There is a dangerous trend in our country in which employers, seeking to reduce health plan costs they pay, enter into agreements with small third-party administrators that “carve out” specialty drug benefits from their self-funded health insurance plan. What employers are not told is that these spending reductions are accomplished by risking the health of their employees. It is the self-funded businesses that are being preyed upon by these administrators because there is a lot of money to be made by carving out the specialty drugs in their self-funded health plan.
Dr. Madelaine Feldman
Let’s start with a little primer on “fully insured” versus “self-funded” health plans. As a small business owner, I understand the need to make sure that expenses don’t outpace revenue if I want to keep my doors open. One of the largest expenses for any business is health insurance. My private rheumatology practice uses a fully insured health plan. In a fully insured plan, the insurer is the party taking the financial risk. We pay the premiums, and the insurance company pays the bills after the deductible is met. It may cost more in premiums than a self-funded plan, but if an employee has an accident or severe illness, our practice is not responsible for the cost of care.
On the other hand, large and small businesses that are self-funded cover the health costs of their employees themselves. These businesses will hire a third-party administrator to pay the bills out of an account that is supplied with money from the business owner. Looking at the insurance card of your patient is one way to tell if they are covered by a fully insured or self-funded plan. If the insurance card says the plan is “administered by” the insurer or “administrative services only,” it is most likely a self-funded plan. If their insurance card states “underwritten by” the insurer on the card then it is likely a fully insured plan. This becomes important because self-funded plans are not subject to the jurisdiction of state laws such as utilization management reform. These state laws are preempted from applying to self-funded plans by the Employee Retirement Income Security Act of 1974. The Rutledge v. Pharmaceutical Care Management Association Supreme Court case took up the question of whether certain state laws impermissibly applied or were connected to self-funded plans. The ruling in favor of Rutledge opens the door that certain state legislation may one day apply to self-funded plans.
Specialty drug benefit carve outs are not in best interests of employees, employers
This piece is not about Rutledge but about the small third-party administrators that are convincing self-funded businesses to let them “carve out” specialty drug benefits from the larger administrator of the plan by promising huge savings in the employer’s specialty drug spending. Two such companies that have come to the attention of the Coalition of State Rheumatology Organizations are Vivio Health and Archimedes. CSRO has received numerous complaints from rheumatologists regarding interference from these two entities with their clinical decision making and disregard for standard of care.