The Health Insurance Exchanges are now set to go and there is widespread debate among extremely knowledgeable healthcare experts as to what will happen. The key question is just who and how many will use the exchanges. Will companies elect to pay employees a little more and allow them to choose their own plans on the exchanges? Would workers be better off controlling and owning their own plans? For those that doubt this is a possibility, all you need to do is look at 401k programs that have taken so much away from traditional retirement plans over the last decade or so.
Take a look at this Chicago Tribune article that reports Walgreens will move 180,000 employees to the Aon Hewitt exchange which consists of a wide variety of plans and tons of choices for the employees. Although not the government run exchange set under the Affordable Care Act, it will run pretty much the same way. Note the advantages mentioned for both the employer and the employee discussed in the article. Walgreens will get to see a cap in their healthcare spending and over time this could shift a considerable burden to the employee if costs on the exchanges go up rather than down. Employees are offered choice and although they will be compensated for a “silver” plan they could spend more and upgrade or spend less and keep some of the compensation. Time will really tell how this all works out for both sides. Oh and by the way in case you were thinking Walgreens is alone, look at Richard Vanderveer’s blog from last week where he points out IBM is going a similar route for some of their colleagues using Towers Watson’s exchange.
So what does this all mean for the pharmaceutical industry? Well in some ways it might be good as there will be increased competition in the payer world which should drive down costs and weaken some of the power big insurers have over the industry. This may be an opportunity for creative contracting and aggressive marketing to help capture new patients during this period of chaotic change. On the flip side, studies have shown that employees, when given a choice, will often opt for less coverage which in this case might mean selecting plans with formularies that are less friendly to brand name drugs. But could things get much worse than they already are today with over 85% of all prescriptions being filled with generics?
Perhaps the key is for the industry to convince patients to select plans that provide good drug coverage as that will save them a lot in the long run. Also, if they are leaving solid employer plans they should at least try to keep their drug coverage solid. Industry should also try to convince insurers that they need to provide as attractive a drug benefit as possible as this is where their new customers will look to see which plan is better than others. It could be a real competitive advantage for insurers. It really is all about marketing, public relations and customer relationships.
Whether we are talking about the government health exchanges or those run by private entities, we seem to be on the edge of some major change. Those that embrace the change and try to stay ahead of the inevitable will win. Those who ignore what is happening, close their eyes and hope things will not change are taking a huge risk. Which side are you and your company betting on? Take a look at your business plans for 2014 and if they look like those in 2013 (or even 2004) you may be vulnerable.