Self-Funded Pharmacy Plans Becoming More Popular Among Large Employers

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UBA Survey Finds Self-Funded Pharmacy Plans Have Increased Nearly 30 percent in Five Years

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“Despite the large amount of capital necessary to pay for fluctuating claim costs, self-funding can be more affordable for pharmacy benefits,” says a representative from TrueNorth Companies/MedOne, a UBA Partner Firm.

As a result of the Patient Protection and Affordable Care Act (ACA) triggering cost increases for fully insured employer-sponsored health insurance plans, more employers are moving to a self-funded model for pharmacy plans, particularly among large employers (1,000+ employees), according to data released from the 2014 United Benefit Advisors (UBA) Health Plan Survey.

UBA’s survey, the nation’s largest benchmarking survey with nearly 10,000 employers responding, shows that self-funded pharmacy plans have increased 29.8 percent (from 8.4 percent) in the last five years and fully insured pharmacy plans have decreased 2.7 percent (from 91.6 percent). Although fully funded pharmacy plans still dominate with 89.1 percent of the market, self-funded pharmacy plans now make up 10.9 percent of all plans, as of 2014.

“Despite the large amount of capital necessary to pay for fluctuating claim costs, self-funding can be more affordable for pharmacy benefits,” says a representative from TrueNorth Companies/MedOne, a UBA Partner Firm.

The survey finds that 66.1 percent of employers with 1,000+ employees have self-funded prescription plans, while nearly all small employer plans (1 to 99 employees) are fully insured. Regional differences do have a major impact, however. For example, 99 percent of California plans are fully insured with only the state’s largest employers offering self-funded plans. North-central employers, on the other hand, have more self-funded plans at 17.7 percent.

“North-central employers are more likely to self-fund due to the favorable climate for doing so – less competitive workforce, higher-than-average concern for costs, and a greater amount of manufacturing and agricultural businesses,” says TrueNorth Companies/MedOne.


Not surprisingly, the increase in self-funded pharmacy plans coincides with an increase in stop loss coverage. UBA’s survey finds that 95.3 percent of self-funded pharmacy plans have specific stop loss coverage, an increase of 6.7 percent in the last five years (from 89.3 percent to 95.3 percent).

Similarly, the data shows that 76.7 percent of self-funded pharmacy plans have aggregate stop loss coverage, an increase of 9.1 percent in the last five years (from 70.3 percent to 76.7 percent).

Only 3.7 percent of pharmacy plans have neither specific nor aggregate stop loss coverage, a number that has decreased 64.1 percent in five years (from 10.3 percent to 3.7 percent). Virtually no plans have only aggregate coverage.

In 2014, the average specific stop loss level was $140,235, an increase of 13.8 percent in the last four years (from $123,188 to $140,235).

“With the no annual and lifetime maximum clauses that have come into play, the increased cost of specialty medications, and no pre-authorization, employers/payers have had no choice but to protect themselves by using specific and aggregate loss coverage with the pharmacy included,” says TrueNorth Companies/MedOne. “Particularly, now that pharmacy is being considered an essential health benefit and tracks to out-of-pocket maximums, the dollars spent in pharmacy are more important than ever to the plan’s overall performance.”

“Stop loss coverage is becoming more and more important,” says Mark Kmety, Senior Managing Director/Co-Practice Leader at Mesirow Financial, a UBA Partner Firm. “With the rapid emergence of so many high cost drugs, you can’t continue to provide a prescription drug benefit without stop loss coverage or not be aware of the risks without this protection. Stop-loss coverage is now more critical for financial protection.”

Download a copy of the 2014 UBA Health Plan Survey Executive Summary by visiting or contact UBA media representative, Carina Sammartino, at 760-331-3547 or csammartino(a)

Data in the 2014 UBA Health Plan Survey is based on responses from 9,950 employers sponsoring 16,467 health plans nationwide. The survey's focus is intended to provide a current snapshot of the nation's employers rather than covered employees. Results are applicable to the small to midsize market that makes up a majority of American businesses, as well as to larger employers, providing benchmarking data on a more detailed level than any other survey. The 2014 UBA Health Plan Survey offers more than just national data and UBA recommends that employers benchmark with local data, which is more effective when adjusting plan design, negotiating rates, and communicating value to employees.

For a customized benchmark report based on industry, region and business size, contact your local UBA Partner Firm.

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Carina Sammartino
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