ITEM TITLE:
Authorization for Staff to Proceed with a Proposed Change to the Prescription Drug Benefit Provider
SUBMITTED BY: Brian Carlson, Finance Director
FISCAL NOTES:
Expenditure Required: n/a
Unencumbered Balance: n/a
Funding Source: Health insurance reserve fund; funded via payroll deductions
RECOMMENDATION:
Authorize staff to proceed
SUMMARY STATEMENT:
• Staff is forwarding to Council a broker/consultant recommendation to change the Health Plan’s prescription medication provider.
• Council has directed staff to obtain Council approval of any health-plan changes that impact the end-user costs and/or benefits. Though this is not a plan change, it does ultimately have limited end-user impact.
• The prescription medication benefit is approximately $700K of the total health plan expense (10%-15%)
• The purpose of the proposed change is to improve the cost structure by:
o Capturing and retaining rebates which have been retained by the current benefit provider, totaling over $120K annually (combined City/School)
o Switching to a provider who offers better pricing for our Health Plan profile (estimated $80K combined annual savings) via better ingredient cost pricing and lower dispensing fees
o Incentivizing and implementing limited formulary changes where prescription equivalents or alternatives are available
• The proposed change would take effect with the plan renewal on April 1.
• The lead-time to implement such a change necessitates a commitment in advance of the plan renewal date.
• As this proposed change does not change the Health Plan language, it does not violate the School’s collective bargaining terms.
• A retrospective analysis of the contract change (called a “disruption analysis”) indicates a low level of disruption: 0.4% of total prescriptions would have been excluded from coverage in favor of cost-effective alternatives.
o Staff, broker, and proposed new contractor will proactively communicate changes to impacted plan participants in advance of the change
o The city has latitude to mitigate the impact of these changes to the participants
PDF Attachment: Prescription Benefits Manager