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Congress has extended for a second time the COBRA subsidy eligibility period under The American Recovery and Reinvestment Act of 2009 (ARRA). Signed March 2, the Temporary Extension Act (TEA) extends ARRA an additional 30 days to March 31, 2010. It also makes the 65% subsidy available to eligible individuals who first experience a reduction in hours followed by an involuntary termination. Previously individuals who had their hours reduced and were later involuntarily terminated were not eligible for the subsidy.

If an individual is involuntarily terminated during March 2010, the employer will now need to determine whether their hours were reduced all the way back to September 2008 and whether they were offered COBRA at that time. If the individual did not elect COBRA after their original reduction in hours, they will be given another option to elect COBRA as of their involuntary termination date, if they are eligible for the subsidy; any gap in coverage would be disregarded for pre-existing conditions and no catch-up premiums would be required.

Summary of new provision:

• If an individual’s COBRA qualifying event is an involuntary termination of employment during March 2010, normal COBRA procedures will apply.
• If an individual had a reduction in hours later followed by an involuntary termination and the individual elected COBRA immediately following the reduction in hours, no additional COBRA election period is required.
• If an individual had a reduction in hours and did not elect COBRA (or elected coverage but later dropped it) and is involuntarily terminated between March 2, 2010 and March 31, 2010, the involuntary termination is considered a new “qualifying event”� and will trigger an additional round of COBRA notices for employers (or their administrators). However, irrespective of the new qualifying event, the maximum period of COBRA coverage (usually 18 months) will be applied from the original reduction of hours date, not upon involuntary termination.

As an example, an individual has a reduction in hours on September 30, 2009, triggering COBRA eligibility on October 1, 2009. She fails to elect COBRA within the required timelines, and is later involuntarily terminated on March 10, 2010. In this example, March 10th is deemed to be a new qualifying event, triggering a new round of COBRA eligibility. However, the employee’s general COBRA eligibility period will have commenced on and date back to October 1, 2009.

Next Steps

1. Employers will need to comply with these changes and notify effected individuals immediately.
2. Employers should keep track of individuals who are eligible for COBRA due to a reduction in hours so that appropriate notices can be delivered if those individuals are later involuntarily terminated during March 2010.
3. Employers should continue to track these employees because it’s highly likely the COBRA subsidy will be extended again.

The Commonwealth Fund’s 2008 International Health Policy Survey reported that in the U.S.:

• 38% of study participants left the doctor’s office without getting important questions answered.
• Only 53% said their doctor involved them in treatment option decisions.
• 41% said their doctor had not reviewed their list of medications in more than two years.

Each of the above problems can bring about serious health consequences. How do your plan members compare with these statistics? Is there a potential drug interaction crisis looming, with the potential to create an outlier cost for your company to bear? Below are a few tips you can share with your plan members to encourage open and detailed communication with their doctors.

1. Write down the names and the dosage of all the medications you take. Although you might feel that you have your medications memorized, it is not uncommon to confuse bits of data when you’re trying to pass the information along to your doctor. It is better to hand the doctor a written list so that he can quickly extract the data he needs.
2. Before you visit the doctor, think about topics you would like to discuss during this visit. For example, if you were diagnosed previously with high blood pressure, your doctor might have asked you to reduce salt intake, exercise more, quit smoking, and take an anti-hypertensive medication. Since he will be curious about your progress, make notes of what you plan to tell him.
3. Make a list of questions you would like to ask the doctor. You will be more able to think clearly about questions in the comfort of your home, than when you are sitting on an exam table and wearing a paper gown.
4. Arrive on time for your appointment. If you are anxious because you’re late, and the doctor is aggravated that he is running behind schedule, the lines of communication might not be open.
5. Be aware that your doctor is neither a miracle worker with a perfect solution to every problem; nor is he an adversary purposely ignoring your needs. He is a highly trained professional using his best judgment to guide you in both treatment options and preventive care. If you feel he is veering off course, speak up and be involved in guiding the conversation.
6. Don’t be discouraged if the doctor refers you to a nurse or physician’s assistant. These professionals are also highly trained and will often spend significant time explaining medical information to you.
7. Jot down new instructions as well as answers to your questions. It can be difficult to remember all that is said during an office visit, especially if you received unexpected news or information.
8. If you get home and realize you are confused about the doctor’s instructions, don’t hesitate to call the office. It is far better to get the information straight in your mind, than to make errors in your care or medication routine.
9. Pay your doctor bills. A medical office is a business, and if you fail to pay your bills, your relationship with your doctor can suffer.

Overall, remind your members to be active partners with their doctors as they pursue both medical treatments and preventive healthcare.

Overall spending on prescription drugs has increased an average of about 10% a year since 2000, with a “small but growing subset”� of drugs having “extraordinary price increases,”� according to a report from the General Accounting Office (GAO). In particular, specialty drugs drive especially high costs. Specialty drugs are generally defined as high-cost drugs that typically target a smaller group of patients with a narrow indication or complex medical condition; they also might have special shipping and/or handling requirements and require close supervision and/or monitoring during drug therapy. Cost data on these types of drugs emphasizes how important it can be for employers to develop specific cost control strategies aimed at specialty drugs. According to the GAO report, between 2000 and 2008, 416 brand-name drugs had price increases that ranged from 100% to 499%, but in a few cases were 1,000% or more. In most cases, the products sustained the new price: 87% of these products remained at the increased price or rose even further, while only 13% had a price decrease.

Specialty drug prices are especially acute. A report from pharmacy benefit manager (PBM) Prime Therapeutics LLC shows, though specialty drugs represented 1.1% of prescriptions filled for its members, they accounted for 15.4% of overall drug costs. An article in the Journal of Managed Care Pharmacy lists 10 specialty drug therapeutic classes, with the average annual cost of therapy ranging from a low of $5,000 to as high as $150,000 or more. Drugs in these classes treat rheumatoid arthritis, HIV/AIDS, multiple sclerosis, cancers, growth disorders, hepatitis, hemophilia, infertility, osteoporosis, and other conditions.

When developing strategies to manage specialty drug costs, it is important to remember that, unlike non-specialty prescription drugs, some specialty drugs require administration by a health care professional in a doctor’s office, infusion center, or outpatient hospital department. When a specialty drug is administered by a health care professional, it might be paid through the medical benefit rather than through the prescription drug benefit. This can have the effect of hiding the actual expense of specialty drugs from the plan sponsor. According to the Prime Therapeutics report, more than half of specialty drug costs may be paid as a medical benefit. Separate payments through the medical benefit also make implementation of cost management strategies more difficult, since different billing codes may be used for drugs under the medical benefit than are used in the prescription drug plan, with the pharmacy benefit coding more specific. More specific coding enables better identification and analysis of prescription drug use.

For specialty drugs covered by the pharmacy benefit, many plan sponsors have adopted a four-tier copayment/coinsurance structure, in which the first, lowest-pay tier is for generics, the second for preferred brand-name drugs, the third for nonpreferred brand-name drugs, and the fourth tier-requiring the highest cost for specialty drugs. Given the potential high annual cost for specialty drug therapies, plans with a fourth tier typically set a maximum out-of-pocket cost per prescription or for the plan year. If cost-sharing results in a financial burden for the patient, noncompliance with the therapeutic regimen is more likely to occur, which can result in a worsening of the medical condition and the need for hospitalization or other treatments that are more costly. Consider whether it is appropriate to include some specialty drugs in the lower-cost tiers, in an effort to drive compliance.

The Prime Therapeutics report notes that growth in the number of specialty drugs presents the opportunity to establish formularies and preferred drug lists that encourage use of those specialty drugs that are identified for their clinical safety, effectiveness, and value. Thus, though costs for all specialty drugs might be high, formularies can be used to optimize use of those medications that best combine therapeutic and cost value. This report also suggests use of efficient drug delivery channels; a pharmacy program that offers streamlined processes, detailed utilization reporting, integrated care management, and the opportunity for aggressive discounts on specialty drugs; and controls on “buy and bill” arrangements by health care providers administering specialty drugs.

The Journal of Managed Care Pharmacy article notes that another possible cost management strategy is to move all specialty drugs into the pharmacy benefit, with the goal of having more uniform application of patient cost sharing and clinical and utilization management. Implementation of this strategy might pose its own challenges, however, due to specific plan provisions, vendor contracts, and contractual arrangements with health care providers.
Though specialty drugs offer innovative therapeutic opportunities for patients, their price tags pose cost management concerns. Consultation with a benefit consultant, PBM or health plan is a good starting point for developing strategies for optimizing the value of specialty drugs for your employees.