How Carve-In Plans Can Control Pharmacy Benefits for Optimal Savings

How Carve-In Plans Can Control Pharmacy Benefits for Optimal Savings

Within employee benefits, the dynamics of “carve-in” and “carve-out” are an important decision for employers to make, particularly when it comes to pharmacy. While these plans follow different methodologies, self-funded employers can exercise control over their pharmacy expenditure, no matter if they leverage a carved-in or carved-out approach.

Pharmacy Carve-In vs. Carve-Out

The difference between carve-in and carve-out pharmacy plans lies in how employers manage, administer, and supply medical benefits and pharmacy access to their workforce.

• Carve-In Pharmacy Plans: Carve-in plans consolidate all healthcare coverage under a single entity, typically the medical provider. In this model, the PBM contracts reside with the medical provider, offering less direct control for the employer. Examples of carved-in plans include UnitedHealth medical coverage with OptumRx pharmacy coverage (owned by United), Aetna medical coverage with CVS pharmacy covered (both under the CVS Health Corporation umbrella), or Cigna medical coverage with Express Scripts pharmacy coverage. Plan sponsors choose the carve-in structure often because it is easier to be fully integrated with one carrier. Typically, carve-in plans are chosen by smaller groups under 1,000 lives.
• Carve-Out Pharmacy Plans: In contrast, carve-out plans allow employers to contract with separate medical and pharmacy entities, and enable a plan sponsor to isolate benefits related to specific disease states or particular services, like a specialty pharmacy carve-out. For example, in this scenario, an employer’s medical plan could be with Aetna, but they could choose any PBM for pharmacy, as well as implementing a different alternative funding model. This approach grants customization within the overall pharmacy benefit and is often the chosen approach by larger groups given its flexibility.

The decision to choose a carve-in or carve-out plan is more than a strategic choice – it’s a decision that impacts cost structures, administrative processes, and the overall efficacy of benefit programs. However, both carve-in and carve-out groups can strategically optimize their pharmacy contracts for increased transparency and reduced costs.

Carve-In Groups Can Still Control Pharmacy Spend

Traditionally, when employing a carved-in healthcare model, plan sponsors and brokers feel they have limited control over the pharmacy contract presented to them. However, contrary to that misconception, carve-in groups can still wield autonomy over their pharmacy contracts while still enjoying the benefits of a fully carved-in plan.

By leveraging an independent pharmacy marketplace, brokers and employers can conduct a direct comparison between the carved-in employer’s incumbent plan renewal offer to similar PBM offers available in the market. This can show the employer how their carve-in plan stacks up in the market, and whether they have leverage to negotiate a better pharmacy deal.

Introducing this vetted competitive marketplace option motivates the incumbent carve-in PBM to improve their pricing and terms. Faced with the prospect of more attractive competing offers on the market, the incumbent plan often restructures their renewal to be more aggressive to retain the client’s business, rather than risk losing both the medical and Rx business. This methodology encourages the incumbent carve-in PBM to sharpen their pencil, and after a market check they are often willing to provide a more competitive offer for their carved-in client.

Carve-in Pharmacy Savings In Action

A carved-in Truveris client with more than 600 lives was looking to renew with their incumbent PBM. The Truveris Marketplace compared the client’s renewal offer to five other similar PBM offers on the market, and discovered that most of the other offers were more competitive than the incumbent’s offer. Truveris conducted an analysis of the client’s historical claims data to determine the impact of each market check offer on the client’s future pharmacy spend. Once the results were analyzed, the client and Truveris reviewed all scenarios with each offer, and ultimately was able to convince the incumbent PBM to submit a more competitive renewal offer. The result was a 25% reduction from the initial PBM renewal offer, resulting in over $120,000 in savings for the client in just one year.

In summary, it’s important that carved-in plans remember that they can still negotiate with their PBM to get better contract terms. If you are looking to learn more about how to control pharmacy spend for self-funded carve-in plans, connect with a Truveris pharmacy contract expert today.

Truveris is a leading digital health company focused on delivering truth and clarity in pharmacy. Truveris’ proprietary technology, coupled with deep pharmacy expertise, helps to build a more efficient market that maximizes choice, accessibility, and prescription drug affordability. Our solutions provide the insight and knowledge to help people lead healthier and more productive lives.