Paterson switches teachers’ prescription plan insurance to contain escalating costs
By Jayed Rahman
Published: June 3, 2016
In an effort to contain escalating drug costs, the city’s school district switched its prescription plan insurance provider on Wednesday night.
School board members approved a $22.5 million plan which will switch teachers’ prescription plan insurance provider from St. Louis-based Express Script to Lawrenceville-based Benecard Services.
Robert Murray, an attorney for the district, said the switch will place a cap on the amount the district will spend on prescription benefits for its employees.
Murray said the $22.5 million cap is 5-percent more than the amount of money the district is expected to spend on prescription health plan insurance in 2015-16. He said the typical increase is 15-percent.
“If the usage is less the district gets a dividend,” Murray told school board members. He said the dividend will be issued at the end of the year if utilization is under the capped amount.
The district was projected to pay $30 million in prescription health benefits at the end of this year, according to an analysis conducted by its insurance broker Marlton-based Conner Strong & Buckelew.
Murray said the district’s prescription plan insurance has sky rocketed over the past few years with more employees utilization brand name, compound drugs, and the general increase in drug prices. He noted the prescription plan cost has been increasing by millions of dollars every year.
The district’s prescription claims stood at $15.9 million in July 2013-4. It jumped by $4.34 million to $19.7 million in 2014-15. The cost is expected to hit $30 million for 2015-16, according to an analysis conducted by the district’s insurance consultants Conner Strong & Buckelew.
Consultants warned the district of the sky rocketing cost of the district’s drug plan in late November. Although the costs have been skyrocketing, the district has managed to avoid budget shocks by taking out stop-loss policies.
Those policies covered excesses beyond a certain point. For example, the 2014-15 spike which would have cost the district an unexpected $4.34 million was picked up by a stop-loss policy it took out from Express Script.
Murray said no carrier was willing to offer a stop-loss policy to the district for the next year. He said the district is not responsible for costs that go beyond the capped amount.
The consultancy proposed adding a screening mechanism by deploying an extra layer of authorization for prescription drugs, limiting maximum amount of one medication an individual may receive over a period of time, ensuring FDA approved dosing regimen is followed, and barring refills until 75-percent of a previous fill runs out.
The extra layer of authorization for drugs worried the Paterson Education Association, the teachers union.
The union at first balked at the additional layer of authorization for its members. As the district and the union attempted to reach some sort of a compromise on the drug screening process, state-appointed district superintendent Donnie Evans threatened to lay off 517 employees due to the ever increasing prescription benefit costs.
The union put the measure to a vote in early May during which members of the union unanimously voted in favor of the screening mechanism, a key process to rein in skyrocketing compound drug costs, according to John McEntee, president of the Paterson Education Association (PEA).
McEntee brushed off any suggestions the union was cowed into approving the drug screening process. He said members took into account the district’s layoff warning, but it was not the biggest reason for the approval. He said ultimately two concessions by the district resulted in the unanimous approval.
McEntee said the union managed to obtain an appeal process for members who are denied drugs and a reduction of co-payment for prescription drugs. He said the prescription deal with the district also saved money for union members who now will pay zero dollars for generic drugs.
“You show me a prescription plan in the state — show me another one in the East Coast — where they pay zero dollars for generic,” said McEntee on Wednesday afternoon.
School board members approved the switch during their workshop meeting on Wednesday night.
Board member Errol Kerr said he was re-assured by the union’s acceptance of the deal. “If they could work something out it’s pointless for me to start throwing stones at it,” he said.
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