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Tiered Copayment Plans Increase in Use

Kate Traynor

Employers paid 8.3 percent more for their employees' health plans this past spring compared with the year before, with most of these plans covering prescription-drug bills through two- or three-tier copayment systems, according to a national survey.

The annual Employer Health Benefits Survey, conducted by the Henry J. Kaiser Family Foundation and the Health Research and Educational Trust, reported that employers paid an average of $202 per employee for individual health insurance coverage and $529 for family coverage in spring 2000. Sixty-seven percent of employers indicated that escalating drug prices contributed "a lot" to the premium increases that occurred during the previous year.

Employers did not transfer their increased costs to workers, who paid an average of $28 a month for their share of individual coverage premiums, compared with $35 a month last year. The employee's monthly share for family coverage decreased as well, from $145 to $138.

The report's sponsors speculated that the tight labor market in the United States encouraged employers to absorb increases in insurance increases.

Overall, there was an increase in the use of two- and three-tier copayment systems for prescription drugs. Two-tier systems, which use one copayment amount for brand-name prescription drugs and a lower one for generics, were most common in preferred-provider organization (PPO) plans.

Three-tier systems—whose copayment amounts differ for generic prescription drugs, brand-name drugs with generic equivalents, and brand-name drugs with no generic equivalents—were used most often by health maintenance organization (HMO) members.

Sixty-one percent of workers covered by employer-paid indemnity plans faced two-or three-tiered prescription plans. Eighty-one percent of workers covered by PPOs, 78 percent of those with point-of-service plans, and 77 percent of HMO members paid for prescriptions on the basis of two-or three-tiered systems.

Employer-paid plans rarely had price caps on prescription drug benefits, according to the survey. Four percent of workers at firms with fewer than 200 employees faced annual caps, as did two percent of employees at larger organizations. The report stated that many of the proposals for Medicare prescription-drug benefit plans include annual price caps.

Separate deductibles for prescription benefits were required of six percent of workers at small organizations and seven percent of those employed by large firms.

The survey, which polled a total of 3,402 randomly chosen public and private employers, was conducted between January and May of this year. The overall response rate was 45 percent; 1,887 employers completed the full survey and 1,515 told whether they offered workers health-insurance coverage.

Survey findings related to indemnity insurance were published in the September/October issue of Health Affairs.