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Thursday, March 08, 2012

Do the Benefits Math (Please!)

I've wanted to write this brief post for years but it has not been the right time until now.  Every year when benefits go up you hear, "My paycheck isn't keeping up with my benefits" because pay goes up at, say, 3% and insurance goes up maybe 5%. 

This year our insurance isn't going up at all so I can stick a pin in this fallacy without seeming like I am being defensive.

Okay so let's do the math.  The lowest allowable pay for any position is $7.25/hr. With 2,080 working hours in a year, assuming no overtime, anyone reading this post and working full time is making at least $15,080/yr. Assuming a 3% increase (which appears to be close to the market for this year) that person will receive an increase of $452. 

Now let's move on to Benefits.  Medical insurance is going to cost the average family about $4,500/yr in premiums. Let's assume a 5% increase, which again is pretty typical, and you come up with an increase of $225.  So while the annual wage increase was largely eaten-up by increases in insurance, in no way did it fail to keep up.

So since 95% of employees make more, often substantially more, than minimum wage the gap between wage increase and benefits increases is equally substantial.

So please, please, in the name of all things holy, the next time you hear that you got 2.5% increase and insurance went up by 5%, don't say, "I'm going backwards!" because you aren't.  Those percentages are applied to numbers of vastly different size.

Monday, March 05, 2012

The Future of Rx Benefits May Not Include Walgreens

This is not a current problem for our plan; but a preview of what may be coming in the months ahead.

A few years ago Walgreens set out on what seemed to be their mission; that you could stand in the parking lot of any one of their stores and see the sign for the next closest one.  There is now a Walgreens in just about every neighborhood and sometimes it seems there's one on every corner. 

That this was their mission; to take market share from other competitors, was in the normal course of business.  In the past few months, however, they have begun flexing their buying power and fighting pharmacy benefit networks.  Their goals are anything but laudable. Their position is that without them any pharmacy network would be incomplete and so they should receive a higher reimbursement for the prescriptions they dispense.

Their latest row has been with Express Scripts.  Their proposal to Express Scripts, according to my sources, would have made them the single highest-cost provider in that network.  They also wanted the right to terminate individual company plan sponsors (for reasons of which I've not received information) and dictate plan designs to plan sponsors.  They also wanted to limit Express Scripts audit rights to ensure compliance with their network contract.

Because Express Scripts refused Walgreens left their network effective January 1 of this year.  What impact that has on their network and their ability to write pharmacy benefit contracts is yet to be determined. What is relatively certain is that if Walgreens is successful flexing their muscles in the marketplace they will next turn their sights on larger networks that impact, among others, our Blue Cross Blue Shield pharmacy network. Those networks will have a tough choice to make; allow their expenses, and therefore our premiums, to rise as an accommodation to Walgreens or to allow them to leave their networks.

This will get interesting.  Stay tuned...