Effect of Carving in Pharmacy Benefits on Utilization and Costs.

Abstract

Rising medical costs are a significant concern for employers offering health benefits to employees, and there is interest in identifying insurance plan designs that optimize the effect of pharmacy benefits on overall costs. For instance, employers must decide between plans that carve in pharmacy benefits (where medical and pharmacy benefits are integrated into 1 package through an insurer) versus plans that carve out pharmacy benefits (where pharmacy benefits are separately administered through a pharmacy benefit manager). Little is known about the effect of carving in pharmacy benefits on medical utilization and costs. To compare the effect of carving in versus carving out pharmacy benefits on medical utilization, medical costs, and health management program participation in commercial health plans. We performed a propensity score-matched analysis comparing carve-in and carve-out members of a regional health plan in 2018. Our primary outcomes were medical utilization (annual medical claims/1,000 members) and costs (medical costs per member per month [PMPM]). We categorized these into the following domains: inpatient, emergency department, outpatient/ambulatory surgery, urgent care, primary care, specialist services, and diagnostics (laboratory testing/imaging). We additionally assessed participation in health plan-based health management programs. We analyzed 9,633 carve-in members matched with 9,633 carve-out members. Compared with carving out pharmacy benefits, carving in was associated with 3.7% lower medical costs, with an $8.73 reduction in PMPM ($225.87 vs. $234.60), and no significant difference in medical utilization; significantly lower inpatient and urgent care claims (reduction of 9.29 claims/1,000 and 51.3 claims/1,000, respectively) and costs ($10.08 and $0.12 PMPM reduction, respectively); lower injectable medical therapy costs ($4.32 PMPM reduction); and higher durable medical equipment costs ($2.14 PMPM increase). Carve-in members also experienced 4.9% higher health management program participation. As employers attempt to understand the value of carving in versus carving out pharmacy benefits to health plans, our findings suggest that carving in pharmacy benefits is associated with reduced medical costs and hospitalizations. Our findings can assist in informing employer decision-making processes and, as a result, reducing costs of care. No outside funding supported this study. Parekh was and Huang and Good are employed by the UPMC Centers for High-Value Health Care and Value-Based Pharmacy Initiatives. Manolis is employed by the UPMC Health Plan within the UPMC Insurance Services Division. Papa, Drnach, and Spiegel are employed by WorkPartners within the UPMC Insurance Services Division.