Prescription drug costs are one of the fastest-growing¹ and most unpredictable components of employer-sponsored health plans. A single high-cost therapy or catastrophic claimant can skew an entire year’s budget, disrupt cash flow, and destabilize long-term benefit strategies. Just 1% of employees account for nearly a third of all health care spending, averaging more than $206,000 per person annually¹.

The Challenge with Self-Funding

Self-funding is often viewed as a cost-saving strategy because PBMs “promise” savings through manufacturer rebates, drug discounts, and clinical management programs. On the surface, these look attractive, but the actual savings or expected claim costs these PBM’s propose are not guarantees.

Let’s get right to rebates which typically become the primary selling point under self-funding.  Unlike our fixed rate program, where rebates are accounted for in month one and floated by Benecard, self-funded PBM’s typically don’t pay such rebates until 120–150 days after the close of each contractual year’s quarter—resulting in cash-flow challenges and budget uncertainty.

Prescription drug costs are especially vulnerable to excessive spikes in claims costs—often driven by one or two specialty drugs such as those related to oncology² or inflammatory conditions, as well as weight-loss and diabetes drugs like GLP-1s. Stop-loss coverage may appear to offer protection, but it is not a silver bullet for managing 100% of the pharmacy risk. Plan sponsors remain exposed to exclusions through “laser” provisions, gaps in coverage, and additional costs beyond the stop loss insurance. Furthermore, after a poor claims year, it can become difficult to find a stop-loss underwriter willing to take on the risk.

The Benecard Guarantee: Combining the Best of Insured and Self-Funding

Benecard’s fixed-rate Rx benefit program is designed to break this cycle. Unlike self-funding, our model eliminates volatility by guaranteeing plan sponsors’ Rx bottom line and providing them with a fixed monthly rate for prescription drug coverage. That means:

• ● No surprises: Plan sponsors know exactly what their Rx benefit costs will be, regardless of claimant mix or catastrophic prescriptions. There is no year-end reconciliation or unexpected supplemental payments required.
• ● Budget certainty: CFOs and HR leaders can plan with confidence, free from the uncertainty of fluctuating claims experience.
• ● Risk removal: The risk of one or two high-cost claimants derailing the plan is transferred away from the plan sponsors, creating true protection. There are no laser provisions or mandatory benefits that a plan sponsor is required to adopt.
• ● Return of Savings: When plan performance is better than projected, plan sponsors receive a credit toward their renewal program costs—ensuring they benefit from favorable claims experience.

Leveraging Collectives to Spread Risk

Another strength of Benecard’s approach is the administration of collectives (groups of employers who share the risk together). By combining purchasing power and spreading risk across a broader population, collectives create stability that individual employers, particularly smaller ones, cannot achieve on their own.

Collectives help reduce the impact of catastrophic claims and ensure that no single employer bears disproportionate financial burden. For brokers advising clients, collectives are a powerful option to recommend, particularly for small to mid-sized employers who want the advantages of self-funding without the inherent risks.

A Smarter Path Forward

For plan sponsors, the choice is not just about funding models; it’s about risk management, predictability, and long-term sustainability. As brokers and consultants look for innovative ways to support their clients, and as plan sponsors seek to balance rising costs with competitive benefit offerings, fixed-rate Rx and collective solutions deliver precisely what today’s plan sponsors need: stability, protection, and guarantees.

To learn how Benecard’s fixed-rate Rx solutions can safeguard your Rx benefit plans, we invite you to connect with us and explore a smarter path forward. Email us at talktous@benecard.com to get started.

Sources:

¹ “Just 1% of employees drive nearly a third of all health care spending”, BenefitsPro
² “86% of employers increased cancer care spend since last year”, BenefitsPro