In June 2020, representatives of a regional health plan and its pharmacy benefit manager (PBM) authored and conducted a study that was published in the Journal of Managed Care & Specialty Pharmacy. This study asserts that members in carve-in pharmacy plans spent on average $148 less on medical costs than members in a carve-out arrangement. The argument, although specifically caveated in the limitations of the study as not showing causation, is that it is mostly the integration achieved through a carve-in arrangement that leads to these lower costs.

The debate between carve-in and carve-out pharmacy plans continues to persist, but recent acquisitions among health carriers and PBMs has brought new enthusiasm to those espousing the benefits of carve-in. It’s important to remember that medical claims and pharmacy claims are processed on separate platforms, regardless of whether a carve-in or carve-out arrangement. The question therefore isn’t whether you’ll have separate data sets – you will – but how will the claims be integrated to create actionable insights. For example, through our PBM relationships with CVS Health, OptumRx and Elixir, our carve-out clients send claims files directly to health plans on a regular frequency for purposes of disease and case management opportunities. From our experience, it is safe to say that insurance carriers vary widely in their ability to effectively combine those data, even in cases where there is an ownership connection between the PBM and health plan. Interestingly, the third-party solutions providers winning business in the marketplace are those like Quantum Health that have a platform for integrating data and taking actions to engage both patients and their providers. These types of organizations neither own a health plan or a PBM, nor do they process any of their own claims. So, a big question for the carve-out lives in this study is whether pharmacy data are being sent to the health plan and whether they are being utilized in the disease and case management programs.

Aside from a nice refresher on statistical analysis, the study relies on long-standing claims made by carriers and health plans on the value of integration but fails to address how the health plan actually uses these “integrated data” to engage patients and providers and drive behavior to positively impact costs. While the study does make accommodations for variable factors like age, geography and risk levels, it fails to take into account several other factors that are less quantifiable but probably better help explain the differences. For example, the study claims that the carve-in members are less likely to have an emergency department claim or a hospitalization over the two-year study period. However, the study doesn’t look at whether carve-in members have access to things like virtual care, onsite care or local urgent care versus the carve-out members.

Additionally, the study does not account for the impact of the carve-in plans utilizing one specific PBM versus the carve-out plans utilizing a multitude of different PBM providers. Just as the insurance carriers handle things differently, we know different PBMs approach patient engagement and management very differently. Hence, selecting a less effective PBM may be a condemnation of the PBM selection process versus the decision to carve-out.

At the end of the day, we see many self-insured clients realizing significant pricing improvements by carving-out their PBM services, particularly to a coalition arrangement. Clients in the Employers Health PBM purchasing program will see upwards of 20%-30% improvements when moving from a carve-in arrangement, resulting in cost reductions anywhere from $200-$400 per member per year. Most plan sponsors would agree that spending an additional $200 or more to potentially save $148 isn’t a prudent plan decision.

About the Author

Michael Stull, MBA

Michael Stull, MBA

Chief Strategy Officer

As CSO, Mike’s primary focus is on strengthening the Employers Health brand and growing membership, particularly in the coalition’s 20-year, $1.5 billion group purchasing program for pharmacy benefits.