Pacific Business Group on Health Case Study
Article Highlights
- Study Title
- Pacific Business Group on Health Case Study
- Study Authors
- Jeffrey R. Harris and Helen H. Schauffler, et al.
- Publication Date
- 2001
In this case study, the researchers analyze the business case for health insurance coverage of smoking cessation treatments by employers, and they highlight the coverage decisions of the Pacific Business Group on Health (PBGH).
The Problem
The PBGH Negotiating Alliance is a San Francisco-based consortium that purchases health insurance from managed care organizations on behalf of large employers based in California and in other Western states. Until 2000, PBGH provided limited coverage for smoking cessation; they covered pharmacotherapy by prescription but not over-the-counter treatments like nicotine gum or nicotine patches. Additionally, health plans could require members to pay the pharmacy co-pay on the drugs and attend smoking cessation classes. However, PBGH did not reimburse for the classes and allowed some plans to reimburse the cost of medication only after a member had successfully quit smoking. This coverage plan set up many financial barriers for members interested in quitting smoking, including limited access to reduced cost over-the-counter nicotine replacement therapy.
The Business Case
Employers and purchasing consortiums should consider the business case (cost effectiveness, return on investment) for covering cessation programs and pharmacotherapy.
There is much evidence to support the business case for tobacco cessation programs. First, a male smoker incurs $9000 more in medical expenses over his lifetime than a non-smoker; a female smoker incurs $10,000 more than a non-smoking female. Since many of theses costs are passed on to the employer and taxpayers, it is estimated that smoking-related illnesses cost the U.S. healthcare system between $50-$73 billion. Employers face additional smoking-related costs in terms of lost productivity and increased absenteeism among smokers.
Key Questions
The following key questions address the financial impact in smoking cessation treatments:
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Question:
What is the relative financial impact of smoking cessation treatments compared with other commonly used preventive and therapeutic interventions?
Answer:
In a 1996 guideline on smoking cessation, the Agency for Health Care Policy and Research released a study showing the financial impact of smoking cessation treatments is nearly cost-neutral. Specifically, the analysis showed the cost per quality-adjusted life-year was $1,555, which includes costs and benefits to individuals, health plans, employers, and government. The quality-adjust life-year accounts for both more years of life gained through quitting smoking and years of healthier life due to reductions in smoking-related chronic illnesses.
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Question:
Which effective smoking cessation treatment offers the best value for money?
Answer:
The AHCPR study mentioned above shows that all smoking cessation treatments are quite cost-effective but studies have shown that the more intense a program, the more likely a person is to successfully quit smoking. In addition, studies have shown that the combination of behavioral interventions plus pharmacotherapy is more cost-effective than pharmacotherapy alone.
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Question:
How soon will an employer see a return on investment?
Answer:
One landmark study estimates the business case from an employer's perspective and, therefore, estimates the ROI to occur within three years of starting coverage on the smoking cessation program. In fact, a smoking cessation program is expected to return 1/3 of its costs to employers in the first year and to break even by the third year. This rapid ROI assumes an annual employee turnover rate of 11% and accounts for corrections in the higher absenteeism and lost productivity prevalent among smoking employees.
Once the decision is made to cover smoking cessation programs and pharmacotherapy, the authors advise purchasers to consider the following questions at they devise their coverage model.
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Question:
Should health insurance cover pharmacotherapy, behavioral interventions, or both?
Answer:
The 2000 Public Health Service guideline recommends both pharmacotherapy and behavioral interventions for treating tobacco use. Indeed, studies show the combination of pharmacotherapy and behavioral counseling is more effective than either intervention on its own.
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Question:
Should over-the-counter pharmacotherapy be covered?
Answer:
Yes. If employers want to maximize utilization of pharmacotherapy, they should provide access to both prescription medications and OTC medications (like the patch or gum) to expand treatment options.
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Question:
How many courses of pharmacotherapy should be covered?
Answer:
Limitations on the number of covered refills of pharmacotherapy stem from concerns about abuse of the drugs. However, the researchers found little evidence to support the notion of abuse of covered pharmacotherapy.
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Question:
Should out-of-pocket costs be eliminated?
Answer:
Yes, if employers want to increase utilization. If possible, employers should eliminate - or reduce as much as possible - the out-of-pocket costs to the employees to participate in smoking cessation interventions.
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Question:
Can health plans be accountable for delivering smoking cessation treatment?
Answer:
To date, national surveys have only been concerned with whether or not physicians inquire about smoking status, give advice to smokers to quit, and provide assistance by referring smokers to behavioral interventions and/or writing prescriptions for pharmacotherapy.
The Solution
In January 2000, PBGH revised its smoking cessation coverage model to include over-the-counter nicotine replacement therapy, pharmacotherapy by prescription, and behavioral interventions. Their commitment to cover smoking cessation programs will most likely yield a positive return on investment in short order due to decreases in medical costs related to tobacco use as well as increases in employee productivity and overall health.