AUGUST 1988

You're not the only one who's eager to battle the rising cost of medical insurance. After watching his company's premiums increase by more than $500,000 over five years, Jack Stack of Springfield Remanufacturing Center Corp. (SRC) gambled on a way to slow the tide: SRC now self-insures the prescription-drug portion of its insurance plan.

Under the previous program, employees filled prescriptions without ever seeing a bill. Since there was no incentive to limit costs, price was never an object -- and the big spending resulted in premiums that were about to run SRC $70,000 a year. Well, Stack decided, why don't we pay for the prescriptions ourselves, arrange for volume discounts, and give employees a reason to think twice about costs?

It worked. SRC canceled its prescription-drug insurance, struck off-price deals with area pharmacies in grocery chains, and offered a special bargain-rate deductible on purchases of generic drugs. Encouraging the use of generics -- something insurance companies don't do -- can reduce the prescription-drug outlay of the company's 425 employees and their families by more than 40%.

How has the change affected the program as a whole? What would have been a $5,000-per-month insurance bill is now a $1,800-per-month pharmacy bill. That will add up to almost $40,000 in savings for SRC this year.

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