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Expect More From... Labor Relations!

Writer's picture: Christine JohnstonChristine Johnston

I know what you are thinking… what does labor relations have to do with pharmacy costs? A lot! This week the Kaiser Family Foundation released its annual Employer Health Benefits Survey. KFF found “The average annual single premium and the average annual family premium each increased by 7% over the last year. Comparatively, there was an increase of 5.2% in workers’ wages and inflation of 5.8%.” The following chart shows a startingly increase over the last 5 years.

As most of you know, premiums are directly correlated to claim expenses.


Whether it is the UAW strike, the nurses at Kaiser Permanente or the Screen Actor’s Guild, the demand of the workers are higher wages. UAW workers want a 40% increase, the nurses were seeking a 25% increase and the actors want a 11% increase and revenue sharing. The companies that these employees work for all say their demands are too much. I don’t know the details of the financials of these companies, but if employers and employees are paying on average $23,968 per year for healthcare premiums, a reduction in overall healthcare cost would allow employers to shift some cost from the healthcare budget to the salary/wages budget.


Let’s use the UAW demands as an example:

  • According to Comparably, the average auto worker makes $32,253.

  • They want a 40% raise over 4 years. So that is an annual increase of $12,901.

  • Ford’s latest offer is 23%. That is $7,418.

  • The delta is $5,483.

  • A 23% reduction in overall healthcare cost would fill that gap.

Employers and employees need to stop thinking about healthcare costs and the associated premiums as an uncontrollable expense. We need to stop accepting these annual increases and look at what can be done to reduce the overall healthcare costs, while maintaining quality. Consider the airline business which is a common reference to the medical field. Consumers will not fly the friendly skies if the prices are too high or safety is in question.


One strategy is clinically managing your high-cost patients in the pharmacy benefit. Using industry data, we estimate that the annual cost for a family for pharmacy is $4,025. From my experience, employers are able to realize between 20 -40% savings by better managing their pharmacy benefit. The savings would range between $805 – 1,610 per year per family. This one strategy has the potential of closing the wage gap in the UAW negotiation by 30%.


Labor negotiators need to stop thinking about the employees’ needs in silos. If you reduce costs in one area, you can provide a better benefit in another area.

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