Traditional health insurance policies typically have two deductibles: one deductible is assigned to medical benefits such as hospital, physician or lab services, and the second deductible is assigned to the prescription benefits.
Prescription drug cost growth is motivating carriers to adopt various utilization management strategies in an attempt to control costs. The most recent data indicates that the average annual percentage increase in drug cost spending for 2020 was 3.7%, 1.1 percentage points greater than general price inflation of about 4%. Since 2000, health insurance carriers have employed a dual deductible strategy to mitigate premium increases.
By applying a separate deductible to prescriptions, the policyholder is delayed from qualifying for the prescription co-pays that apply to either generic, preferred brand name or non-preferred drugs. The policyholder must incur a separate prescription deductible, typically $200, before any of the plan’s prescription co-pay benefits will apply. Carriers may also apply the deductible only to preferred brand name or non-preferred brand name drugs and not to generic drugs to encourage the consumer to consider that option. By waiving the deductible for generic drugs, carriers encourage the policyholder to ask the doctor if a generic drug is available, that meets the same efficacy as the preferred brand or non-preferred brand.
The only exception to this dual deductible structure is a health savings account (HSA) policy where all services received, medical and prescriptions, are applied to the deductible. Health savings account (HSA) coverage treats prescriptions as any other medical service received from a hospital, physician or lab. The prescription is applied to the plan deductible first, and co-pay benefits will not apply until the plan deductible has been met. If an individual has an HSA plan with a $2,500 deductible, the prescription co-pay will not be available until the deductible is satisfied, either from hospital, physician, laboratory, x-ray or prescription services. In this example, an individual could incur $2,500 in prescription costs with no other medical costs and be out-of-pocket for all prescription costs. In these situations, policyholders will receive a negotiated discount on prescriptions, which can typically result in a 12% to 15% reduction; however, this coverage still does not provide the benefit of a $10, $15, $25 or $40 co-pay.
Prescription requirements can many times negate the tax deductible and lower premium benefits provided by HSA coverage. For example, an ongoing maintenance prescription such as Crestor can cost $145 per month. The annual cost would be $1,740, which means the $2,500 HSA individual plan deductible would not be met and no co-pay for the prescription would be available. The policyholder would be able to contribute to an HSA to cover the cost of the prescription thereby reducing his taxable income by $1,740, but the reduction in income tax would only be approximately $200, which would not offset the out-of-pocket drug costs.
Consideration should be given to options for prescription coverage when determining what health insurance plan to purchase. Prescription coverage with an HSA policy is included in a single deductible structure. If you choose a more traditional health insurance plan with a dual deductible, or a separate deductible for prescriptions, always discuss with your physician the availability of generic drugs. If a generic equivalent is available, the co-pay will be significantly less than the brand name co-pay and depending on the carrier, a separate prescription deductible may not apply.
STATESIDE CAN HELP!
Stateside Insurance Services, since 2003, has focused on providing comprehensive health insurance information, responsive customer service and expert industry knowledge for Texas consumers. Stateside has annually been recognized by health insurance carriers and the Health Insurance Marketplace as a Top Producer in Texas.
Whether the health insurance policy is for an individual, family, small business or supplemental Medicare coverage, Stateside dedicates the time, and our deep industry expertise, to ensure our clients have identified the best health insurance plan for their specific needs.
Stateside is available to answer any general questions regarding your coverage options, can provide a subsidy determination, and even assist in creating and submitting online applications for ACA compliant plans during an Open Enrollment or throughout Special Enrollment periods.
By using the Telephone Appointment System, clients can take advantage of scheduling a health insurance discussion when convenient for their schedule. During Open Enrollment phone appointment availability is expanded to include extended hours and weekends.