After determining a premium, most people focus their choice of insurance carrier on plan benefits such as deductibles, copayments, provider networks, and maximum out-of-pocket reimbursements. All these factors are important to understand, but people often overlook a plan’s prescription formulary and how it treats prescription benefits. Formularies are an important component of health insurance plans. You need to understand them to get the most benefit from the prescriptions issued by your doctor
First Off: What is a Formulary? A formulary is the list of drugs a health insurance company identifies as most effective for treating specific condition as related to the lowest cost. Prescription medications are mandated by the federal government to be included in the list of 10 essential health benefits as mandated by the Affordable Care Act.
How Does a Drug Get into a Formulary? The list of drugs in an insurer’s formulary is based on research and documented results. Pharmaceutical companies provide health insurance carriers with scientific findings on the drugs they manufacture. These results justify the insurer’s decision to add a particular drug to a plan’s formulary. Formularies are designed to provide at least one drug in every United States Pharmacopeia (USP) category or class. They are updated each year and are available on an insurance company’s website in a searchable format or as a PDF to download and print.
How Formularies Work in Texas. All Texas health insurance carriers rely on drug formularies to manage their plans’ prescription benefits. Although prescription drug spending has been relatively small compared to overall health care spending, it is been one of the fastest growing components. For this reason, health insurance carriers have focused on managing prescription costs. The Centers for Medicare & Medicaid Services (CMS) reports that retail drug spending increased 42% from 2010 to 2020. A recent report from online prescription discounter Goodrx.com reports that 629 brand and generic drugs increased in price by an average of 8.2% in 2019.
Formularies are designed to change our buying habits by encouraging us to request the insurance carrier’s preferred drugs. The goal is to reduce the impact of prescription costs on overall premium costs without negatively affecting the desired results of the treatment. Beginning in 2016 when Texas health insurance carriers moved from PPO plans to HMO plans, the change dramatically affected the formularies and how the carriers apply prescription benefits.
The major change several carriers enacted involved brand-name drugs with generic equivalents. Carriers changed their prescription benefits, so they do not provide a brand-name copayment when a generic drug is available. If there is no available generic, the carrier will offer the appropriate brand-name preferred or brand name non-preferred copayment. The obvious result: to direct policyholders to the lower cost generic drug. If the policyholder chooses the higher-cost brand-name drug, the cost is shifted to the policyholder.
A secondary effect of the formulary change had a direct impact on prescription benefits offered with Bronze plans under the Affordable Care Act. Bronze plans typically have plan deductibles exceeding $6,000. Coinsurance offered by the insurance carrier does not apply until the plan deductible has been met. If policyholder is issued a brand-name drug and there’s a generic equivalent, not only will the brand-name drug not be covered, if the policyholder insists on the brand-name drug the cost won’t be applied to the plan deductible.
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.