How do prescription costs affect my premium?
This is a complex question that should be addressed
from several angles to help shed light on the seriousness of this issue.
It is estimated that nearly 35-40% of every premium dollar you pay for health
insurance is set aside for Rx costs. That doesn't leave allot of room for ER
coverage, regular physicals, planned or unplanned procedures, disease treatment,
maternity and the list goes on.
- First I need to point out that the number 1 reason
for health insurance premiums on the rise is the cost of medications.
The national health insurance rate increase last year (2004) was 22%
It is projected that this year alone should be nearly 27% I want to
indicate that if you are a current client whom we manage we combat these
type of increases affectively through various strategies some of which can
be viewed here>
. After you have had a chance to read this article about prescriptions
please take a minute to go here to read what the Texas State Insurance Board
Texas department of Insurance . There you can see what
the "Base" rate is in your area and the complex formula to determine it.
I say "Base" because it reflects normal health
and not high risk or current health conditions
which causes rates to be more.
- Secondly, I need to illustrate the differences of
charges between a "hospital facility" vs. "prescription". Those
of you whom have been in a hospital for a procedure can remember getting
statements (EOB) from the insurance carrier. On that statement you may have
noticed the total bill AFTER the discount. You see the
hospital contracts with the insurance carrier for "discounted" rates.
In turn the hospital shows that "discount" as a loss. As long as the
hospital retains in JACO certification they are able to submit that loss to
federal and state government agencies for reimbursements. This
achieves cost control overall for a insurance carrier. Not to mention
"reinsurance policies" that a carrier buys from another insurance entity to
cover large one time claims. BUT prescriptions are different. When you
submit a prescription at a pharmacy for payment, you pay a copay. Right?
The insurance company pays the difference of the cost of that medication.
Whatever the cost is with NO
predetermined discounts and the insurance carrier can't purchase
"reinsurance policies" to cover these types of losses. You can
remember when we had just "Generic" and "Name Brand" Rx copays? Now we
have all kinds that get my head swimming. We have Generic, Name Brand,
Formulary, Non Formulary, Discounted, and least but not last % copay.
Carriers have come out with these copay options to combat the rising costs
of medication as well as the hundreds of medications that are released into
the market through FDA approval.
- This brings the third point. Do you remember the
presidential debate about allowing prescriptions into the United States from
Canada? How can that help health insurance rates? Competition
combats inflationary pricing. That is really the bottom line and
history has proven that. Everyone knows that many prescriptions in the
United States are "inflated" in pricing. I will address this latter in
the article. Why hasn't Canadian prescriptions been allowed in the United
States? FDA must approve any prescription for open market use prescribed by
- My fourth point here will begin to stab at the
heart of the issue. When the FDA approves a medication for general
release into the market just about all health insurances do not cover it
very well or even at all. Especially if it is a "Elective" medication
used to treat symptomatic issues not related to maintenance of a health
standard. Some examples are Viagra and Weight Loss medications.
When these medications are released into the market they still undergo field
studies and FDA gathers results from general public use. Some medications
are found "Unsafe" and pulled off the market. Some recent medications
pulled from market are like VIOX. Legal damages are estimated to reach
18 million. See>
http://www.vioxx-center.com/ . So what does Merck
pharmaceutical do to stabilize such losses. Current medications they
distribute and any new RISE IN COST. Who pays for that? You and
mostly insurance carriers. This is why President Bush is fighting to place
"CAPS" on medical and pharmaceutical judgments. It is the most
effective way to get overall costs down.
- To summarize there are no regulatory mechanisms in place to control the
cost of prescriptions. Federally this can be done by applying a cap on
the time period a pharmaceutical manufacturer can exercise "Patent"
restrictions. This will push Name Brands into Generic distribution
faster. (See bullet below). The other mechanism that can regulate costs is
open market competition. The FDA is already strained now to breaking
point. A entire arm of the FDA would need to be created to "police"
the quality of medications allowed into United States or manufactured so
that the "patient interest" is always #1 concern. In closing,
hopefully this article helps shed a little light on the issue of why health
insurance increases every year and what we do to combat it for you.
More importantly what you can do to voice your concern with your state
representative or senator.
- Patents? Pharmaceutical manufacturers have patents?? You bet they
do. When a Pharmaceutical manufacturer begins "construction" on a
medication to treat diseases, symptom related illnesses, mental health, and
elective medications they establish a MORTGAGE. This mortgage pays for
the development of the medication. It pays the expensive research,
testing, etc. This goes into the millions. The patent protects
the mortgage because through marketing research the manufacturer knows it
can earn enough back in a time period (PATENT) to pay off the mortgage and
make a profit. The problem I have is my investigations show that a
manufacturer actually breaks even in the early 3rd year. We are
talking about millions a year in revenue brought in for just ONE
prescription. Why should a Patent be allowed any longer. Why not
shorten the patent so that competitors can make "GENERICS" that pass FDA
standards? Competition among "GENERIC PHARMACEUTICAL MANUFACTURERS"
forces the price down and history has proven that. One example is the
Rx Prozack. When it first came out the cost of the medication was nearly
$140 for a thirty day supply. You paid on average a $25 copay and the
insurance company paid the rest. Now that it is a generic it costs a
total of $40 - $50. You pay either a $5, $10 or $15 copay now
depending on your plan design. Lets look at Allegra? Now you can
get it over the counter at a fraction of the cost compared to 2.5 years ago.