Medical Prescriptions Costs - Brand Name Or Generic - Big Bill Costs

Do I really need brand name prescriptions in a California health insurance plan?

There has been a trend in the California health market over the past few years towards plan offerings that do not cover Brand name prescriptions or cap the annual payout on these costs. We strongly feel this is the wrong direction considering the overall trends in prescription costs. First, a little history as to why we are seeing this trend and a quick introduction to prescription coverage and your California health insurance plan. 

Prescription Benefits 1.0 in the California health insurance market:

Back in the late 90's, there was a marked change in the way pharmaceutical companies began to market their new brand name medications as well as an explosion in new products to the market. Until that time, a person would go in to the doctor and the doctor would recommend a medication for his/her ailment. The Pull method. Starting in the mid to late 90's, the pharmaceutical companies began to market directly to the consumer. The Push method. We now take this for granted after years of television, radio, and magazine ads touting the latest medications with some advertisements not even stating what condition the medication treats. This had a huge impact on utilization, a snazzy insurance term which basically said more people used more medications at larger amounts. The first sign that we were going to have an issue arrived with the triumvirate of allergy medications, Allegra, Zyrtec and Claritin. The public's uptake of a seemingly benign medication was so great that we were having people declined coverage due solely to their usage. The underlying medical condition (allergies...typically seasonal or common) was not the issue. The cost of the brand name medication was the issue especially as more and more people were prescribed these meds on an ongoing, maintenance basis. It was hard to explain to an applicant why he or she was declined health insurance due to medications but it was essentially a knee-jerk reaction by the carriers as their medication re-imbursement skyrocketed. 
 
Allergies is only one condition that experienced this growth among many others. It was the "good old days" for pharmaceutical companies but not for California health insurance carriers and their subscribers. Acid reflux, acne, and a host of conditions were attacked by new classes of brand name medications with patent term dates far away.
 
The carriers first panicked and then they adjusted. The initial response was to keep the rich benefits (no deductibles, low copays, even on PPO plans) but increase the rates to offset the escalating costs. There was a series of years with double digit insurance premium increases..sometimes twice a year. Clearly, that could not continue. They then start to add brand name deductible to brand name drugs. Generics were not the problem. We recall vividly the poor reception of our clients by having a brand name deductible added for medication...something you cannot get away from today. This deductible typically runs $250-500 annually per person for PPO and HMO plans; Individual Family health plans and Small Group health plans. 

Prescription Benefits 2.0 in the California health insurance market: 

The second approach which has crept into the California health insurance market is to not cover brand name medications all together. The problem with this approach is that it ignores a new trend in medication, potentially much more important and serious than the Zyrtecs of the last decade. The allergy and acid reflux medications were widely used but they ran on average from $60-150 monthly. Yes, this adds up to $1000 plus each year in out of pocket cost but this is penny's compared to the new trend. 
 
The new trend, which is a mixed blessing, is towards highly targeted, highly effective but very expensive medications. An example is the treatment for Rheumatoid Arthritis which consists of 3 shots at $6000 each annually. This is very expensive but it stops the dreaded disease in its tracks. This will only continue as the much touted genetic and biotech promises start to materialize. Can we afford our new technology?? Probably not but that is more of a political question than a market one. The important point for California health insurance purchasers is that you do not want a plan which excludes these drugs. It was one thing not to cover a Zyrtec at $80/monthly. It's quite another to have a $20,000 tab. We have always believed that health insurance is really about covering the big bill and now medications have entered the "big bill" arena. 
 
The first California individual and family health insurance plans to outright exclude medications was Anthem Blue Cross's Right Plan $40 No Rx and Generic only plans. The Right Plan $40 comprehensive still covers Brand RX. Health Net quickly followed suit and the Small Group health insurance market now has plans which do not cover brand RX. This is the problem...most people look at this and say, "Well, I'm not on any brand drugs anyway. I'll just get Generic". That same logic supports the, "I never get sick, why should I buy insurance" statement which precedes 50% of the California's bankruptcies. The public is generally unaware of this new class of medications and the potential financial impact they can have. Knock on wood...we'll never have to personally know but the whole point of health insurance is to cover the "what if". 
 
A similarly dangerous (and we feel deceptive) approach is to cap the brand name RX. Blue Shield of California has rolled out some plans with this practice. The problem is that you look at the benefit summary and it looks like you have a normal brand name copay. Small print (sometimes in another part of the summary altogether) states that the max payout by Shield is capped annually. What they are saying essentially is that they will cover the Claritin but not the $20,000 bill. This partially feeds on people's lack of knowledge or experience with the new drugs and partially on their lack of familiarity with reading plan summaries.
 
In the end, these prescription benefit changes serve a key function. They keep cost down for the very reasons mentioned above. Some Californians may choose to take a calculated risk and reduce their premium by choosing such a plan. We just feel that it is important that they have all the facts and future trends to consider when making such a choice. 
 
Hopefully, this will help narrow the multitude of plans on the market to a few that work well for your situation. You can can now run your California individual health insurance quote or ask us questions regarding your particular situation.