Insurance and the Prescription drug card program

As the cost of prescription drugs continues to rise, health insurance companies put much effort into finding ways to keep these costs in check. This section describes three practices that work toward accomplishing the goal of minimizing drug expenses.

Formularies

Insurers save money with prescription drug formularies. A formulary is a list of drugs that the health insurance plan approves. In a closed formulary, the insurer pays only for certain, approved drugs. If the drug you need isn’t on the approved list, you pay the entire cost. An open formulary offers most drugs, but the prices of the drugs vary. More and more, HMOs are using a three-stage format to set prices for prescription drugs. For example, you pay a copayment of $5 for a generic (no brand name) drug, $10 to $15 for a brand-name drug in the formulary, and around $30 for a brand-name drug outside the formulary. If your plan has a closed formulary, and that formulary doesn’t include your drug, check your plan carefully: It may have a provision that lets you request approval for benefit coverage of your drug.

Step therapy

Health insurance plans also limit the high cost of drugs through step therapy. Step therapy requires plan members to follow a specific progression of prescriptions. You start with the least-expensive medication and then move one prescription at a time toward the most expensive prescription, stopping when your condition is under control. If you already know which prescription drug is successful for you, take action before you join a new plan. Call the new plan’s member services department to see whether it restricts the drug you’re taking. If the plan puts your medication in the Step 3 category, explain that you already take this medication. Ask whether you can leave out Steps 1 and 2. If the insurer denies your request, look for another plan.

Prescription drug card program

Your health insurance plan may offer a prescription drug card program. Prescription drug card programs are a way to give members discounts on prescription drugs when they fill their prescriptions at a pharmacy that is a member of a pharmacy network. You also save money when you get an FDA (Food and Drug Administration) approved, generic equivalent drug instead of the brand-name drug. If you go outside the pharmacy network to purchase a generic or brand-name prescription, you pay the deductible and coinsurance. The plan pays only the amount it would pay if you bought the medication at a member pharmacy.

Mental Health Care

Mental illnesses are brain disorders that frequently make coping with life’s daily tasks difficult. Mental illnesses may affect thinking, emotions, moods, and a person’s ability to relate to other people.

Many health insurance plans provide some mental health coverage for psychological services that mental health practitioners, such as psychiatrists and licensed clinical social workers, provide. Coverage varies greatly from plan to plan. Some plans offer a fixed dollar amount for mental health services for each day of a hospital stay and limit the number of days covered. For outpatient services, plans may pay a fixed amount for each visit and limit the number of visits they cover for each year.

The Mental Health Parity Act (MHPA) of 1996 went into effect in January 1998. This law requires that the annual and lifetime benefit limits for mental illnesses be equal to the annual and lifetime benefit limits that health insurance plans offer for other illnesses and injuries.

The requirements of this act don’t apply to employers with fewer than 51 employees or to a group health plan whose costs increase 1 percent or more as a result of implementing MHPA’s requirements. Some states have passed their own, stricter parity (equality) laws for mental health coverage.

Hospital Indemnity Insurance

Hospital indemnity insurance pays a specified daily, weekly, or monthly amount to an insured person during a hospital stay. You choose the amount of coverage when you buy the plan, so the money you receive isn’t based on the actual cost of the hospitalization. You can spend the amount you receive in any way you choose. Some policies have an elimination period provision that pays benefits only after you’ve been in the hospital for a specific number of days. You can reduce your premiums by choosing a longer elimination period, but remember that hospitalizations are usually for relatively brief periods.

Short-Term Health Plans

Short-term insurance plans are designed to provide coverage for hospitalization and/or medical services for individuals and families when you find yourself temporarily out of health insurance. Short-term policies do not cover pre-existing conditions. With short-term policies, you get to choose the length of the policy. In many cases, coverage can begin immediately after you apply. Short-term plans are not renewable, but you can reapply for a second policy. However, the second coverage won’t continue the coverage you had under the first plan; the second plan is brand-new. Consequently, the second plan considers any condition that occurred while you were covered under the first plan to be a pre-existing condition and doesn’t cover it. The combined total coverage of both the first and second short-term policies usually can’t exceed 365 days.

Eligibility requirements for short-term health insurance vary from plan to plan, so check the requirements of the plan you’re considering carefully. Short-term plans for students are specially designed to remain in effect during a student’s full-time enrollment in an accredited college or university. Short-term health insurance policies are available in most states. For information on student plans, call your school or an insurance company or agent. For student and short-term plans in general, check with your state’s insurance department for companies that sell shortterm plans.