Choosing the right health insurance plan can be a challenge, even for the pros. It can be even more difficult when you or a loved one has a complex, rare, or chronic condition requiring maintenance medication. In this blog, I’d like to focus on a specific class of medications called specialty drugs. Coverage for specialty drugs can vary by insurer, and so can your share of the cost, depending on the plan’s deductible, coinsurance, and out-of-pocket limit.
What are specialty drugs?
Specialty drugs are complex and/or “high touch” medications that are prescribed for people with complex, chronic, or rare conditions like cancer, multiple sclerosis, hepatitis C, HIV/AIDS, and rheumatoid arthritis, among others. Because of their complex nature, they typically require special delivery, preparation, handling, storage, distribution, and patient education. They also tend to be very high cost. The table below shows the average annual cost for three different specialty drugs used to treat three different conditions, before insurance is applied.
|Average Annual Cash Price (using discount coupon)
If you or a covered dependent takes a specialty medication, you’ll want to consider how each of your plan options covers these drugs as you choose your coverage for the coming year. Let’s walk through these components one by one.
Medical or Drug Benefits?
You might not realize it, but 50% of specialty drugs actually run through medical benefits, not drug benefits.If a healthcare professional administers your specialty medication, whether at a doctor’s office, clinic, or in your home, the specialty drug will likely be covered through your medical benefits. However, if you administer your own medication, it will probably be covered through the prescription drug portion of your health coverage. Before you go any further, it is important that you know how the drug will be administered.
Your deductible is the amount you have to pay out-of-pocket before your insurance kicks in. For this reason, it’s important to determine whether the options available to you have a combined medical and prescription drug deductible, or if they are separate. Separate prescription drug deductibles are much lower than medical or combined deductibles, so will be easier to meet.
Compare the applicable deductible to the cash cost of your specialty medication. If your deductible is high, you could end up paying for one or more months of medication completely out-of-pocket before your insurance kicks in. Let’s look at an example.
Assume your plan has a combined medical and prescription drug deductible of $4,000 and you are taking a specialty medication that costs $2,000 per month. If you don’t incur any other health expenses, you’d have to pay the entire cost of your first two months’ prescription in order to hit the deductible.
Specialty Drug Formularies
Every insurer has a formulary, a list of generic and brand-name drugs that are covered by your plan. If a drug is not on the formulary, you will have to pay the entire cost yourself, unless your doctor can convince your insurer that no other option will work for you. Insurers have a separate formulary list for specialty drugs, and you’ll need to check that list to see if your medication is included. This list can change over time, so keep checking back to see that your plan still covers it. If it doesn’t, you might have to switch plans or come up with another way to cover the cost of the drug.
You have hit your deductible, and your insurance has kicked in, now what?
Copays and Coinsurance
In general, once you have hit your deductible, the copay or coinsurance for your specialty medication kicks in. Continuing on with the example above, after you meet your $4,000 deductible, your coverage will take effect and you will only be responsible for the plan’s $150 specialty medication copay each time you fill your prescription.
As you evaluate health insurance plans, there are a few costs to take into account: for instance, checkups and other evaluations for the condition that requires the specialty drug. There’s also the cost of the premium, and the copay or coinsurance. Multiple states are setting limits on how much a specialty drug can cost the consumer out-of-pocket. Check your state’s guidelines to see what your options are.
Because of the high cost associated with specialty drugs, knowing the out-of-pocket maximum on your plan is important. This is your safeguard to limit the amount you will have to pay out-of-pocket in a year. In our example, if you have no other health care expenses, you would reach the out-of-pocket maximum in August, which means your specialty medication is covered in full for the rest of the year.
You won’t be able to comparison-shop for the best price on your specialty drug, like you would with other medications. But check with the manufacturer to see if they offer a rebate or coupon. Nonprofit groups, especially those associated with your chronic condition, may offer financial assistance. State programs offer help with prescriptions as well. Check your state’s website to see what it offers.
If your employer offers them, you can also use a health care flexible savings account (FSA), health care savings account (HSA), or health reimbursement arrangement (HRA) plan to reimburse yourself for some of the costs of your drug. You can put money into an FSA or HSA tax-free to use on certain medical expenses each year. Under an HRA, your employer contributes to an account on your behalf. HSAs and HRAs are typically only available if you elect a high-deductible health plan, while a health care FSA is available (if your employer offers it) if you elect any other type of health plan (even if you don’t elect coverage through your own employer).
Other Things to Consider
Remember our discussion about the high cost and high degree of complexity of specialty drugs? Because of this, insurance plans might also include other conditions like those listed below. It is important to be aware of these conditions and allow extra time to fill your prescription, especially the first time on a new plan. Work closely with your doctor and your pharmacy to make sure you have the right paperwork to submit to your insurance company.
- Prior authorization – Your health plan may require your doctor or pharmacy to file prior authorization paperwork before they will cover your specialty medication.
- Step therapy – Your health plan may require you to show that a lower-tier medication has not worked for you before they will cover your specialty medication.
- Specialty pharmacy – Because of the complex handling and storage associated with specialty medications, many insurance plans require that consumers use a specific pharmacy to fill their specialty prescriptions, or to fill your prescription through a mail-order pharmacy. You may not be able to use your usual pharmacy for your specialty medication.
- Utilization management – Because of the high cost associated with specialty medications, insurance companies want to minimize the amount of these drugs that goes to waste. To do this, they might limit your prescription to a 30- or 34-day fill at any one time. They may also limit how quickly you can refill your specialty medication.
There is a lot to think about when choosing the right health plan, particularly when you want to minimize your out-of-pocket costs for expenses like specialty medications. Take the time to do the math and consider all your options before choosing a plan – and remember, the plan you have now may no longer be the right choice for you.