Despite rising costs, few limit prescription benefits

Almost everyone agrees that the increasing cost of prescription drugs is a big factor in the rapid rise of health insurance premiums.

Coming up with an answer is far more difficult.

The cost of drugs is rising faster than other segments of the health care industry, says Norm Roberts, president of Alta Insurance Agency in Reno, and television advertising of brand-name drugs prompts patients to demand those drugs from their doctors.

That demand for brand name drugs, in turn, is the single strongest item leading to increased costs, says Kevin Sampson, president of Health Benefits Associates.

"Now prescription drug costs range from 20 to 30 percent or higher of plan premiums. That's equal to the cost of three weeks in the hospital," Sampson says.

As recently as six to eight years ago, he adds, drugs comprised between 3 percent and 5 percent of insurance carrier costs.

Unhappy as they may be with costs, insurers worry that the effects of further limitations on prescription drug coverage could lead to bigger problems.

If a plan drops pharmacy coverage, explains Sampson, people stop taking their prescription drugs.

"In the case of high blood pressure medication, stopping the meds can lead to a heart attack. That translates to a huge claim on the medical side," he says.

For that reason, says Valerie Clark, president of Clark and Associates, "Unbundling prescription plans only happens once in a blue moon. Only one among all our clients does it. It's not a safe way to go, in my opinion."

Even if employers wanted to make pharmacy an option like vision or dental coverage, she adds, "Most carriers will not unbundle health and prescription coverage. You end up regretting it most every time."

But employers have another option, says Phil Randazzo, president of Nevada Benefits Associates. Companies are charging higher co-pays for brand name drugs and adding deductibles to prescription plans.

Rather than severing that pharmacy insurance card from the health insurance card, he adds, "When we consult, we recommend raising co-pays."

A health plan's deductible can apply to prescriptions, too, says Roberts. "To have a free market, you must have price sensitive consumers."

Another trend, says Sampson, is the insurance plan that will only pay for generic drugs.

"They may not be the latest and greatest drugs on the market, but there exists a generic to treat every condition,"

he observes.

And that ban on brand-name drugs can translate to a 10 to 15 percent reduction in premium costs.

When it comes to changes of any kind in health care coverage, the challenge, says Sampson, is communication.

"The employer must have open discussion with employees," he says. Much trouble could be avoided if employees knew the details of their plan and how to use it. "Employers must keep employees in the loop."