Understanding Health Insurance: Does My Plan Cover This Medication?
Sponsored by Catalyst Pharmaceuticals, Inc.
There may be times when you need medications and want to rely on your health insurance to help take care of the bill, but you find it hard to understand the factors contributing to the fees you end up paying. You may also wonder why your health insurance plan does not provide coverage for a particular medication you need and if there is a way to get coverage for it.
Once you learn the basics of healthcare insurance, knowing what goes into medication coverage becomes much easier. Here is an overview of how health insurance works, what contributes to the price you pay for medications, and what you can do when you need a drug that your health insurance plan does not cover.
What is Health Insurance?
Health insurance is an agreement between you and an insurer that enables the insurer to help cover medical bills, typically for a premium or monthly fee. In healthcare insurance, there are roles that different entities play. The main players are:
- Patients and/or Employers
- Pharmacy benefit managers
The patient and/or employer is the one who pays the premium for health insurance. The patient in need of medical care or tests receives it through medications, imaging and testing procedures, or other treatment methods.
A provider is a term used for health professionals or companies that prescribe medications and provide medical and health services to patients. Providers are often physicians, nurse practitioners, physical therapists, optometrists, podiatrists, chiropractors, dentists, and clinical psychologists.
A payer, or sometimes referred to as a payor, is the person or body that helps pay for a patient’s medical services. Payers are typically private health insurance companies like Blue Cross Blue Shield or national government-sponsored health insurance programs like Medicare and Medicaid.
Pharmacy Benefit Managers
Pharmacy benefit managers, or PBMs, are companies that serve as a type of middleman between payers and drug manufacturers. Payers contract PBMs to negotiate with drug manufacturers to receive affordable prices for drugs that the payer covers for its enrolled patients, known as a drug formulary.
The drug formulary classifies the drugs and indicates if a drug has a quantity limit, which is the amount of the drug that the payer will provide coverage for over a specific timeframe.
Some of the most notable PBMs include:
- CVS Health (Caremark)
- Express Scripts (ESI)
- Optum Rx
- Prime Therapeutics
What Contributes to the Price You Pay for Prescription Drugs?
If you are uninsured, or your health insurance plan does not cover a particular medication (the drug is not on your plan’s drug formulary), you often must pay the list price that the drug manufacturer sets for the drug, in addition to a pharmacy markup. However, there are assistance programs through pharmacies, retail stores, state and federal agencies, or the drug manufacturer themselves that can help you receive the drug if you need it but cannot afford it.
If you are insured and your health insurance plan covers the medication you need, you will usually pay a copay or coinsurance. A copay is a price your insurance plan sets for purchasing the drug, while coinsurance is a portion of the drug cost you pay after meeting your plan’s annual deductible. The deductible is the amount of money you must pay for covered medical services before your insurer starts to help cover those services. The price you pay may also rely on a plan’s annual out-of-pocket maximum, which is the maximum amount of money you must pay for covered medical services before your health insurer starts to cover the entire cost of future covered medical services.
Also, the drug itself has much to do with the cost. Some drugs are more expensive to make than others, resulting in a higher list price and a higher copay or coinsurance. Some drugs are so complex that they are referred to as specialty drugs.
Specialty drugs are usually the most expensive and in their own category on a drug formulary. They are drugs for chronic or rare conditions and are often not found in pharmacies and retail stores. These drugs typically have unique storage or shipment requirements, such as needing to be refrigerated.
Why Does Your Health Insurer Need Prior Authorization for Certain Medications?
Many health insurance companies require a prior authorization (PA) request before covering certain medications. It is a form for you and your provider to fill out and explain why the medication you are seeking is medically necessary to improve your health. It is to help reduce unnecessary expenditure, especially if there are cheaper options, as health insurance plans tend to cover generic versions of brand-name drugs, lowering costs for the insurance company and the patient.
But for some patients, a brand-name drug may be more effective than a generic version. In these cases, if an insurer’s health insurance plan covers a brand-name drug in addition to its generic counterparts, step therapy may be required as part of the PA process before the insurer will cover the more expensive brand-name drug. Step therapy is when a patient tries the generic version(s) of a brand-name drug to assess its effectiveness and will “step up” to the brand-name version if the generic version(s) is ineffective in treating their condition.
What Happens If Your Health Insurance Does Not Cover the Prescription Medications You Need?
Needing a medication that is not covered under your health insurance plan or needing dosages of medications that go beyond the quantity limit of your insurer’s drug formulary can be problematic. Thankfully, there is a process known as a formulary exception request that allows patients and their prescribing provider to request that the patient’s insurer provide coverage in such instances.
For a formulary exception, your health insurance company will usually provide a fillable form for you and your provider to complete and send back to them. A verbal or written statement from your provider is often needed, explaining why the non-formulary drug or the amount of drug exceeding their drug formulary’s quantity limit is necessary to treat your condition.
Understanding how your health insurance plan helps cover the cost of your drugs enables you to know the reasoning for the prices you pay and how you can effectively receive coverage for the medications you need. Health insurance plans can differ significantly from each other, though, so it is essential to contact your insurer directly for further details on the terms of your plan.
This article is Sponsored by Catalyst Pharmaceuticals, Inc. on behalf of its LEMSAware.com program, where LEMS knowledge turns into strength. For more information about health insurance, watch the LEMSAware insurance webinar. To learn more about LEMSAware, visit www.lemsaware.com.