High deductible health plans are changing the customer marketplace
Before the third-party payers entered into the health insurance industry to cover a patient’s medication (full or partial), most patients paid for their medications 100% out of pocket. These amounts used to vary a bit across pharmacies.
Prescription drug shopping back then was more like shopping for necessity items. Cost, convenience, trust, and relationship were the primary factors that shaped consumers’ decisions when they used to go shopping for their medications.
Introduction of Pharmacy Benefit Industry, Co-Payments, and Formularies
With the invention of new medications to treat more diseases, drug prices began to climb. This led to the formation of the pharmacy benefit manager (PBM).
With the existence of PBM, many changes took place in the pharma industry. Many similar drugs with the same action and formula became available to the public. Formularies were becoming popular, and patients were getting accustomed to the term ‘Co-pay’. By the end of 1990’s majority of patients were using third-party payments.
People are Shifting Back to Cash Again…
While employers continued to expand the use of general annual deductibles, the number of patients paying full cash for their prescriptions has increased rapidly.
We have now entered the age of Health Savings Accounts (HSA) linked to high deductible health plans. According to the Centers for Disease Control and Prevention (CDC), more than 40 percent of Americans under the age of 65 with private health insurance were enrolled in high deductible health plans (HDHP) in the first three months of 2017.
What are High Deductible Health Plans (HDHP)?
High deductible health plans have lower monthly premiums than a traditional insurance plan. However, you have to pay these health-care costs to a certain amount until the company kicks in to pay its share. These plans are often linked with a Health Savings Account (HSA). The HSA allows you to set aside some money on a pre-tax basis to pay for qualified medical expenses.
These types of plans (often with individual deductibles of $2000 or more and $6000 or more for a family) disclose the actual prices of medication. That is the main reason that most patients with HSAs are therefore cash customers.
2018 Employer Health Benefits Survey By Kaiser Family Foundation
The Kaiser Family Foundation recently conducted a survey on Employer Health Benefits that we will be discussing here in brief. If you like to read the full report, you can find it on their website. Some key findings from the survey:
- Average premiums for high deductible health plans with a savings option (HDHP/SOs) are considerably lower than the overall average for all the other plan types for both single and family coverage.
- With almost 49% of covered workers enrolled in PPOs, this plan continues to remain the most common and favored health plan type among employers. Other 29% of covered workers are enrolled in a high deductible health plan with a savings option (HDHP/SO), 16% in an HMO, 6% in a POS plan, and less than one percent in a conventional (also known as an indemnity) plan.
- In 2018, the average premium for a single employee increased by 3%. The average family premium increased by 5 percent, whereas wages of employees went up by only 2.6 percent this year.
- About 61% of covered employees are enrolled in either partially or entirely self-funded plans.
- Most covered workers are required to pay a share of the cost when they use health care services. About 85% of covered workers have a general annual deductible for single coverage. These deductibles must be met before most services are paid for by the plan.
Even workers who do not have any general annual deductible and use copayments and coinsurance are required to share the cost when paying for hospital services.
Drug Shopping is Entering a New Era
These increased deductibles have recreated a price marketplace where consumers do drug shopping in a way that they used to do before.
Let me ask you a question. What is your first step when you want to book a hotel or a trip to another city?
Most probably you visit sites like Expedia and booking.com and do comparison shopping. Well, it’s the same thing with drug shopping these days.
If you are a cash paying customer, you will first of all search for the retail price of your drug. After that, you will use various tools like “drug pricing” to find a local pharmacy that offers the best price on your prescription.
To make it easier, visit sites like Discount Drug Network.com and use their drug pricing tool. After that, sign up to get their free prescription discount card for additional savings and save almost 85% on most of your prescriptions.
With discount giants like Amazon entering the pharmacy market, big retailers like Walgreens, CVS, and Rite-aid already fear the loss of the foot traffic at their stores.
For this reason, many pharmacies inside of mass merchandisers or grocers, are filling drug prescriptions at a relatively less cost to increase foot traffic. They believe that by doing so, the patient/consumer will make additional purchases, such as for household items or commodities in their stores.
With growing high deductible plans, drug shopping is now becoming more like comparison shopping. Cash paying customers are increasing and looking for ways to save on their prescription drug costs. If you are one of them, then get your free discount card today for significant savings!
- Kaiser Family Foundation. 2018 Employer Health Benefits Survey; Summary of Findings. https://www.kff.org/report-section/2018-employer-health-benefits-survey-summary-of-findings/. Published October 03, 2018. Accessed May 23, 2017.