How drug costs affect your group insurance

It's basic math: the more expensive a drug is, the higher the claim on group insurance will be—and the bigger the cost increase come renewal time.

The insurer will look at premiums paid during the year as well as claims made during the same period. If claims were too high in relation to premiums, then the cost of the plan will go up in the insurer's renewal proposal. Conversely, if members made few claims during the period, the cost could go down.

Despite the media coverage of this issue over the last few years, it seems that employees and employers still haven't changed their ways, because the cost of group insurance plans keeps on increasing. An aging population and the development of new and more expensive drugs are clearly factors in the increase, but they don't tell the full story. Plan members also shoulder some of the responsibility. 

A few tips to reduce drug costs

This brings me to what each of us can do to help curb the rising cost of drug insurance. 

You can buy almost everything online these days, so why not order your prescription drugs from the comfort of your own home?  If your condition is stable and you have been taking the same medication for several years, you might consider buying your maintenance drugs online (for conditions such as high blood pressure, high cholesterol and diabetes, for example).  I'm obviously not suggesting that you buy your medication from dubious websites.  Rather, I'm thinking about the new style of pharmacies that will mail your prescription to you, like the ones that have opened over the past year.

Other ways to save:

  • Ask for generic drugs. They are just as effective as brand-name drugs, but less expensive. 
  • Ask your pharmacist to give you 90–100 days' worth of medication, to save money on dispensing fees.
  • If you're not comfortable buying medication online, at least take some time to shop around and compare the cost of the drugs you buy every month. Although it may be convenient to get your prescription at your local drugstore, you can save money in the short and long term by comparing costs at different pharmacies.

The pricing myth

My time working in the group insurance field has taught me that most consumers think that prices are the same everywhere. Unfortunately, this isn't the case. Prices can even vary from drugstore to drugstore within the same chain. The price you pay actually depends on a number of factors:

  • The services the pharmacy offers
  • How much it pays in rent
  • Its purchasing power.  Are we talking about an independent pharmacy, a well-known drugstore chain or a big-box store?

When market forces come into play, the final cost of a drug can vary depending on whether you're buying it in a big city or a rural area.

Small changes can make a big difference

Let's imagine a plan member who goes to fill his prescription at a pharmacy. Because he has group insurance, he only pays his deductible and co-insurance. His receipt will certainly show the full cost of the drug, but will he bother to look? Transactions are so easy that the vast majority of people with group insurance don't know how much their medication actually costs. The impact of the choices they make (the choice of pharmacy, brand-name or generic drugs, a 30-day or a 90-day supply, etc.) is not immediately obvious to them.

Because they pay only their deductible and co-insurance, plan members mistakenly think they don't pay the full cost of their medication. They often completely forget to include the cost of their group insurance. Sooner or later, our plan member will end up paying more than he did at the cash register, because the cost of drug claims will be taken into account when his employer's plan is renewed. If he remains oblivious to the cost of his purchases, and if all his colleagues do the same, the cost of their insurance will eventually go up.

If you take away just one thing from this article, let it be this: making informed choices will save you money in the short term and, above all, help ensure the viability of your employer's group insurance plan. By following these few simple tips, together we can make a real impact on insurance plan costs.

 

Always listening to his customers, Benoit Rondeau is Deputy Vice-President, Sales and Development - Group Insurance for National Bank Insurance Firm and a Group Insurance Plans Advisor.