Health insurance companies are constantly looking for new ways to make money. Two of the major impediments to their quest are sick people and the drugs they need. Clever, as a good corporation should be, they have figured out how to overcome the second of these obstacles. Two techniques are employed. The first is practicing medicine just the way doctors do even though few, if any, insurance companies have attended medical school.
When a doctor prescribes a specific drug for a patient (whom it has never met) the insurance company may decide that the generic equivalent of that drug is just as good for the patient as the one that the physician prescribed and refuse to pay for the physician prescribed drug. In that event, if the patient wants to use the prescribed drug the patient must pay for the drug out of his or her own pocket.
There is, however, a built in appeals process that patient and doctor can go through if they would like to prove that the trained doctor’s decision is more medically accurate than the corporation’s but it is a somewhat cumbersome process. Why the company insists on substituting its judgment for the doctor’s judgment is best known to the insurance company. As creative as this is on the part of the insurance company, it is not the most dramatic example of saving money through creative insuring.
A recent report in The New York Times discloses that some insurance companies have realized increased profits by reducing the amount of money they are willing to pay for certain prescription drugs taken by their insureds. It seems like such an obvious thing to do that the only remarkable thing is that the insurance companies have not thought of it before now.
Before the companies became creative in reimbursing for drug costs, the insured was required to pay a fixed amout (known as a co-pay) for a prescribed drug that that went anywhere from approximately $5.00 to $50 the amount of the co-pay being determined by the company and on whether the drug was a Tier 1, 2 or 3 drug. The insurance company paid the difference between the drug’s co-pay and its actual cost to the insurance company. Then, a funny thing happened on the way to the pharmacy. The insurance companies invented Tier 4 into which they placed REALLY expensive drugs.
People taking Tier 4 are the beneficiaries of the new policy. Here is how three randomly selected insurers have made themselves its beneficiaries.
The American Association of Retired Persons (AARP) requires patients taking Tier 4 drugs to pay 30 percent of the cost of the drugs with no limit on how much the insured ultimately has to pay. The drug Sprycel is a tier 4 drug that blocks the growth of cancer cells and eliminates the need for chemical infusions. It costs $13,500 for a 90-day supply. AARP requires the insured to pay $4,500 for each 90-day prescription and AARP pays the balance. First Health Life & Health also charges a flat 30 per cent for Tier 4 drugs without any limit on what the insured pays.
Kaiser Permanente, by contrast, tempers profitability with mercy. It requires its insureds to pay only 25 percent of the cost of Tier 4 drugs and places a $325 limit on how much the insured has to pay for each prescription.
Increasing the insurance companies’ profitability is not the only benefit from the new program. For Medicare beneficiaries who have to pay 5 percent of their drug costs after they’re through what’s known as the doughnut hole, the increased amount they are forced to spend gets them through the doughnut hole more quickly. (Not all Medicare beneficiaries will see the benefit in that.) Another benefit that will, however, be obvious to its beneficiary is the cost savings that inures to the benefit of employers who furnish health insurance to employees.
Karen Ignagni is president of America’s Health Insurance Plans, an organization that represents most of the health insurance industry. She pointed out in the New York Times story that lower outlay for prescription drugs means the insurance companies can charge employers lower premiums, thus providing a cost benefit to employers. Adding those benefits to those enjoyed by the insurers makes it obvious that the new policy is a win-win except, of course, for those who can no longer afford to take drugs.
In George Bush’s United States 47 million people have no health insurance. In George Bush’s United States 9 million children have no health insurance. Thanks to the creation of Tier 4, we will soon have a new class of citizen. It will comprise people who have insurance but are unable to pay for the drugs needed to keep them in or restore them to, good health. In a few years we will know how many people are members of their class. They will join the uninsureds as statistics.
CHRISTOPHER BRAUCHLI is a lawyer living in Boulder, Colorado. He can be reached at: firstname.lastname@example.org