Prescription drug benefits provide protection against financial losses due to illness or injury.
With the rising cost of prescription drugs and new drugs that are more expensive than ever; prescription drug benefits are an integral part of any group benefits plan.
Prescription drug benefits are highly valued by employees. Group benefit plans share a major role with government sponsored health care to ensure Canadians have access to proper care. OHIP in Ontario is often wrongly assumed to cover its residents for everything. Private prescription drug benefits build on the minimum universal standard of care provided by provincial/territorial health plans, covering many of the prescription drugs and services that the government does not.
Prescription drug coverage is one of the main features of any group benefits plan. Prescription drug costs are rising and much of the cost has shifted to the private plans. Having to take a prescription that is not covered and has a large cost (in the tens of thousands) can cost an individual their house and lifestyle.
Group prescription drug benefits reimburse the Insured and/or their dependents for certain prescription drugs as specified in their group benefits contract.
Plans today will typically include a pay direct drug card for processing at the pharmacy. Benefit plans will cover drugs and medicines that are medically necessary, prescribed by a dentist or physician, have a drug identification number (DIN) and are dispensed by a registered pharmacist.
How a prescription drug is reimbursed is determined by the plan design and generally based on factors such as the drug formulary type, deductibles, co-insurance, dispensing fee caps and the overall maximum.
A drug formulary is a list of prescription medications that will be covered by a group health care benefits plan. Criteria for placing a drug on a formulary are typically based on what is deemed to be the most effective and economical. Drugs not on the formulary may not be available, may carry a higher co-insurance level or may be accessible only through prior authorization. A formulary can have single or multiple tiers (where cost varies).
Below are two of the most prevalent drug program types or formularies available today.
Mandatory Generic Substitution:
Most plans have moved to a mandatory generic substitution platform for reimbursement. Mandatory generic substitution ensures that all claims for drugs with a generic version pay for the lowest-priced equivalent, even if “no substitution” is indicated on the prescription. Employees will be required to pay the difference, if the higher priced alternative is dispensed. Generic drugs generally provide the same quality, purity and effectiveness of treatment, but at a lower price, and are therefore a great option to manage spending on drugs. If a brand name drug is medically necessary, an employee can typically ask their doctor to fill out a form for an exception to have the brand name drug covered. There are now many savings programs and coupons available from brand name drug manufacturers that pay the difference called continuity of care.
A managed formulary covers drugs that satisfy certain criteria. It may be on a stand-alone basis or in combination with a more open drug formulary where formulary drugs are covered at a higher co-insurance level than non-formulary drugs. For instance, a plan might have a 90% co-insurance level if managed formulary drugs are purchased, versus a 50% co-insurance when other, non-formulary drugs are purchased. To promote affordability most insurers are starting to develop managed formularies that assess the pharmacoeconomic value of a drug prior to listing it. Formularies typically change as new drugs become available. There are also formularies out there that are fixed or frozen, they only cover drugs listed from when the formulary was adopted and are not as common.
A dispensing fee is the fee charged for the professional services of the pharmacist when dispensing a drug which includes explaining how to take the drug and any side effects. Ontario pharmacies must post the fees in view of consumers when they fill a prescription. Dispensing fees vary from pharmacy to pharmacy ranging from $4.00+ to $14.00+ while most pharmacies are typically charging around $10.00. Plans can be designed to cover none of the dispensing fee, some of the dispensing fee, the full dispensing fee, or cap the fee reimbursement at a set dollar amount. Examples of dispensing fee caps are $5.00, $7.00, and $10.00.
Though not as common, there are plans with large drug deductibles such as $1,000 per calendar year to allow for cost savings while providing for catastrophic drug claims. Most commonly, plans will have a per prescription deductible. Some examples of per prescription deductibles are $2.00, $5.00, $10.00.
Coinsurance is the percentage of eligible expenses (after the deductible is applied) eligible for reimbursement under the plan. Most plans will elect a coinsurance level of 80% or 100% although there are also options at levels such as 70% and 90%, etc.
The overall maximum is the maximum dollar amount for prescription drug benefits that a plan will pay as stated in the group benefits policy contract and is typically expressed as a per person, per calendar year maximum. Prescription drug plans can have maximums such as $1,000, $5,000, $10,000 or unlimited amongst other amounts. Due to the high cost of prescription drugs, lower drug limits provide more risk to the Insured as they could potentially be underinsured in the event of larger claims.
Some plans can allow an employer to add-on coverage for smoking cessation, fertility, erectile dysfunction and vaccines.
Group benefits plans may allow for the continuation of health benefits for dependents of a covered employee following his or her death. The survivor benefit will typically be available for up to two years with specific eligibility requirements and conditions.