Generic versus Brand RX Coverage and California health insurance

Many of the most popular suites of plans on the current California health insurance market give you a choice when it comes to prescription drug coverage.  Choice is usually a good thing but with choosing a health insurance plan already complicated by dozens of available plans and benefit summaries written in an old form of Klingon, one more decision can freeze the mental process of picking a plan.  The fear of making the wrong choice can often lead to no choice at all and the generic versus brand RX obviously has ramifications for your pocket book both in the short term (premiums) and long term (potential exposure to brand RX costs).   Let's try to break down this decision to make it a little more manageable.  Enter the world RX coverage on the California health insurance market!

First, what's the difference between generic and brand name.  Great question.  Most medications begin their journey to the marketplace as a brand name drug which essentially means that they are protected by a patent for a period of time.  The net effect of this patent is a higher retail cost which is why there's even a distinction to begin with.  After a period of time, the patent ends and other manufacturers are able to produce the same basic chemical formula on a generic basis.  This newfound competition generally reduces the costs significantly.  We won't wade into the political minefield of brand name patents and costs aside from how it impacts you, the California health insurance shopper.

We've been independent agents long enough to remember the first big wave of brand name drug cost explosion with the triple threat of Claritin, Allegra, and Zyrtec.  The carriers panicked as their claims experience exploded just due to allergy meds.  I remember people getting declined just due to brand allergy meds which was quite depressing as a broker.  With time, the carriers adjusted and added brand name drug deductibles not to mention quite a few percentage points on the premium to account for the oncoming waves of brand RX hitting the market which leads us to today's market.

Most of the popular suites of plans such as Cross' Smart Sense and Blue Shield's Vital Shield Plus plans offer identical plans with different RX options.  For example, you may choose the Smart Sense $3500 deductible plan with generic only or the same plan with brand name drugs covered.  Keep in mind that most plans that cover brand RX on the market currently have a brand RX deductible of $500 annually (calendar year).  This means you will pay the first $500 of brand RX benefits (per person/calendar year) before you get copays.  Generics are generally available right away at a $10 or $15 copay with no deductible depending on the plan.  HSA plans include the RX in the main deductible which is unique. So how do we compare the generic only or brand option?  What's the risk and reward to either?

First, look at monthly premium difference for like plans and multiply by 12 to get your annual difference in cost.  Make sure you're looking at identical plans ($2000 deductible versus $2000 deductible under same plan name).  Now add $500 (your brand deductible).  This is the amount you would need to spend in brand RX coverage to break even by going with brand RX.  Depending on your age and area, the difference might be $750-1000 on average per year.  On one hand, it takes a lot of brand name drugs to justify an extra $750-1000.  So what's the risk to offset this savings?  The main risk is for more catastrophic RX needs.  Keep in mind that we're generally not talking about medications administered in a facility (hospital) setting as those will likely be covered under the main plan benefits.  This is the issue...the new medications can be amazing in their efficacy but also extremely expensive.  This trend will only continue if not accelerate as genetics and information technology attack the intersection of chemistry and health.  For a more chronic issue (like rheumatoid arthritis), it's not inconceivable to think of medication costs in the 10's of thousands of dollars.  Anthem Blue Cross has addressed this well by putting a ceiling in their "Generic only" plans of $7500 which protects you from the above situation.  We feel this is the direction to go with the market so that people can self-insure the smaller brand RX exposure but have actual insurance for the catastrophic brand. 

Other important concepts to help you understand your California health insurance quote are:

Question on the individual health insurance application
Individual health insurance underwriting
Enrolling for Individual health coverage in California
Download the health application or apply online
What can delay your individual health application
Options for people who do not qualify