With over half of Americans taking prescription medication regularly, those medicines can quickly become expensive. Even just a one month supply of some medicines can cost hundreds of dollars without insurance.
To manage these costs, many people turn to commercial prescription drug insurance. Typically provided by nonprofit or for-profit organizations, these plans pay some or all of the expenses for prescription medication.
How Does Commercial Health Insurance Work?
Commercial health insurance refers to any coverage that isn’t sponsored by a government agency. Medicare or Medicaid are both examples of government-sponsored health insurance programs. A health insurance plan that an individual purchases through their employer from private insurers, for instance, would be a form of commercial health insurance.
Most commercial health insurance plans, including those for prescription drug insurance, work the same way. When an individual signs up, they should already have an idea of what their plan covers. Some health plans might only cover a portion of medical procedures or medications, while others are designed to take on the majority of the cost. For prescription drug coverage, many health plans often have guidelines about how much of a medication they’ll cover or what types of medication.
For instance, some health plans might cover a one-month supply of medication, but not the cost of picking a prescription up early. Anytime that someone is dealing with a medical procedure or getting prescribed a new drug, a claim will be filed to the insurance provider. In most cases, the individual shouldn’t need to file a claim on their own. As long as the procedure or the medication fits the individual’s guidelines, the insurance company will provide coverage.
Types of Commercial Health Insurance
Commercial health insurance falls under a broad category. For most people, there are several different types of health insurance that they can pick from. It’s usually categorized by the type of benefits that it provides and its renewal provisions.
An Exclusive Provider Organization (EPO) is a plan that restricts which doctors and medical services an individual can go to. The services are usually only covered if the procedure happens in the provider’s network of doctors, hospitals, and specialists. There may be exceptions for emergencies. For instance, if an individual were out of town but needed emergency surgery, the provider might view the hospital as in-network.
A Health Maintenance Organization (HMO) is a type of plan that usually limits its coverage to specialists or doctors who contract or work for the HMO. Unless it’s an emergency, procedures, or medication from doctors out of the HMO’s network won’t be covered. Keep in mind that HMOs are typically restricted by distance as well. To qualify for this type of plan, an individual usually has to live or work in the HMO’s service area.
A Preferred Provider Organization (PPO) allows individuals to get service from doctors or specialists that are out-of-network, but they might be more expensive. This type of plan encourages people to use in-network medical services by making them cheaper. However, this plan can be more appealing to some people since they don’t need a referral to gain coverage for out-of-network doctors.
Point of Service (POS) plans try to encourage individuals to use doctors and hospitals that are in-network. In order to see a specialist, patients need to get a referral from their primary care doctor first.
Individual vs. Group Health Insurance
Besides the types of different plans that people can purchase, health insurance is usually split up into two major categories: individual and group health insurance. Group plans are usually purchased through an employer, while an individual health plan is something that people must buy on their own. Anyone who is self-employed, freelancing, or owns a business might have to buy individual health insurance.
Group Commercial Insurance and Prescriptions
Not all commercial prescription insurance plans cover prescription drugs 100% - especially if you are enrolled in Medicare Part B or Medicare Advantage. Talk with your doctor and insurance company about pricing for high cholesterol, diabetes and acne meds.
Group Commercial Insurance and Prescriptions
Although someone could buy individual health insurance even if they work for an employer, most people don’t.
Group plans have a few key advantages:
- Your employer will give different options for health insurance policies
- They’ll answer any questions that employees might have about that health plan
- Pay a portion or all of an employee’s monthly premium
- Automatically deduct the employee’s portion of the premium from their paycheck
- Provide any documents that an individual needs
Not only can group coverage be cheaper, but it also makes the process a little easier as well. Rather than having to find a plan and contact an insurance company on their own, an employer does most of the heavy lifting.
In comparison, individual health insurance requires a little more work. On top of shopping for a plan on their own and finding one that will cover their needs, an individual must also pay the entire monthly premium and manage their own benefits. With individual health insurance, figuring out what the plan covers (and what it doesn’t) can be trickier than with group insurance.
Commercial Prescription Drug Insurance
In addition to paying for medical procedures like surgery, most health insurance plans also include prescription drug insurance. Depending on the type of plan you have, some insurance companies may cover the cost of the entire medication or a portion of it.
Bronze insurance plans, which often have the lowest monthly premiums but high annual deductibles, include prescription drug insurance, but they might not cover the entire cost. An individual may still be responsible for a copay or a portion of the medication’s cost. Certain providers, like United Health Care, might have to approve certain medications before they provide coverage for them.
Both silver and gold insurance plans also typically cover a portion of prescription drugs (if not the entire cost). However, there still may be limitations as to what pharmacy works with the insurance company or the type of medication.
With a platinum plan, which is designed to cover 90% of medical costs, it’s unlikely that an individual will need to pay a copay when they pick up their medicine. Platinum plans usually cover the entire cost of the medication.