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Protecting Your Future, Today                          

The Benefit Basics

March 2008

 
In This Issue
What are the benefits of choosing generic drugs?
What is the difference between a copay and coinsurance?
Why does it matter where I get my prescription drugs if I have a copay?

What are the benefits of choosing generic drugs?

Kristen Mumper
 

PillsYou may be surprised to learn that generic drugs are (with few exceptions) the same formula as the brand name drugs they mimic. In fact, the FDA requires that generic drugs meet the same standards as their brand name counterparts.  The only real difference is the name of the drug, and the cost. Generic drugs cost 20 to 80 percent less than brand name drugs.  Therefore, they are usually a lower copay through your medical insurance carrier.  Most prescriptions have a generic equivalent.  When you receive a prescription from your doctor, ask if a generic version is available.

What is the difference between a copay and coinsurance?

Caren Martin
 
pharmacist

A copay is a flat amount that is due when the service is received, such as a $20 office copay which is payable to the physician's office when you arrive.  Copays usually do not involve the deductible; you pay the copay instead of a deductible.  Some plans have multiple copays for an extended service, i.e. $100 copay per day for the first 5 days of an inpatient hospital stay.

 

Coinsurance is the cost-sharing portion of the health insurance.  For example, once you have paid the full deductible, the insurance company pays a portion of the claim and you would pay the other portion.  Typical coinsurance splits are 90/10% and 80/20%, where the insurance company pays the larger percentage.  Claims are usually shared until a maximum out-of-pocket limit has been met, after which the insurance company pays all of the claims for the rest of the year.  For example, if you have an inpatient hospital benefit of 80/20% coinsurance with an out-of-pocket amount of $1,000, you would pay 20% of the hospital charges up to $1,000.  After that, the insurance would pay 100%. 

 

Copays usually do not apply to the maximum out-of-pocket, but coinsurance does apply.  Sometime the terms are interchanged, so it is important to read your certificate of coverage and benefits summaries carefully.

Why does it matter where I get my prescription drugs if I have a copay?

Kelli Finn
 

prescriptionWhen one has a traditional medical plan with a prescription drug plan attached to it, there is no difference to the insured in the cost of a prescription at a discount retail chain such as Wal*Mart and a neighborhood drug store.  As your employee benefits advisor, HORAN educates our clients on why there is a difference.  If the prescription plan has a copay of $10, and a generic drug costs $30 at Walgreens and $20 at Wal*Mart, the insured will only pay $10, but the insurance company will pay the rest: $20 at Walgreens and $10 at Wal*Mart.  Some may say, "Since insurance companies have more funds, they should pay," or "That's why I have insurance."  Both of those responses are technically true, however, at the time of renewal for a group medical plan, the insurance company will evaluate the expense of prescription drugs for the group, among other things.  If every employee has chosen his or her local drug store over a more cost effective Wal*Mart, Costco, or Target, there will be greater justification for the insurance company to increase monthly premiums.  When one compares the cost of prescription drugs with the number of people taking medication regularly, it can make a big difference.
 
QUESTIONS OR COMMENTS?
 
Do you have a question you would like addressed in our next issue?
Please email Laura Lauber at laural@horanassoc.com or call (513) 745-0707

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