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The Hidden Cost of Federal Health Plans

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Did you know that more than 25 percent of total spending under the Federal Employees Health Benefits Program goes to prescription drugs? Rising drug prices and increasing drug utilization continue to drive up FEHBP premiums.

Every year, the Office of Personnel Management sends a call letter to all FEHBP carriers. This year’s edition encourages the carriers to thoroughly evaluate options to improve affordability, reduce costs, boost the quality of care, and protect the health of their enrollees. The letter also advises that any proposed benefit enhancements must be offset by proposed reductions so premiums are not increased due to benefit changes.

The first item that OPM is setting as a theme for the upcoming health insurance open season is a focus on prescription drugs.

That makes sense, because drug costs are clearly on people’s minds. In the Kaiser Family Foundation’s latest health tracking poll, respondents identified it as their number two priority in health, just behind reducing out-of-pocket health care costs in general.

The May issue of AARP Bulletin featured a story called “Why Drugs Cost So Much.” It noted:

  • Americans spent $457 billion on prescription drugs in 2015, up 8 percent from the previous year.
  • From 2008 to 2016, prices for the most popular brand-name drugs rose 208 percent.
  • The median salary of a pharmaceutical firm CEO in 2015 was $14.5 million, more than any other industry.
  • Drug companies spend $24 billion per year marketing to doctors.

It’s important that federal employees and retirees keep drug coverage in mind when choosing a health plan because:

  • Prescription drug costs are the largest out-of-pocket health care expense for many FEHBP participants.
  • If you only use generic drugs or don’t fill many regular prescriptions, you may be paying for a health plan that has a lot of prescription drug costs reflected in its premiums.
  • If you’re a retiree with Medicare Parts A & B as primary coverage, your FEHBP plan (or TRICARE for Life, if retired military), not Medicare, provides prescription drug benefits.
  • Medicare Part B (medical insurance) generally doesn't cover prescription drugs used at home, but it does cover a limited number of outpatient prescription drugs under certain conditions.
  • Medicare Part D is a separate plan and is generally not necessary for federal employees and retirees since you can get prescription drug coverage that is as good or better than a Medicare drug plan through your FEHBP or TRICARE for Life enrollment.

It’s a good idea to study the prescription drug coverage for your FEHBP plan in your plan brochure. You can find a link to your 2017 FEHBP plan brochure by clicking on the state where you live. On the last few pages of the brochure, you will find a summary of plan benefits with links to the pages of the brochure that cover each benefit. Details about your plan’s prescription drug benefits are found in Section 5. You will find the copays for generic and name brand drugs and the difference between high and standard plan options. Some plans provide additional incentives for members who have Medicare A & B as their primary coverage.

In addition, on the same chart, you will find a link to your health plan’s website, which includes much more information about prescription drug coverage. Here are some things to look for:

  • Copays for prescriptions filled at a local pharmacy compared to the cost of ordering your prescriptions through your health plan's mail-order drug provider.
  • Out-of-pocket costs for generic, preferred brand name, and non-preferred brand name drugs.
  • A list of your plan’s list of covered prescription drugs. It includes generic, brand name, and specialty drugs as well as preferred drugs that, when selected, will lower your out-of-pocket costs.

I checked the cost of 100 mg Precose tablets, which are used to treat Type 2 diabetes. Here are some of the results of my search for a dosage of 90 tablets per month:

  • Blue Cross Blue Shield Standard Option (CVS Caremark prescription provider): $49.29 for a 30-day supply or $7.25 using Acarbose, the generic equivalent. Acarbose was also available in a 90-day supply for $15 through the mail-order program. I searched again with the option checked for Medicare Part B coverage as primary and the price came up as $48.36 at the pharmacy and $10 for a 90-day supply of Acarbose through the mail order program, or $4.84 at the retail pharmacy for a 30-day supply.
  • National Association of Letter Carriers High Option (CVS Caremark prescription provider): $82.53 for a 30-day supply with in-store pickup, or $221.42 for three months supply through mail service or at the pharmacy. The cost for the generic equivalent, Acarbose, was $12 for three months supply through mail order or at a pharmacy.
  • Aetna’s pharmacy benefits were: $316.68 for three months supply through their mail-order service and $107.35 for a 30-day supply at a local pharmacy. For Acarbose, the price was $20 for a three-month mail-order supply and $10 for a 30-day supply at a retail pharmacy.
  • Kaiser Permanente of the mid-Atlantic region listed Acarbose on their formulary. For generic medications, the copay is $7 ($5 for mail delivery) for high-option coverage and $10 ($8 for mail delivery) for standard option coverage if the prescription is filled for a 30-day supply at a Kaiser center pharmacy.

If you fill a regular prescription, compare how your FEHBP plan covers that drug compared to some of the other plans. It’s also a good idea to call your plan to be sure that the prices listed on the plan website haven’t changed.

To get ready for the 2017 health insurance open season this fall, you may want to spend one of your lazy, hazy days of summer comparing prescription drug benefits between your FEHBP plan options. It could save you some out-of-pocket costs in 2018.

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Tammy Flanagan has spent 30 years helping federal employees take charge of their retirement by understanding their benefits. She runs her own consulting business at www.tammyflanagan.com and provides individual counseling as well as online training for the National Active and Retired Federal Employees Association, Plan Your Federal Retirement as well as the Federal Long Term Care insurance Program. She also serves as the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars.

For more retirement planning help, tune in to "For Your Benefit," presented by the National Institute of Transition Planning Inc. live on Federal News Radio on Mondays at 10 a.m. ET on WFED AM 1500 in the Washington-metro area. Archived shows are available on NITPInc.com.

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