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Health Insurance 101: Specialty Drugs

You’ve read about specialty drugs. But what makes them special? Are they covered by all health insurance plans? Do you need them? Should your plan cover them? Should you be concerned?

While there is no standard definition of specialty drugs (except under Medicare), specialty drugs are expensive medications often used to treat chronic illnesses such as rheumatoid arthritis, multiple sclerosis and some cancers. Usually, these medications must be ordered from a specific pharmacy and are not available from the local pharmacist. Although these drugs add up to only about 1 percent of all prescriptions written, specialty drugs account for approximately 25 percent of spending on all medications. According to various studies, this figure is expected to rise.


Increasingly, health insurance plans, including those that are employer sponsored coverage, require high payments for specialty drugs. Prescription medications that an insurance company considers specialty drugs may necessitate a coinsurance payment of 20 to 40 percent of the total cost of the medication. That is a change from the copayment of $10 to $50 that many participants have grown accustomed to for other drugs. There is usually an out of pocket maximum per participant, but that if often several thousand dollars.


Individuals who are covered through the federal and state marketplaces can expect to see a similar experience with specialty drugs. According to a study conducted by Avalere Health in December, 2014, more than half of the bronze level plans sold through these exchanges will require co insurance payments of 30 percent or more of the cost of these drugs. Also, the study found that 41 percent of the silver plans, which are the most purchased plans in the exchanges, will require co insurance payments of 30% or more for specialty drugs.


As always, become fluent in your health insurance provider’s formulary. Over time, this can be a critical component of your health care expenses

For additional information, contact EAB HealthWorks.