Health Insurance Articles
How Health Insurance Rates Are Affected By Rising Prescription Costs
2010-10-15
Health insurance in the United States has received extensive media attention recently due to the passage of the Patient Protection and Affordable Care Act by Congress and the President on March 23, 2010. This act assures that all Americans who need health insurance will have access to coverage. Because passage of the act will require insurers to provide coverage for patients whom they may have previously rejected, all costs, including prescription costs, will be examined to determine upward adjustments in premiums to compensate for the extra risk and expense now assumed by the insurance companies.
According to a report from the National Center for Health Statistics, the percentage of Americans who took at least one prescription drug in the past month increased from 44 to 48 percent over the last 10 years. This increase in prescription drug use even before the full implementation of the health care bill indicates potential price increases if demand outpaces supply. As the NCHS states, access to health care services is positively correlated with an increase in prescription drug use, so an increase in covered Americans will place more demand in the marketplace and potentially cause drug prices to rise. This will require insurers to raise premiums in order to maintain their profitability.
The sizable Baby Boomer population might further increase the upward price pressure on prescription drug use, and therefore, health insurance costs. NCHA statistics show that more than 76 percent of Americans aged 60 or older use two or more prescription drugs. The more the overall population ages, the greater the pressure on the drug supply will be.
Prescription costs can be lessened by customers choosing generic drugs over brand name drugs. As drug patents that secure exclusive manufacturing rights for pharmaceutical companies expire, low cost formulations can be brought to the marketplace by competing firms. Health insurance costs can be expected to drop as more of these generic drugs replace brand name versions. Certain medications with a narrow therapeutic range will continue to require brand name, and therefore, more expensive formulations. These drugs can have a change in efficacy or safety with even a minor change in formulation. An example is Coumadin, which can adversely affect blood thinning if exact dosages are not maintained.
Health insurance will continue to receive media scrutiny as the Patient Protection and Affordable Care Act is implemented. Because drug prescription costs are an important piece of the insurance rate equation, consumers can expect premiums to rise along with prescription costs. Generic drugs can offset some of the price increases, but the expected swell in demand due to a greater insured and aging population can keep even generic prices on an upward slope if demand outstrips supply.
