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Don't base your selection only on premium price

Everyone was asking about premiums in the months before the rollout of the Affordable Care Act. But many people are mistaken if they think the premium represents the bottom-line cost of health insurance.

Everyone was asking about premiums in the months before the rollout of the Affordable Care Act. But many people are mistaken if they think the premium represents the bottom-line cost of health insurance.

It doesn't.

Yes, the premium price is key. But it shouldn't necessarily be the decisive factor when shopping in the new marketplace. To find the real annual cost, add up the out-of-pocket costs, drug selection, and other parts of the drug benefit.

"People should not be making decisions to buy a plan based on premiums alone," said Larry Levitt, senior vice president of the Kaiser Family Foundation, a health-policy research and communication group. "The most frequent service that people use is prescription drugs. That is a key thing that people need to evaluate. And it's complicated."

The new plans are still far better than drug insurance on the individual market pre-ACA, which was almost nonexistent.

Last year, Americans with and without drug insurance spent an average of $898 per person on prescription drugs. "This is daunting to the consumer, and they shouldn't rush into it," said Kevin Coleman, head of research at HealthPocket Inc., which ranks health plans. "Before you buy a health plan, make a list. Basically, what kind of health services do you use in a year, including your drugs? Then go into the details of a plan" to learn the cost-sharing.

Each metallic tier classifies medications as generic (the cheapest), favored brand and nonfavored brand or nonformulary, referring to drugs not on the plan's favored list.

Platinum plans - the most expensive - have fewer, if any, out-of-pocket expenses (such as deductibles, co-payments or dollar amount towapord coverage, and coinsurance or a percentage of the drug's cost) than the lowest-tier bronze plan.

So for a 40-year-old buying an Independence Blue Cross Personal Choice Platinum PPO plan, the premium would run $435 a month (assuming no subsidies) with no drug deductible.

The co-pay for drugs would be $5 for generic, $30 for brand, and $50 for nonformulary.

That same 40-year-old considering IBC's Personal Choice Bronze PPO would pay a monthly premium of $266, saving $170 a month right off the bat. But the plan also has an integrated deductible (which includes hospital admissions and other medical costs) of $4,000 for an individual and $8,000 for a family.

That deductible must be paid before the lower co-pays kick in.

If your plan doesn't contain your drug in its formulary, you may have to switch drugs or pay out of pocket. So make sure the formulary includes your medication, especially if you take it long term.

Also, ask your doctor if a generic substitute exists. And check whether there are "utilization protocols" on drugs in the plan's formulary. Quantity limits may exist, or you may need a pre-authorization from your doctor.

"There may be some requirements that, before you can get to that brand drug, you have to try something else first," said Joel Ario, a managing director at Manatt Health Care Solutions and a former Pennsylvania insurance commissioner. "So there is not only cost-sharing, but utilization techniques used by the insurers to keep drug costs down that oftentimes are challenging for consumers."

So add it all up, said Coleman. "At the end of the day, a premium isn't a cheap premium if your out-of-pocket costs are really high, and you could spend less money annually for a different plan with a slightly higher premium."

Comparing Drug Co-pays: Bronze and Platinum Plans

Depending on your income, subsidies can dramatically reduce premiums for plans on the exchanges. But out-of-pocket costs* for cheaper plans can add up quickly.

Here is a comparison of what you'll pay for prescription drugs, both in network and out of network, in two plans: Independence Blue Cross' Personal Choice PPO Bronze (least expensive) and Platinum (most expensive).

Network:                    In/out                 In/out

Medical deductible

(single)                     $4,000/$15,000      None/$2,000

(family)                     $8,000/$30,000     None/$4,000

Rx deductible              Included in            None

medical deductible


Retail generic**            $10/70%   ***     $5/70%

Retail brand                  50%/70%            $30/70%

Retail non-formulary    50%/70%            $50/70%

Mail order (both plans)    Available/not covered


This article was produced in partnership with Kaiser Health News, an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health-policy research and communication organization not affiliated with Kaiser Permanente.