Cash is King: Skipping Insurance Could Lower Your Prescription Costs

You may save money by choosing NOT to use your insurance.

5 min read • 2024-07-05

When it comes to getting prescriptions filled, many people assume that using their health insurance will always provide the best savings. However, this is not always the case. Report has shown that 23% of prescriptions are overcharged when paying with insurance, costing over $135 million in a year. Sometimes, paying in cash or "out-of-pocket" for your medications can be significantly cheaper.

What is Cash Price?

Cash price is the price you pay without going through your insurance, also known as paying "out-of-pocket". The cash price can vary significantly depending on the pharmacy, the location, and the specific medication.

While many factors can influence the price, each pharmacy ultimately gets to set the final cash price for consumers. Pharmacies add their own markups to cover operational costs and profit margins, in addition to the cost from manufacturers or wholesalers. For example, CostPlus Drugs claims to charge 15% markup in additional to manufacturing cost to cover their operating expenses.

What is a Copay or Coinsurance?

A copay, short for copayment, is the fixed amount you pay when using your insurance. Often for more expensive drugs, coinsurance may apply instead of copays. Unlike copays, a coinsurance is a percentage and may vary based on the prescription cost.

Copays and coinsurances are set by the insurance company, specific to each plan and drug. Pharmacists would not know the exact amount until your prescriptions are billed to your insurance. To avoid sticker shock when picking up your prescriptions, you can find the exact copay for your drugs on the formulary of your plan, a list of covered drugs and how much. The formulary can be found on your insurance website, often in PDF format. Here is an example of a formulary for 2024 Aetna Standard Plan.

However, there is a catch! Copays do not matter until your deductible is met. A deductible is an amount you must pay full price for until your insurance begins to cover the costs. Paying cash without insurance would not count toward your plan deductible.

Formularies can be updated as frequenctly as monthly, where drugs may be added to or taken off the covered list. Make sure to check the latest coverage of your medication when starting or refilling!

When to consider paying with Cash vs Insurance?

As a rule of thumb, ALWAYS ask for the cash price.

Previously, insurance companies imposed gag order on pharmacies, preventing them from sharing cash prices. Patient Right to Know Drug Prices Act in 2018 has made such gag order illegal. However, pharmacists are not required to share cheaper cash prices, unless the patients ask. To get the best prices, you must ask your pharmacies for the cash price and compare to your copays from the insurance plan.

Here are some conditions to consider for paying cash:

• Cash price is lower than copay: No brainer! Pay cash as if you do not have insurance.
• Drug is not covered: In theory, the insurance should negotiate for a lower price than retail price. However, that is not always the case, especially for generics. Local pharmacies may offer the same prescription at much lower cost.
• High deductible: Your plan includes a high deductible, which you will not meet to get the benefit of insurance.
• Urgent needs: If your drugs require prior authorization, the process may take several days or weeks to be approved. Paying with cash deals directly with the pharmacy and bypasses the administrative complexities with insurance companies.

However, here are also some instances to consider paying with insurance, even if cash price may be lower right now:

• Low copay: Before deductible is met, you may be paying higher full price through insurance than cash price offered by the pharmacy. However, your cost may be much lower once the deductible is met, particularly for branded drugs. Calculate the cost of meeting deductible and paying copays in a year to determine if you may save money in the long run.
• Out of pocket maximum: Some plans include an out-of-pocket maximum, where the plan covers 100% of your medication beyong the amount. Typically, deductible, copay and coinsurance count toward the maximum. If you are taking very expensive drugs covered by your insurance, paying towards the maximum may save you money by the end of the year.

How to pay with Cash?

Let your pharmacy know as soon as possible when dropping off your prescription. If your doctor sends prescriptions electronically, you can call the pharmacy and ask to pay with cash before picking up the medications. If there are multiple drugs prescrbied, you may ask to pay for cash for some while using the insurance for the others.

Avoid choosing to pay cash at the register only at the very end. Pharmacists would need to run the system again and re-bill insurance. This would take up additional time, and sometimes may not be possible once the prescription is billed to the insurance company.

What is your experience paying with Cash?

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