Prescription Drug Costs ‘Number One Driving Factor’ For Rising Health Insurance Premiums

Continued increases in prescription drug costs are “the number one driving factor” for increasing health insurance premiums, according to testimony from Wyoming Insurance Commissioner Tom Glause, who was appointed by Gov. Matt Mead (R), at a subcommittee hearing on small business health care costs held by the Senate Committee on Health, Education, Labor and Pensions.

“Health care determines the cost of health insurance. Health insurance doesn’t dictate the cost of health care,” Glause said.

Comments from Glause and other Republican-leaning stakeholders at the hearing were an indication that mortgage-level prescription drug prices are garnering widespread opposition.

Tom Harte, head of an employee benefits company in New Hampshire who spoke on behalf of health insurance brokers, said that between 26 percent and 28 percent of health insurance premiums go toward prescription costs, which can cost as much as $100,000 a month for some enrollees.

In addition to prescription costs, Harte said, his clients are facing “double-digit rate increases” for health insurance premiums. Moreover, deductibles have increased by 47 percent from 2009 to 2014, and many people have unaffordable annual deductibles of $5,000 to $6,000, he said.

Several of the people testifying at the hearing called for giving businesses more flexibility in offering health care coverage to employees.

Warren Hudak, president of an accounting firm in central Pennsylvania who testified on behalf of the National Federal of Independent Business, called for Senate passage of the Small Business Health Care Relief Act (H.R. 5447), which the House passed June 21. The bill would allow businesses to offer health reimbursement arrangements to employees without being penalized.

The Internal Revenue Service issued guidance in 2013 prohibiting the use of such employer payment plans to pay employees’ health insurance premiums. Subsequent guidance similarly prohibited stand-alone health reimbursement arrangements.

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