We Call Them ‘Zero Balance Claims’

by Ryan Jerico
Senior Consultant, TFG Partners

With my Prescription Benefit, I pay a $20 copay for all generic medications. So when I go to the doctor for my yearly sinus infection each spring, things are pretty routine. She writes me a prescription for Amoxicillin.  I walk across the street into a large chain grocery store who advertises $4 for a 30 day supply of 40 different generic drugs.

A the pharmacy counter, I present a script for the antibiotic and my drug  card to the pharmacist. She inputs my plan information into her computer. Based on on what information the Pharmacy Benefit Manager transmits back to the pharmacy, I am given a total due.  In this case, I am asked to pay my usual $20 copay (as I have come to expect for most prescriptions) so I present the clerk with a $20 bill and gladly go on my way. Unfortunately, the pills in the bottle I have in hand retail for only $4. Where did the remaining $16 dollars end up?

A recent article from Kaiser Health News highlighted a problem we here at TFG Partners know all too well, Zero Balance Claims. These are prescription drug claims where a patient is charged their usual copay even when the cost of the cost of the drug less than that copay amount.

Cash prices started to dip below copays a decade ago when several big box stores started offering dozens of generics for as little as $4 per prescription. But as copays have risen and high-deductible insurance plans become more common, more consumers are now affected.

The phenomenon illustrates the complexity of how drugs are priced in the U.S. and has led to finger-pointing about who is benefiting or who’s to blame.

Pharmacists say large pharmacy benefit management (PBM) firms that handle benefit claims for millions of Americans are pocketing the difference, while those firms say pharmacists themselves are being greedy.

-Excerpt from Filling A Prescription? You Might Be Better Off Paying Cash

Let’s step back for a moment and imagine my example on a grander scale. What if I worked for a large Public Utility (~6,000 employees). What if this practice of charging the member a the copayment even when that amount in excess if the cost of the drug happened every time? Now what if that situation was replicated more 275,000 times in one plan year? Well, then you would have a Pharmacy Benefit Plan with members being overcharged approximately $1.9 Million. This specific example is derived from one of our actual clients, but we have seen it on numerous other occasions.

Zero balance claims are particularity troubling because they primarily effect the members rather then the employer. While we do not see practice as often now, it is still occurring as is evident in a recent lawsuit filed against a TPA and PBM. If you’re an employee with Rx benefits, do your best to educate yourself on what medications cost. A good indicator could be that banner on the outside of the store that reads “$4 generic drugs inside”. If you are a HR professional or CFO tasked with being the Plan Administrator for your corporate plan be vigilante and more so diligent. Plan Sponsors who are not exercising their fiduciary duties are getting wrapped up in lawsuits . With the way many TPA and PBM contracts are written today, the plan is the fiduciary and not the administrator. Be sure that you have a vendor management plan in place to check their work.