Pill Insurance
You’ve been feeling sick lately, bedridden at home and unable to work. Your doctor diagnoses a serious illness but luckily he is able to prescribe a medication, which controls the disease and can return you to a normal life. He explains its benefits and the low risk of side effects.
After having the prescription filled, your pharmacist asks if you want to purchase the supplemental “Pill Insurance”. Noticing your confused look, he offers the following explanation.
“This will automatically cover serious adverse reactions caused by the medicine.” He looks up the drug in the premium book and finds a 1 in 10,000 risk of serious side effects for this medication. At first you are alarmed, but after some reflection you conclude that these odds are more than acceptable for the chance to return to a normal life.
He offers to quote a price for the insurance.
“For $1,000,000 coverage the rate is $500.00 for this prescription. If you want
$10,000,000 it will be $5000.”
“Wow that’s very expensive”, you say. Using some 6th grade math you ask why something with a 1 in 10,000 risk doesn’t cost $100 for $1,000,000 in coverage. The pharmacist explains that 80% of your premium is needed to pay the operating expenses in the system. The premium cost includes expenses averaging about 20% for insurance company and agent fees, 30% for your plaintiff lawyer, and 30% for the drug company lawyer. These “expenses” make the insurance premium cost about 5 times the desired coverage cost. “Its all been sanctioned by the government as a compromise between the insurance companies, drug manufacturers, and the trial bar.”
“Doesn’t my existing health and disability insurance cover most of the expenses of a drug reaction?” you ask.
“Why yes but this supplemental insurance guarantees you an additional large fixed amount to aid your recovery.”
After pondering the offer you conclude that it is prohibitively expensive and besides you just want to get well and not become a student of insurance underwriting.
“I’ll decline any insurance”, you state.
“Oh, you can’t do that”, he says. “You can decline the supplemental coverage but you have to pay the basic risk coverage. It’s already including in the high price of the drug. The only way you can avoid this expense is to move to Canada and buy your drugs there.”
“What’s the difference between the basic coverage and the supplemental coverage?”, you ask.
He replies, “The supplemental coverage guarantees payment but the basic coverage is like a lottery system. Only a small percentage of people ever collect under the basic coverage plan but the awards can be huge - in the $10 to $200 million dollar range. But to win you have to prove the scientists that made the drug are greedy criminals who knowingly manufactured a faulty drug and sold it to you just to make a profit. The chances of winning are small but the awards can be tremendous.”
“This is too complicated for me!” you reply. As most people do, you pay for your prescription and walk out.
