by Tom Norton
We are now approaching the six month point in the implementation of the new Obamacare program. It’s senseless to go into the good, bad and ugly of this new program. While much of the concept continues to be thrashed about in the political arena, in terms of actual medical results the truth of what Obamacare is and isn’t, is yet to be determined. It’s just too early to know exactly what’s going on.
However, even at this early point in the game, there are some specific data points that are emerging that do allow for fairly close, quantitative comparisons of the “before” option for healthcare versus the “after-the-fact” reality.
Copays for Prescription Drug Coverage Under Obamacare
One area that is providing unusual clarity – and not a little bit of controversy – is the area of copays that are being charged for access to prescription drugs in the state exchanges versus the copays for drugs provided under private employee insurance plans.
As with just about everything in Obamacare, we do have to be careful as to how we evaluate this information; some things are just not as clear as they seem. However, in the case of prescription drugs copays, the anecdotes are piling up about newly covered Obamacare patients paying more for drug copays — in fact, some have termed it “unacceptable” amounts of copay — versus their privately covered brethren.
What proof do we have at this early stage of the program that this is occurring — and more importantly, why is this happening?
I have summarized below two early studies on Rx copay policy in the exchange programs. I imagine this information may prove provocative for many who read it, but I ask you to bear with me as we think about these results. As I say, with Obamacare, I am learning to be careful with all my evaluations.
The earliest report that I have found on this issue of drug copay costs comes from HealthPocket.com. In a broad study that reportedly evaluated the health data of 46 state health exchange plans, Health Pocket.com came up with this finding: Drug copayments in the 2014 Obamacare state exchanges are up an average of 34% as compared to the drug copayment fees that were charged last year in private employer insurance plans.
How does this lay out? Again, the results that HealthPocket.com presents are fairly compelling:
For example, if you follow the “2013 pre-Obamacare” column and compare it specifically with the average “Silver Plan” drug sharing offerings which most Obamacare patients are opting into, you will find there are increases in Obamacare copays, sometimes substantial increases, in all three categories (Generics; Preferred Brand; Specialty Drug). A few highlights include:
First, note that because of cost, generics will likely be favored over the brand names in both public and private plans. No big surprise here.
Secondly, and in the same vain, the average preferred brand name, i.e., the branded product that has won the bidding war for placement in the state exchange formulary, and likely is the only brand prescription drug available in a specific class of Rxs, is tagged with a near 30% increase in charges versus a similar brand drug charge in a private plan.
The shocker, though, comes in the so-called “Specialty Drug” category. If a patient is prescribed, say, a pricey biomedical product for the treatment of cancer or hepatitis C, and the drug is available in the state exchange formulary, the Obamacare patient is going to experience a copay that is 185% higher versus that being charged in private employer programs.
So, on a dollar-to-dollar copay comparison, there is just no doubt that the Obamacare prescription drug users are paying a lot more in real dollars for their prescription copays versus their private pay colleagues.
A second study, sponsored by PhRMA, was recently completed by Milliman. It, too, compared the out-of-pocket copay costs of prescription drugs provided in the Obamacare exchanges versus those utilized in the private insurance programs. Milliman’s findings although similar to Health Pocket.com’s, were somewhat different.
Like the Health Pocket.com report, Milliman confirmed that most Obamacare patients are seeking “Silver Care” health insurance. However, whereas HealthPocket.com was focused solely on Rx copays, Milliman discerned that most of the drug plans associated with “Silver Care” in the Obamacare exchanges are being provided in “combined deductible” insurance plans.
According to Milliman:
“With ‘combined deductible’ plans, patients are responsible for 100 percent of their non-preventive medical and pharmacy costs before meeting the deductible.”
The copay costs in the “combined deductible” insurance product will be higher than other plans, but the monthly premium costs are lower. Thus, initially, the low premium “Silver Plan” options are attractive to many of the new Obamacare patients.
However, when patients begin to utilize these plans for everyday medical needs, especially for Rx drugs, they are in for a fairly rude awakening in terms of their out-of-pocket copay obligations. Again from Milliman:
“The findings reveal that the large combined deductibles for all medical spending that are common in ‘Silver Plans’ in Exchanges may disproportionately impact out-of-pocket costs for patients relying on prescription medicines.”
Indeed, Milliman claims that Obamacare “Silver Plan” patients may pay as much as twice as much “out-of-pocket” for prescription drugs than would the patient in the typical private employer health plan.
Why are the Obamacare Rx copays so high?
Before we descend into open rebellion re: these Obamacare Rx copays, I do think we need to consider several issues that are operating here.
Following discussion with various industry types, I was given several reasons as to why this Obamacare “copay disparity” exists:
1. The Actual Private Employer Insurance is “Richer”
As it stands in this first year of Obamacare, the vast majority of private employer health insurance plans provided by large employers continue to simply be “richer” than the policies being offered in the Obamacare exchanges. In 2014, the average private employer coverage provides more Rx options to employees, for lower deductibles, and at substantially lower Rx copays; these services continue to be viewed as “competitive” employee benefits. Now, will these disparities in coverage and copays continue? Certainly the onset of “Gold Plated, Cadillac” healthcare plan taxes in 2018 will change this, but that is a ways off. For now, it’s a fact. There are clear, discernible Rx copay differences based solely on the “richness” of these two, very different insurance offerings.
2. Consumer Healthcare Behavior
For the last decade, various entities, including large PBMs, have been encouraging consumers to understand the consequences of their healthcare decisions — especially as it pertains to emergency room access. As a result, the fact that Obamacare copays for prescription drugs are high, especially since the premiums for the actual “Silver Plan” insurance option are generally quite low, should come as no surprise to anyone.
The insurers want these new healthcare consumers to understand that these drugs are accessible, but are available at a direct cost to the consumer. Reasonable “consumer healthcare behavior” is a consideration in the creation of every Obamacare Rx copay.
3. Establishing a “Baseline” cost for Obamacare Insurance
Another substantial reason that the Obamacare Rx insurance copays are “so high” is that when the insurers entered into the creation of these plans, the actuarial premises on which they generated their Obamacare designs were primarily based on many uncertain assumptions . Let’s face it, an awful lot of it was just guess work.
For starters, you may recall that for many months after passage, it was stated that 30 million people would sign up. It has only been in the last few months that the figure has dropped to “6 or 7 million.”
With fluctuating participation numbers like this, as well as very fluid demographics, how were the insurers to account for, say, drug cost inflation for this operating year? How about five years from now? Answer: It’s a total guess. So, generally they planned for the worst scenario, and loaded those “assumptions” into the Obamacare Rx copay structure.
4. Impact of Drug Innovation
The last reason I’ve heard for jacked-up copays in the Obamacare health plans is: Rx innovation. The insurers, for example, know all about Gilead’s Sovaldi and the host of other so-called specialty drugs that are either on the market, or will be soon. Sovaldi, which has an $84,000 per therapy price tag scares the daylights out of insurers. What if it turns out that the new Obamacare patients are high utilizers of innovative products like Solvaldi? As the insurance community sees it, that would be big trouble.
Specifically, what if this one drug holds the potential to wipe out insurance profits and possibly put the insurance company position in an overall loss position on all Obamacare claims? Answer: Among other things, lay on prohibitively high copays that will reduce the numbers of people who actually utilize the drug (See Health Pocket.com study).
So, as I hope you can now appreciate, while we do have compelling evidence that “unacceptably high” drug copays are being charged, in particular, for “Silver Plan” Obamacare participants, there is a lot to think about here. While difficult for the new Obamacare patients to manage, could it be that these very high Rx copays are ‘reasonable’ after all…at least for now?
Tom Norton is principal at NHD Smart Communications. He can be reached at firstname.lastname@example.org