Private insurers are shafting patients who need speciality drugs

Exchange Plans Increase Costs of Specialty Drugs for Patients in 2015

By Caroline F. Pearson
Avalere, December 2, 2014

A new analysis from Avalere Health finds that patients accessing specialty medications – drugs often used to treat life threatening illnesses, such as cancer, rheumatoid arthritis, or multiple sclerosis – through exchange plans are more likely to experience higher out-of-pocket costs in 2015 than in 2014.

In particular, the incidence of plans charging coinsurance greater than 30 percent for specialty medications has increased from 27 percent of Silver plans in 2014 to 41 percent in 2015. Coinsurance is the practice of charging consumers a percentage of the total cost of the medication, as opposed to a set co-payment fee. Approximately two-thirds of exchange enrollees picked Silver plans in 2014.

“Health plans continue to focus on managing drug costs to keep premiums low,” said Dan Mendelson, CEO at Avalere Health. “Competitive premiums are key to a sustainable exchange marketplace, which has led plans to pursue more significant cost-sharing. In some cases this could make it difficult for patients to afford and stay on medications.”

Percent of Exchange Plans with Coinsurance Above 30% for Specialty Tier drugs

Bronze (60% actuarial value)
2014  38%
2015  52%

Silver (70% actuarial value)
2014  27%
2015  41%

Gold (80% actuarial value)
2014  20%
2015  22%

Platinum (90% actuarial value)
2014  17%
2015  26%



By Don McCanne, MD

Specialty drugs are a problem for private insurers for two reasons. They are very expensive, and they are taken by individuals with serious high-cost disorders such as cancer, rheumatoid arthritis and multiple sclerosis. It is important to understand the insurers’ responses to their concerns.

Although set-dollar copays were common for drugs covered by insurance plans, the modest patient payments left the insurer responsible for the high costs of expensive drugs. So the insurers established different tiers of drugs covered, ranging from the bottom tier of very low cost generic drugs which were not a burden for the insurers, to the highest tier with the most expensive drugs - specialty drugs. For the more expensive tiers, the insurers now use coinsurance - a percentage of the cost - instead of copays, so that the patient is paying much more of the costs of the drug. A coinsurance of 30% soon became the standard. The patient would pay $3000 toward a $10,000 drug, or maybe about $25,000 toward an $82,000 drug such as Sovaldi (for chronic hepatitis C).

This addressed to some degree the two concerns that the insurers had. For the very high costs of these drugs, either patients would be paying a very significant portion or they would simply not fill the prescription simply because it was unaffordable, in either case saving the insurer considerable costs.

The even more important problem for the insurers was that these seriously ill patients would continue to have very high health care costs. By assigning high coinsurance payments for specialty drugs, patients who were on them would go elsewhere for their insurance coverage when they found out that the coinsurance amount was unaffordable. Although the insurers are now prohibited from turning away anyone because of preexisting disorders, this was a deceptive, dishonest way of avoiding adverse selection - avoiding covering patients with more expensive disorders. Understandably, competing insurers are adopting the same coinsurance practices so they do not get stuck with the high cost patients. It is the patients who are on the losing end.

This has not gone unnoticed. Patients are being deprived of these specialty drugs. The government is now considering options on how to make these drugs more accessible for those who need them, including the option of imposing new regulations which the insurers would oppose.

In a single payer system dedicated to patient service, the prices of the drugs would be negotiated, and they would be made readily available to those who need them. But what is the response of the private insurance industry that operates under a business model rather than a service model - even though they know they are under a cloud of suspicion? Make the patient responsible for even more of the costs by increasing the coinsurance rates well above the 30% level, impairing further access to these drugs.

Look at the table above and you will see the percentage of plans that have moved beyond a 30% coinsurance in this year alone. Over 40% of benchmark-level silver plans now have a coinsurance rate of over 30%. Over 50% of the cheapest plans - the bronze plans that are more attractive to low-income individuals - now have coinsurance in excess of 30% - pricing these drugs totally out of the reach of the purchasers of these plans. Even the plans for the wealthy - the platinum plans - are not unaffected. Over one-fourth of them exceed a coinsurance of 30% - not likely to be well received by this group who thought they were buying the best. You would think that the insurers would tread lightly with this group that has significant political voice.

The solution is obvious. Dump the business model of the private insurers and replace it with our own patient service model - a single payer national health program. Then everyone would get the drugs they need.