Obamacare Expands Drug Coverage But Out-of-Pocket Expenses Go Up
Law Mandates Drug Coverage But Increases Out-of-Pocket Costs in Bronze & Silver Plans
The Affordable Care Act (a.k.a. Obamacare) mandates that new qualified health plans provide prescription drug coverage as an Essential Health Benefit. However, which drugs are covered and at what cost is more vague. With roughly 70% of the population using prescription drugs1 during a typical year, how the Affordable Care Act will alter drug coverage is a critical issue for consumers.
HealthPocket examined publicly available rate filings for 2014 Obamacare Bronze Plans, Silver Plans, Gold Plans, and Platinum Plans to determine what consumers will pay for drugs. While these rate filings did not include formularies, i.e. the list of covered medications within each plan, many of them did include information regarding how much health plan members will pay for various categories of covered drugs: generics, preferred brand name drugs, nonpreferred brand name drugs, and expensive specialty drugs.
Generally speaking, the more expensive the metal used to designate a health plan, the higher the premium is for the health plan. Hence, a Silver Plan is more expensive than a Bronze Plan, the Gold Plan more expensive than the Silver Plan, and so on. HealthPocket confirmed that, in almost all cases, consumer out-of-pocket costs for drugs go down as the health plan metal category goes up. Since out-of-pocket costs for 30-day supplies of covered drugs can come in the form of either copayments or coinsurance, tables for both cost sharing methods are provided below to illustrate the trend of more expensive metal plan/lower drug costs.
Average Flat Fee Copayments for Covered Drugs
* Data not available
Average Coinsurance (Where Enrollee Pays a % of Retail Costs) for Covered Drugs
There are two additional facts about drug costs under the new Obamacare plans that are important to note within this analysis. First, many plans apply the deductible against drug costs so that the full price of drugs must be paid by the enrollee until the deductible is satisfied. Second, people whose income is at or below 250% of the Federal Poverty Level will qualify for cost-sharing reductions if they enroll in a Silver Plan. Cost-sharing reductions equate to lower dollar amounts for deductibles, copayments, and coinsurance fees. Additionally, the maximum amount a plan enrollee can pay annually on out-of-pocket expenses for covered medical services is lowered for those whose incomes are below a federally-specified threshold.
Drug Costs Compared to Current Pre-Reform Health Plans
When compared to the current individual and family health insurance market, both the entry-level Bronze Plan and the higher tier Silver Plan will increase most out-of-pocket drug costs for consumers.2
Cost-Sharing Comparison Among Current Health Plans, Bronze Plans, & Silver Plans
In most cases, the high-end Gold and Platinum plans average lower drug cost sharing than the averages for plans in the existing individual and family market.
A growing concern in the health insurance marketplace is the coverage of specialty drugs. Specialty drugs are high-cost medications that are typically injected and are used to treat complex medical conditions. In 2012, specialty drugs were estimated to represent 28.7% of commercially insured drug expenditures and are projected to represent 50% of those expenditures by 2018.3
Coinsurance is the most common method of cost sharing used for specialty drugs among Obamacare plans. Coinsurance fees are a percentage of the total price of the drug that is the responsibility of the enrollee to pay. For example, a 25% coinsurance for a $100 drug would result in a fee of $25 for the health plan enrollee.
To illustrate cost sharing for specialty drugs, the below table shows coinsurance rates for Copaxone, a medication used to treat multiple sclerosis (MS). The high cost of this drug has resulted in its ranking among the top 10 drugs in the U.S. as measured by dollar sales.4 An estimated retail cost for a 30-day supply for a 20 MG Injection Kit for the drug is $4,951. The out-of-pocket expenses assume that Copaxone is a covered drug for the health plan.
Cost-Sharing for Copaxone among Obamacare Plans
Someone on the Bronze plan would have spent the $6,350 annual limit on out-of-pocket costs by the fourth month of coverage while someone in a Platinum plan would not hit that limit until the ninth month of coverage.
The Obamacare requirement to include drug coverage as a standard benefit will expand the population receiving insurance assistance with drug costs. In the existing individual and family health insurance market, nearly one out of five health plans do not include prescription drug coverage.6 However, consumers with existing drug coverage who enroll in Bronze or Silver plans will likely see their drug out-of-pocket costs increase assuming trends observed in public Obamacare rate filings persist.
Consumers who regularly take medication will need to examine their Obamacare plan options carefully. Even before considering cost-sharing rates, the consumer must confirm that their drugs are covered by the health plan. Uncovered drugs are not subject to any limitations on annual out-of-pocket costs.7 The Affordable Care Act requires only one drug per category and class be covered within a health plan formulary, though the benchmark plan chosen the consumer’s state can increase that number on a per category/class basis.8 Depending on the state, the minimum number of drugs to be covered by the prescription drug benefit varies from 485 medications to 1,070 medications.9 Additionally, a particular drug’s tier assignment to “preferred brand name drug,” “non-preferred brand name drug,” and “specialty drug” is left to the discretion of the health plan.10 Consequently, a drug that is classified as a “preferred brand name drug” in one plan may be a more expensive “non-preferred brand name drug” in a different plan. All of these factors suggest that consumers should do their homework prior to enrolling in a health plan.
ADDITIONAL NOTES FOR CONSUMERS
According to Consumer Reports, Americans already averaged $758 in drug outof-pocket costs for 2012.11 Higher out-of-pocket costs for drugs in Obamacare plans may incentivize some enrollees to explore lower cost 90-day mail order supplies for those medications they use regularly. Additionally, pharmacy-based drug discount programs may be explored as another tactic to control drug expenditures. Drug purchases through these pharmacy-based drug discount programs typically are not counted against the health plan’s annual limit on out-of-pocket spending. However, it is unclear whether Obamacare plans in the individual and family market will receive the same one-year exemption in 2014 as small group plans that allow separate limits for drugs and medical costs, potentially doubling out-of-pocket exposures. These discount drug programs can be very affordable and are available at major pharmacy chains. For example, Walmart offers a variety of generic drugs for $4 for a 30-day supply and $10 for a 90-day supply.12 Walgreens has a similar program offering many generics at $5 for a 30-day supply and $10 for a 90-day supply.13
HealthPocket’s Plan Details pages within its health plan comparison tool includes information on health plan cost sharing for drugs as well as links to the health plan’s list of covered drugs.
Cost sharing for 2014 qualified health plans based on rate filings in California, Connecticut, Ohio, Oregon, Rhode Island, Washington State, and Vermont. Plans whose rate filings had been dismissed were excluded from consideration within this study. Cost Sharing Reduction (CSR) plans that require special income eligibility were also excluded from consideration within this study. If a plan withdrew its rate filings from a state department of insurance, the plans were also excluded from consideration within this study.
Plans had to provide cost sharing on generic drugs, preferred brand name drugs, nonpreferred brand name drugs in order to be included within the study. Cost sharing was first averaged within a state and then the state averages were averaged together. California and Oregon cost-sharing was based on each state’s standard drug cost-sharing model within a metal tier.
Drug costs assume on-formulary drugs of a 30-day supply obtained through an in-network pharmacy provider. Since data was collected from rate filings, there is the possibility of plans being rejected by the individual state department of insurance reviewing the filing.
Percentages are rounded according to standard industry practices.
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This survey analysis was completed by Kev Coleman, Head of Research & Data at HealthPocket.com. Correspondence regarding this study can be directed to Mr. Coleman at email@example.com. Zev Beeber assisted with data collection.
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1 The Mayo Clinic study making this claim analyzed prescribing practices within in a county that was comparable for the United States. Wenjun Zhong et al. "Age and Sex Patterns of Drug Prescribing in a Defined American Population" Mayo Clinic Proceedings.2 Generic, preferred brand name drugs, and specialty drugs were examined. Non-preferred brand name drugs were not examined since this data was not available for the existing individual and family health insurance market.3 S. Johnson, B. Gunderson, K. Bowen, C.I. Starner, P.P. Gleason. "Specialty Drugs are Forecasted to be 50 Percent of All Drug Expenditures in 2018." Academy of Managed Care Pharmacy (AMCP)'s 25th Annual Meeting & Expo. April 4, 2013. San Diego, California. http://tinyurl.com/kmt74s2.4 Ranking based on dollar sales within the United States. “U.S. Pharmaceutical Sales - Q1 2013” http://www.drugs.com/stats/top100/2013/q1/sales accessed July 2, 2013.5 Copaxone price based on the average of five pharmacy price estimates in the Los Angeles Area provided by GoodRx.com on July 3, 2013.6 Kev Coleman. "Almost No Existing Health Plans Meet New ACA Essential Health Benefit Standards" HealthPocket.com. (March 7, 2013). http://www.healthpocket.com/healthcare-research/infostat/few-existing-health- plans-meet-new-aca-essential-health-benefit-standards/7 See section 1302 of Patient Protection and Affordable Care Act.8 See II.C.2.e “Prescription Drug Benefits” within Patient Protection and Affordable Care Act; Standards Related to Essential Health Benefits, Actuarial Value, and Accreditation, Final Rule, 78 FR 12833 (February 25, 2013). http://federalregister.gov/a/2013-040849 See Avalere’s map illustrating the number of drugs covered by each state’s benchmark plan. “EHB Benchmark Formularies Vary Greatly State to State.” http://www.avalerehealth.net/news/spotlight/Avalere_Benchmark_Formulary_Br eadth.pdf. Accessed July 8, 2013.10 "We also note that this section does not require that drugs be covered on a particular tier." See II.C.2.e “Prescription Drug Benefits” within Patient Protection and Affordable Care Act; Standards Related to Essential Health Benefits, Actuarial Value, and Accreditation, Final Rule, 78 FR 12833 (February 25, 2013). http://federalregister.gov/a/2013-0408411 "Same generic drug, many prices" ConsumerReports.org. May 2013. Accessed July 3, 2013. http://www.consumerreports.org/cro/magazine/2013/05/same-generic-drug- many-prices/index.htm12 http://i.walmartimages.com/i/if/hmp/fusion/customer_list.pdf13 http://www.walgreens.com/psc/VPG_List_Update_10-15-2013.pdf