Drug Coverage & the Affordable Care Act
34% increase in drug copayments and co-insurance fees compared to the pre-reform market
Prior to the implementation of the Affordable Care Act (a.k.a. Obamacare), nearly one-out-of-five health insurance plans purchased by individuals (as opposed to employers and other groups) lacked prescription drug coverage.1 With the release of the new Obamacare metal plans, prescription drug coverage is now included with all new health plans in the individual & small group markets. However, the expansion of prescription drug coverage does not mean that every medication is covered nor does it mean that drug out-of-pocket costs will remain identical to the pre-reform health plan market.
To understand how health reform’s transformation of drug coverage affects consumers’ healthcare expenses, HealthPocket examined government health plan data for 46 states. HealthPocket first determined the average out-of-pocket drug costs for Obamacare plan enrollees and then compared these costs to the average drug out-of-pocket costs in the pre-reform individual health insurance market.2
The below table breaks down out-of-pocket costs by drug category (generic drugs, preferred brand name drugs, and specialty drugs). Since a health plan may choose to use either a flat fee copayment or a coinsurance charge (where the enrollee pays a percentage of the total drug cost), both cost-sharing methods are included within the table.. All data represents national averages.
On the whole, the 4 types of metal plans averaged a 34% increase in drug cost-sharing as compared to copayments and co-insurance fees in the pre-reform market. Bronze Plans had the highest increase in average out-of-pocket costs for drugs. When compared to the average out-of-pocket costs for plans in the 2013 pre-reform individual health insurance market, copayments and coinsurance fees were 58% higher for Bronze Plans. Platinum Plans had the smallest increase in out-of-pocket costs for drugs. Copayments and co-insurance averaged 15% higher for this category of health plans. Silver and Gold plans had drug costs increase 36% and 28% respectively.
Understanding Cost Sharing Increases
The increases in drug cost-sharing among the metal plans do not equate to corresponding drug spending increases. Drug coverage is more complex. Differences in deductibles, out-of-pocket caps, and drug formularies can profoundly influence consumer drug expenses.
During a deductible period, a health plan enrollee may face 100% of a drug’s price until the deductible is satisfied. Even with the same metal tier, health plans can have deductible amounts that vary by thousands of dollars.3 Bronze Plans have the highest average deductible at $5,081 and Platinum Plans have the lowest average deductible at $347.4 Some health plans had no drug cost-sharing after the plan’s deductible was satisfied.5
Some metal plans have a separate deductible for medication expenses. For those plans that had a dedicated drug deductible, the average deductible for a Bronze Plan was $564, $271 for a Silver Plan, $110 for a Gold Plan, and $60 for a Platinum Plan. Only 5% of Bronze Plans have a separate drug deductible as compared to 47% of Silver Plans, 56% of Gold Plans, and 68% of Platinum Plans.
Annual Out-of-Pocket Cost Limits
Affordable Care Act health plans have an annual limit of out-of-pocket costs for covered healthcare services. The government has defined the highest amount at which an annual out-of-pocket limit may be set ($6,350 in 2014) but health plans have the option of lowering that amount. Plans with lower caps on out-of-pocket costs can provide considerable savings to consumers who have monthly prescriptions for expensive medications.
It should be noted that in 2014 some small group health plans can have the possibility of exempting enrollee medication payments from the annual cap on out-of-pocket costs when the health plan’s drug benefit is administered by a third party.6 This 2014 waiver does not appear to apply to health plans in the individual market. In the pre-reform individual market. HealthPocket found that 4% of individual health plans lacked a cap on annual out-of-pocket costs.7
On-Formulary Vs. Off-Formulary Drugs
Copayments and co-insurance fees for medications generally apply to “on formulary” drugs. A formulary is a list of the medications for which a health plan will assist with expenses. Off-formulary drugs normally receive no cost-sharing from the health plan and the annual out-of-pocket limits do not apply to money spent on off formulary drugs.
Unfortunately government data is not available currently regarding what drugs are included within each health plan and what cost-sharing tier each drug is assigned.
When discussing the Affordable Care Act, there is a temptation to reduce the legislation’s effect into a “better than” or “worse than” comparison to the pre-reform health insurance market. In the case of prescription drug coverage, the Affordable Care Act resists this simplification inasmuch as the law produced results that are both better and worse. The legislation created an expansion of the drug benefit for the individual market and small group market inasmuch as all non-grandfathered health plans must include a prescription drug benefit. Subsidies on health insurance premiums also result in some portion of the previously uninsured being able to enroll in a health plan containing a drug benefit. Additionally, a few over-the-counter drugs such as aspirin, folic acid, and iron supplements can be obtained without a copayment when used as preventive medicine.8
Health reform represents a decline in medication coverage inasmuch as the average drug copayments and co-insurance fees are higher than the averages found in the pre-reform market. HealthPocket found this to be true regardless of health plan category. Consequently, new health plan enrollees who use multiple costly drugs face the greatest burden from the increases in copayments and co-insurance fees. New health plan enrollees who use drugs infrequently, on the contrary, may not notice the cost-sharing increases.
For those health insurance shoppers with frequent medication use, they should confirm the following for all health plans they are comparing:
- Their medications are covered
- The copayment amounts and/or co-insurance fees that apply to their drugs
- The deductible amount that applies to covered drugs
- Any restrictions that apply to their drugs (e.g. a prior authorization requirement, quantity limits, step therapy)
Zitter Health Insights investigated patient sensitivity to medication expenses and estimated that up to 16% of patients begin to explore alternative therapies when drug out-of-pocket costs reach $50 to $99 a month. Approximately half of the remaining patients will explore alternative therapies when drug out-of-pocket costs reach $100 to $349 a month.9 The increases HealthPocket documented for the new Affordable Care Act plans may result in more health plan enrollees exploring lower priced drug alternatives.
All drug cost-sharing data pertained to the four Affordable Care Act metal plans: bronze, silver, gold, and platinum. All plans investigated in this study belong to the individual & family insurance market. Medicare, Medicaid, short-term health insurance, and group health insurance plans were not analyzed as part of this study.
Industry standard rounding methods were utilized. No weighting by health plan enrollment was performed.
HealthPocket’s primary source of drug cost-sharing data was health plan records within the QHP Individual Medical Plan Landscape files provided by the Centers for Medicare & Medicaid Services. The QHP Individual Medical Plan Landscape files contained health plan records from multiple rating areas for the states it included. For those states where there were no health plan records within the QHP Individual Medical Plan Landscape files, HealthPocket collected health plan data from the health plan data API provided by the Department of Health & Human Services. Health plan data from multiple rating regions was provided within the QHP Individual Medical Plan Landscape files and multiple region queries for each state were used to extract data from the health data API. Drug cost-sharing data was unavailable for the following states: Connecticut, Massachusetts, Rhode Island, and Vermont.
Data for drug cost-sharing in 2013 pre-reform health plans in the individual market was taken from the HealthPocket study “Obamacare Expands Drug Coverage But Out-of-Pocket Expenses Go Up” (see endnotes for full citation). Drug cost-sharing data was not available for nonpreferred brand name drugs in the pre-reform market so that category of drugs was not examined in this study.
This analysis was written by Kev Coleman, Head of Research & Data at HealthPocket, with data analysis performed by Jesse Geneson, data researcher at HealthPocket. Correspondence regarding this study can be directed to Mr. Coleman at firstname.lastname@example.org.
Feedback and questions are welcome but, given the volume of email, personal responses may not be feasible.Kev Coleman on Google+
Jesse Geneson on Google+
1 Kev Coleman. "Almost No Existing Health Plans Meet New ACA Essential Health Benefit Standards" HealthPocket.com. (March 7, 2013). /healthcare-research/infostat/few-existing-health-plans-meet-new-aca-essential-health-benefit-standards
2 Data for drug cost-sharing in the 2013 pre-reform health plans in the individual market was taken from a previous HealthPocket InfoStat report. Kev Coleman. “Obamacare Expands Drug Coverage But Out-of-Pocket Expenses Go Up.” HealthPocket.com. (July 11, 2013). /healthcare-research/infostat/obamacare-expands-drug-coverage-but-out-of-pocket-expenses-go-up/
3 Jesse Geneson and Kev Coleman. “Consumers Risk Higher Healthcare Costs When Using Shortcuts in Health Plan Shopping.” HealthPocket.com. (January 22, 2014). /healthcare-research/infostat/higher-healthcare-costs-risked-using-shortcuts/
4 The amounts cited were for individual deductibles. Kev Coleman and Jesse Geneson. “Deductibles, Out-Of-Pocket Costs, and the Affordable Care Act.” HealthPocket.com. (December 12, 2013). /healthcare-research/infostat/2014-obamacare-deductible-out-of-pocket-costs/
5 For information on average deductibles in Affordable Care Act health plans, see the HealthPocket study “Deductibles, Out-Of-Pocket Costs, and the Affordable Care Act.”
6 Robert Pear. “A Limit on Consumer Costs Is Delayed in Health Care Law.” New York Times. (August 12, 2013). http://www.nytimes.com/2013/08/13/us/a-limit-on-consumer-costs-is-delayed-in-health-care-law.html
7 Kev Coleman. “1 in 3 Health Plans’ Out-of-Pocket Costs Fail ACA Standards.” HealthPocket.com. (February 7, 2013). /healthcare-research/infostat/1-3-health-plans-out-of-pocket-costs-fail-aca-standards
8 “What are my preventive care benefits?” https://www.healthcare.gov/what-are-my-preventive-care-benefits/, https://www.healthcare.gov/what-are-my-preventive-care-benefits/#part=2, https://www.healthcare.gov/what-are-my-preventive-care-benefits/#part=3
9 Study results were based on a survey of practice managers and oncologists. See “The Managed Care Oncology Index: Summer 2013.” Zitter Health Insights (July 2013). Volume 6, Number 2. p.5. www.zitter.com