Exchange plans increasingly use abusive drug tier design

Avalere
February 11, 2015
Exchange Benefit Designs Increasingly Place All Medications for Some
Conditions on Specialty Drug Tier
By Caroline F. Pearson

New analysis from Avalere Health finds that some exchange plans place
all drugs used to treat complex diseases – such as HIV, cancer, and
multiple sclerosis – on the highest drug formulary cost-sharing tier.

"Plans continue to innovate on benefit design in the exchange markets,"
said Dan Mendelson, CEO of Avalere. "These designs are calibrated to
optimize enrollment by delivering low and stable premiums – the primary
metric that consumers use to select a plan."

Specifically, in five of the 20 classes of drugs analyzed, plans placed
all drugs in a class on the specialty tier. Specifically, in the
Protease Inhibitor and Multiple Sclerosis Agents classes, 29 and 51
percent of plans respectively place all drugs, including available
generics, on the highest tier.

Moreover, a subset of plans in each of 10 drug classes1 placed all
single-source branded drugs in a class on a specialty tier.
Specifically, in 8 of the 10 classes, 2015 exchange plans were more
likely than 2014 plans to assign all single-source branded drugs to the
highest cost sharing tier. A single-source branded medication is a brand
name drug without a generic equivalent. The practice was most common for
some cancer drugs and drugs used to treat multiple sclerosis. Roughly 30
percent of plans also place all single-source drugs for HIV/AIDS on the
specialty tier.

"Enrolling in a plan that places all medications for a particular
disease on the specialty tier can mean significant out-of-pocket costs
for consumers, particularly if they do not qualify for cost sharing
reductions," said Caroline Pearson, Vice President at Avalere.

http://avalere.com/expertise/life-sciences/insights/avalere-analysis-exchange-benefit-designs-increasingly-place-all-medication

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Comment by Don McCanne

Some plans in the insurance exchanges are placing all drugs used to
treat complex diseases, such as HIV, cancer, and multiple sclerosis, on
the highest drug formulary cost-sharing tier. We have covered this
terribly abusive process before, but this update shows that they are
"increasingly" placing all medications for expensive conditions into
specialty drug tiers. In spite of the pushback, it's getting worse, not
better.

The reasons are obvious. Higher patient cost sharing reduces the
insurer's portion of the payment for the drugs. Higher cost sharing
increases the probability that patients will not fill their
prescriptions due to the cost, saving the insurer even more money. Most
importantly, placing all drugs for an expensive chronic disorder in the
highest tier greatly increases the probability that the insurer will not
have to cover these high cost patients as they much more likely will
obtain their insurance from a competitor.

What then will the competitor do? It's obvious. They will also move
these drugs to the highest tier. That is the nature of business
competition. When we rely on private insurance plans to cover health
care, we should expect that those plans will always follow an optimal
business model.

This devious policy is great for insurers' businesses, but it is
terrible for patients. Health care reform should have been all about the
patient. We can still make it so by firing the private insurers and
placing our own public insurer in charge through an improved Medicare
that covers everyone.