CMS Might Take Deeper Dive Into Outlier Drug Costs to Find Discriminatory Designs

Reprinted from INSIDE HEALTH INSURANCE EXCHANGES, a hard-hitting newsletter with news and strategic insights on the development and operation of public and private exchanges.

By Steve Davis, Managing Editor

June 2015 Volume 5 Issue 6

CMS is now reviewing 2016 plan designs for individual policies sold on and off of exchanges, and is expected to send deficiency notices to some carriers by the end of June. Recent actions in Florida and California to eliminate potentially discriminatory pharmacy benefits could prompt CMS to pay closer attention to qualified health plans (QHPs) that might create financial barriers for populations with costly chronic diseases, industry observers tell HEX.

On May 21, the board of California’s state-run insurance exchange voted to cap prescription drug copays between $150 and $500 per month, with the majority capped at $250 (see story, p. 8). Last fall, the Florida Office of Insurance Regulation (FOIR) called on several insurance carriers to reclassify certain HIV/AIDS medications.

As a result, most HIV/AIDS drugs previously categorized as specialty drugs in the highest-cost tier of the drug formulary have been reclassified as either generic or non-preferred brand drugs and moved into the lower cost tiers. The ACA requires the public exchanges to assure that QHP benefits are non-discriminatory.

Industry observers contacted by HEX say state regulators and carriers need more guidance from CMS outlining what is considered discriminatory.

CMS May Look for Rx Outliers

In its Final 2016 Letter to Issuers in the Federally-Facilitated Marketplaces, CMS said it is “considering” a review of each QHP to identify out-of-pocket-cost outliers for five chronic conditions: bipolar disorder, diabetes, HIV, rheumatoid arthritis and schizophrenia.

The review will be based on estimated out-of-pocket costs associated with standard treatment protocols. Potentially discriminatory practices, it noted, include “placing most or all drugs that treat a specific condition on the highest tiers.” Carriers with products flagged as potentially discriminatory will have time to either alter the design or submit justification with supporting documentation to CMS or the state explaining how the plan design is not discriminatory, according to the agency.

In a May 15 letter to HHS Sec. Sylvia Burwell, a group of more than 200 patient and community advocacy groups — dubbed the I AM (Still) Essential coalition — advocated for changes in essential health benefits for the 2016 plan year. The timing of the letter coincided with the deadline by which carriers were required to submit their plan designs and rates for the 2016 plan year.

Issue Is Challenging for CMS

Benefit-design discrimination is a new issue for CMS, as well as for state regulators. “And it’s a challenging one,” notes Joel Ario, managing director at Manatt Health Solutions. “I think [CMS] certainly will scrutinize [2016] plan designs, but where exactly the line is to be drawn is an open question,” he says. “If it’s clear cut that all drugs are treated equally, with the exception of a few drugs that have a very specific applicability for a very specific population, then I think you would see action on it. But if there’s a wide range of drugs, and the argument is whether a particular set of drugs is treated differently, then it’s harder to draw that line.” Ario was the first director of CMS’s Office of Health Insurance Exchanges.

For shoppers with a chronic condition, choosing the most cost-effective plan can be daunting because many QHPs require coinsurance for the highest tier on the formulary. “Patients have found it difficult to translate coinsurance percentages into an actual dollar value,” says Elizabeth Carpenter, a director at Avalere Health LLC.

The motivation for caps on drug copays is to protect the patient from costs and to ensure medication adherence. But there are tradeoffs. Caps or other rules that restrict pharmacy design could boost premiums and reduce the level of flexibility carriers have in developing plan designs that hold down premiums, she adds.

While the ACA prohibits discrimination through benefit design, it also notes that insurance carriers shouldn’t be prevented from encouraging efficient utilization and medical management through strategies such as exclusions, cost sharing, drug formularies and utilization management.

In May 2014, The AIDS Institute and The National Health Law Program (NHeLP) filed an administrative complaint with the Office for Civil Rights (OCR) concerning four silver-level QHPs in Florida. An analysis by The AIDS Institute of 36 plans in the state showed that QHPs offered by four plans — Aetna subsidiary Coventry Health Care, Inc., Cigna Corp., Humana Inc. and Preferred Medical Plan, Inc. — “charge inordinately high co-payments and co-insurance for medications used in the treatment of HIV and AIDS.”

That prompted FOIR to conduct an in-depth review of potentially discriminatory practices among carriers in the state. Last fall, Insurance Commissioner Kevin McCarty reached an agreement with those carriers to implement short-term measures limiting cost-sharing responsibility for HIV/AIDS drugs in the highest tier of their drug formularies, to eliminate prior authorizations or step therapy for such prescribed medications or treatments, and to look for long-term solutions that would better address the affordability and accessibility of HIV/AIDS medications for Floridians.

Florida state law specifically prohibits discrimination based on whether a person is living with HIV/AIDS, says FOIR spokesperson Amy Bogner.

“The opinion of the commissioner was that the plans were designed to encourage people with HIV/AIDS to select a different carrier. While the drugs can be expensive, the cost of acute care for those patients can be substantial,” says Mike Adelberg, a former senior official in CMS’s Center for Consumer Information and Insurance Oversight (CCIIO), now at FaegreBD Consulting in Washington, D.C.

As of June 1, Floridians covered by an individual policy from Aetna Inc. or its subsidiaries can purchase all non-invasive, oral HIV/AIDS drugs as generic or non-preferred brands for individual policies sold on and off of HealthCare.gov. The change will lower patient cost-sharing for those products to fixed dollar copays of between $5 and $100 after applicable deductibles are met, Aetna spokesperson Cynthia Michener told HEX sister publication Specialty Pharmacy News in April.

The formulary coverage will extend to individual health plan members in 2016 for policies sold both inside and outside of the exchange. Group products issued by carriers that don’t already include that formulary coverage are being evaluated for similar changes, according to McCarty’s office.

The outlier is Fuzeon (enfuvirtide), which will stay on the specialty tier, because it is a self-injectable and requires greater care management. Michener said that Aetna “made the change after an evaluation of our plans and coverage. We will continue our ongoing evaluation of our plans and formularies to ensure they align with current standards of care and deliver the best value to our members.”

Last November, Cigna voluntarily moved its generic HIV/AIDS drugs from the specialty tier to a lower tier in Florida’s federally run exchange, as well as capped member out-of-pocket costs for several drugs. In addition, the insurer removed the 30-day supply limit for a prescription of an HIV therapy.

CMS Has Tools to Find Outliers

CMS has tools that can identify formulary outliers. They also can dig into whether a benefit covers clinically appropriate care for a specific disease, such as diabetes. But the tools might not be enough to determine whether a plan design is discriminatory. It’s typically not until claims are paid that it can be determined how much someone with a specific disease is paying for care. And while it has sophisticated tools, CMS hasn’t indicated how, or if, they will be used.

When it comes to regulating carriers, CMS typically shows deference to state insurance commissioners. Although the issue of discriminatory plan design is on the radar of the National Association of State Insurance Commissioners, few, if any, states have the qualitative rigor needed to conduct a sophisticated analysis of benefit designs. Moreover, they generally don’t have clinicians, pharmacists or statisticians on staff. Identifying outliers might be easier for states where only a few carriers compete.

More Plans Put Chronic Condition Drugs on Specialty Tier

Some health plans sold on public insurance exchanges place all drugs used to treat complex diseases — such as HIV, cancer and multiple sclerosis — on the highest drug formulary cost-sharing tier, according to Avalere Health LLC.

SOURCE/METHODOLOGY: Avalere Health, February 2015. Based on a sample including silver-tier plans in six federally facilitated exchange states (Fla., Ga., Ill., N.C., Pa. and Texas) and in California and New York, which operate state-based exchanges. Avalere analyzed brand and generic drug coverage in 20 classes, including a mix of specialty and primary care drugs. See the report at http://tinyurl.com/on2z7b9.

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