Out-of-Pocket Costs on Health Insurance Exchanges

Health Insurance Exchanges, also known as marketplaces, were established as part of the Affordable Care Act (ACA) to expand access to quality health care and help control the nation’s health care spending. However, recent research finds that coverage offered through the Exchanges threatens to have a negative impact on patients’ health due to limits on prescription drug coverage and increased out-of-pocket costs through higher deductibles and co-pays. 

Exchange Plans More Likely to Require Patients to Meet Deductible Before Drug Coverage Begins

Many exchange plans require patients to pay thousands of dollars out of pocket before receiving any coverage for medicines or non-preventive services.

  • Recent Milliman analysis found that Silver plans are nearly four times more likely to have a single combined deductible for medical and pharmacy benefits (46 percent of the time) than typical employer-sponsored plans (12 percent of the time).[1] Note: Silver plans were the most popular within the Exchanges for the enrollment period that ended March 31, 2014 (65 percent of total enrollment as of April 19, 2014).[2]
  • Under combined deductible plans, prescription medicines are not covered until patients meet the deductible. This is particularly relevant for patients who rely on prescription medicines to treat chronic illnesses.  
    • Silver plans with combined deductibles impose 130 percent higher member cost sharing for pharmacy benefits than a typical employer-sponsored plan, compared to about a 20 percent increase for other types of services.[3]
  • The average Silver plan deductible is $2,000 in plans where there is a single deductible for all medical spending.[4] 
  • In the lower-cost Bronze plans, almost all plans require patients to reach a deductible before medicines are covered – and those deductibles average nearly $5,000.[5] 

Even After a Deductible is Met, Patients Often Have High Cost-Sharing for Prescription Medicines

High cost-sharing for prescription drugs in the Exchanges reduces patients’ access to life-saving medicines and drives up health care costs. 

  • Cost-sharing for prescription medicines often remains higher in Silver plans compared to employer plans.
    • Silver plans are more likely than employer plans to use coinsurance, which requires patients to pay for a percentage of the cost of a medicine instead of a fixed dollar copayment. While 69 percent of Silver plans use coinsurance for specialty tier medicines,[6] 48 percent of workers have coinsurance for 4th tier medicines.[7]
    • Out of pocket costs from coinsurance are harder for patients to predict and can potentially be very high for innovative specialty products.

Despite Out-of-Pocket Maximums, Patients Still Face Burdensome Out-of-Pocket Costs

  • While the annual maximum for total out-of-pockets costs in the ACA (which is set at $6,350 in 2014) provides an important protection for patients, patients taking specialty medicines could be faced with paying that full amount early in the year to cover just one or two prescriptions.
  • Half of households with incomes from 250 percent to 400 percent of the federal poverty level have less than $2,740 in liquid assets,[8]meaning that it will be difficult for many Exchange enrollees to pay this cost sharing without incurring debt.
    • Enrollees with annual incomes between 100 percent and 250 percent of the federal poverty level (about $11,700 to $29,000 for an individual) are eligible for special Silver plans with lower cost sharing. [9] However, plans have flexibility in how they implement these subsidies, and many plans still have coinsurance levels of more than 30 percent for higher formulary tiers.[10]

Patients with Chronic Diseases Are Impacted by Disproportionately Out-of-Pocket Costs

Patients with chronic illness who have health insurance often shoulder a greater share of their health care costs compared to others who access the health care system for acute needs.

  • Nearly one in two American adults lives with at least one chronic illness.[11]
  • Among households with the same total health care spending, those with a chronically ill family member spend 76 percent more on prescription medicines than other households.[12]

Exchanges Have Serious Obstacles to Access and Adherence

Increased out-of-pocket expenses for patients can lead to reduced adherence, resulting in more hospitalizations and higher health care costs.[13]

  • Improving patient adherence to medicines is one of the best opportunities to improve health outcomes and generate savings in our health care system.
    • Improved medication adherence among diabetes patients could result in over 1 million avoided emergency department visits and hospitalizations annually, for potential savings of $8.3 billion each year.[14]
    • Across the spectrum of diseases, medications have significantly improved quality and length of life. Patients who are diagnosed with cancer today live three years longer than they did in 1980.[15] Since 1995, the HIV/AIDS death rate has declined by nearly 80 percent.[16]
    • Medicare Part D offers an excellent example of how increased access to medicines can improve health outcomes through better adherence while also helping control other healthcare costs.
      • The Congressional Budget Office (CBO) has credited Part D as responsible for much of the slowdown in overall Medicare spending. CBO reduced its 10-year baseline forecast for total Part D spending by $56 billion in 2014. This reduction follows three consecutive years in which CBO annually lowered its 10-year Part D forecast by more than $100 billion. Since 2011 alone, CBO’s 10-year projected estimates for Part D spending have fallen by 23 percent.[17] This reflects one of the largest downward revisions across federal health care spending in recent years.
      • This increased access to medicines has reduced hospitalizations and other health care costs by improving beneficiaries’ health.

Exchanges Lack Sufficient Cost Transparency and Patient Protections

Without improvement, the Exchanges risk failing patients who seek the coverage they were guaranteed. Consumers deserve better.

  • It’s difficult to compare health plans and find a plan that covers medicines you need at a cost you can afford on Exchange websites. There is no online tool to help consumers compare coverage and costs across plans in a meaningful way.
  • Consumers deserve an out-of-pocket cost calculator, like exists for Medicare Part D, for easy comparison of expected costs. Especially for consumers getting health coverage for the first time, comparing coverage and costs should be as easy as possible.
  • There is currently no requirement for Exchange plans to cover or review new medicines as they come on the market, which raises serious concerns about patients having access to cutting edge, life-saving treatments.
    • The current Essential Health Benefit formulary does not account for any new medicines that have been approved since 2010.
    • Without a review process in place, patients with Exchange coverage may never get access to the best treatments available.

[1] Milliman, Inc. “Impact of the Health Insurance Marketplace on Participant Cost Sharing for Pharmacy Benefits.” Prepared for PhRMA, May 2014. Found at: http://www.phrma.org/sites/default/files/pdf/milliman-impact-of-hix-on-pharmacy-benefits-report.pdf

[2] U.S. Department of Health and Human Services. “Enrollment in Health Insurance Marketplaces Totals Over 8 Million People.” Found at: http://www.hhs.gov/news/press/2014pres/05/20140501a.html.

[3] Ibid.

[4] Breakaway Health. “The New ACA Health Insurance Exchanges.” Prepared for PhRMA, January 2014. Found at: http://www.phrma.org/sites/default/files/pdf/aca-exchanges-breakaway-report.pdf.

[5] Ibid.

[6] Breakaway Health. “The New ACA Health Insurance Exchanges.” Prepared for PhRMA, January 2014. Found at: http://www.phrma.org/sites/default/files/pdf/aca-exchanges-breakaway-report.pdf.

[7] Kaiser Family Foundation, et al. “2013 Employer Health Benefits Survey.” Found at: http://kff.org/private-insurance/report/2013-employer-health-benefits/?special=exhibits

[8] Pollitz, Karen, et al. “Medical Debt Among People with Health Insurance.” Kaiser Family Foundation. Found at:  http://kaiserfamilyfoundation.files.wordpress.com/2014/01/8537-medical-debt-among-people-with-health-insurance.pdf

[9] Kaiser Family Foundation. Health Reform FAQs: Marketplace Eligibility, Enrollment Periods, Plans and Premiums. Found at: http://kff.org/health-reform/faq/health-reform-frequently-asked-questions/#question-i-also-notice-catastrophic-plans-that-look-even-cheaper-what-are-those-and-can-i-buy-one-if-i-want

[10] Avalere March 2014 analysis of HHS Landscape File for PhRMA.

[11] Centers for Disease Control and Prevention. “ Chronic Diseases and Health Promotion.” Found at: http://www.cdc.gov/chronicdisease/overview/index.htm?s_cid=ostltsdyk_govd_203

[12] Abraham et al. “Gauging the Generosity of Employer-Sponsored Insurance: Differences Between Households With and Without a Chronic Condition.” 2011. NBER Working Paper No. 17232.

[13] F.H. Gwadry-Sridhar et al. “A Framework for Planning and Critiquing Medication Compliance and Persistence Using Prospective Study Designs.” Clinical Therapeutics, February 2009.

[14] A.K. Jha, et al. “Greater Adherence to Diabetes Drugs is Linked to Less Hospital Use and Could Save Nearly $5 Billion Annually.” Health Affairs 2012; 31(8): 1836–1846.

[15] E. Sun, et al., “The Determinants of Recent Gains in Cancer Survival: An Analysis of the Surveillance, Epidemiology, and End Results (SEER) Database,” Journal of Clinical Oncology, May 2008 Suppl (Abstract 6616).

[16] U.S. Department of Health and Human Services (HHS), Centers for Disease Control and Prevention (CDC), National Center for Health Statistics (NCHS), “Health, United States, 2011 with Special Feature on Socioeconomic Status and Health,” Table 35, http://www.cdc.gov/nchs/data/hus/hus11.pdf, (2012).

[17] PhRMA analysis of data from Congressional Budget Office Medicare Part D Baselines, Components of Mandatory Outlays, for 2010-2014. Data available at www.cbo.gov.  See also CBO, “Updated Budge Projections: 2014 to 2024,” April 14, 2014. http://www.cbo.gov/publication/45229. 

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