Discrimination in Health Insurance Coverage Needs to End

I’m a big fan of the movie Back to the Future. Apparently, so are payers in our health care system who are reprising 1990s-era warnings that pharmaceutical costs alone are going to wreak havoc on the economy unless drastic measures are taken to erect access barriers or put strict price controls into place. Rhetoric notwithstanding, the Centers for Medicare and Medicaid Services (CMS) continues to report that pharmaceuticals account for about 10% of total healthcare costs, just like they have for the past several decades. What has increased, despite all the cost-based hand wringing and finger pointing, is the percentage of generic pharmaceuticals prescribed over the past two decades, from 33% in 1990 to 86% in 2013. This increase is primarily due to the patent cycle of pharmaceuticals, whereby today’s expensive brand name drug becomes tomorrow’s inexpensive generic medicine. Despite the substantial increase in generics usage, there has also been a spike in restrictive drug coverage designs, which place needed treatments for some of the sickest patients out of reach.

The rise in discriminatory drug benefit design practices is playing out primarily in state health insurance exchanges. Private payers selling insurance in the exchanges have begun devising coverage plans with unreasonable co-insurance components for certain drug classes such as oncology and immunology. This approach mandates that a patient pay a percentage of drug costs rather than a standard copay, which is a fixed out-of-pocket expense.

Certain insurers have even gone so far as to place all of the drugs – both generics and brand names – for certain disease classes like HIV in the highest cost sharing tier of a formulary. This new initiative was investigated and chronicled by Harvard researchers, who determined that it is a potentially discriminatory way for insurers to dissuade patients suffering with certain diseases from enrolling in their plans. A study commissioned by CVS Caremark suggests that specialty pharmaceuticals consume only 8% of healthcare costs associated with patients suffering from rare and complex diseases, evidence that discriminating against the sickest patients is not only wrong but also unnecessary.

To fight back against this payer practice, the AIDS Institute and the National Health Law Program filed a complaint with the Office for Civil Rights at the U.S. Department of Health and Human Services requesting that federal officials take action to end discrimination targeting people living with HIV/AIDS. This compliant, specific to four insurance carriers operating in Florida, led one of the largest carriers in that state, Humana Medical Plan, to reach an agreement with the Florida Office of Insurance Regulation that significantly reduced patient cost-sharing for all HIV drugs on qualified health plans. Another big change came this year when Kaiser Permanente, which previously classified many HIV/AIDS medications as specialty drugs and required members to pay a co-insurance fee each time the prescription was filled, reversed this policy and agreed to reimburse members who had overpaid for their drugs.

At the same time, state insurance commissioners are also taking a close look at these discriminatory practices. In Colorado, for instance, carriers must offer at least one plan design in each metal tier offered with an all copayment structure not subject to a deductible. Similar steps have also been taken in Montana by its insurance commissioner, ensuring that residents will have a choice in deciding what their drug benefit coverage will be.

A key fact that’s often forgotten in the debate is that most patients are paying fewer out-of-pocket costs for pharmaceuticals than any time since the 1960s. The patients who take on the brunt of paying out-of-pocket costs are in the minority – severely ill people paying for life saving medication. But this undermines why they purchase insurance in first place – to protect themselves from catastrophic illnesses.

We must think carefully about restriction through arbitrary or discriminatory practices. Dr. Stephen Soumerai of Harvard asserts, “Rigid policies that target essential classes of medications with heterogeneous patient responses and side effects could reduce appropriate care, adversely affect health status, and cause shifts to other drugs or more expensive types of care.”

The introduction of an expensive biopharmaceutical that actually cures Hepatitis C and reduced overall healthcare costs gave payers another opportunity to bring back their doomsday rhetoric from the 1990s. But we might need the ingenious cast of characters from Back to the Future to fix the real problem – a broken insurance model and its siloed payment scheme which places restrictions on the cost-beneficial medications that patients need. These are restrictions that can ultimately lead to declines in health and quality of life or increased use of more costly interventions.


Robert Popovian is the Senior Director of U.S. Government Relations at Pfizer Pharmaceuticals. 


Morning Consult