Follow the Evidence on Premium Impact

Premiums for health insurance are one of the most visible health care-related expenses consumers regularly face. As a result, they rightfully receive a great deal of scrutiny by the public and policymakers.

Most recently, questions have risen about the impact of biopharmaceutical spending, rebating as a contractual tactic and policies that impact access on health care premiums. To determine the answers, it is important to evaluate real-world evidence.

First, for the past two cycles of data published by the Centers for Medicare and Medicaid Services, growth in retail biopharmaceutical spending has been equal to or below inflation and has lagged behind both hospital and physician expenditures. Most recently, Express Scripts, one of the largest pharmacy benefit managers, stated, “In 2018, U.S. drug spending increased 0.4% for commercial plans. … This trend was primarily driven by a negative 6.5% growth in unit cost trend for traditional brand drugs … [and] a 2.1%-unit cost trend for specialty brand drugs.” Thus, the belief that increases in premiums may be blamed on biopharmaceutical spending growth is unsupported.

Next, we should examine whether policies that increase pharmacy access and benefit choice impact premiums. In 2014, Colorado decided to institute a policy whereby the insurers in the state exchange program must offer a single plan within their plan benefits that has a fixed-dollar copay only for pharmaceuticals.

Copay-only health plans provide patients the certainty of a fixed, out-of-pocket cost for medicines as opposed to plans that offer a co-insurance design that may expose patients to open-ended, out-of-pocket expenditures. Based on the analysis conducted by Milliman on data from 2015-17, Colorado saw no noticeable difference in premiums for the plans that were fixed-dollar copay only versus plans that offered coinsurance benefit design for pharmaceuticals in the same actuarial benefit level (silver plans).

In addition, since 2014, several states have passed legislation capping patient out-of-pocket costs for biopharmaceuticals or curtailed policies such as step therapy. PBMs and insurers have claimed that such policies would increase premiums.

For such states, the marketplace average premium is identical to states without such reforms.  The result? While patients have benefited from legislative efforts that improve access, they have not been penalized with higher premiums.

Policymakers are trying to figure out the impact of biopharmaceutical total spending and rebates on health care premiums. To clarify both inquiries, we can turn to California for real-world evidence.

The California Department of Managed Health Care, via Senate Bill 17, requires health plans and health insurers that file rate information with the DMHC or the California Department of Insurance to annually report specific information related to the costs of covered prescription drugs. The report calibrates the impact of prescription drug spending on health plan premiums. Within the report, DMHC also analyzes the impact of rebates on premiums.

According to the DMHC, for the plan year 2017, prescription drugs accounted for 13.1 percent of total health plan premiums. This finding is far below the numbers estimated by America’s Health Insurance Plans (23.3 percent) or by the Peterson-Kaiser Health System Tracker (21 percent). DMHC also calculated that the impact of rebates on health care premiums was 1.4 percent, again far below what some pundits have predicted, and off the mark of what the impact may be if rebates are taken out of the equation.

Overall, the real-world evidence to date demonstrates that biopharmaceutical spending growth and policies that either curtail the use of anti-patient step therapy, improve affordability by capping out-of-pocket costs, or provide patient choice have had no discernable impact on premiums. More importantly, the impact of biopharmaceuticals spending on health insurance premiums overall is in line with the overall percentage of drug spending in the United States.  

At the same time, rebates have had a minor impact on health care premiums based on real-world evidence.  Following the evidence will allow us to have a fact-based debate on patient-centered policies that will result in real savings for patients.


Robert Popovian is the vice president of Pfizer U.S. Government Relations.

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