In late 2013, this column addressed an emerging issue in the new “Exchange Plans” created by the 2010 Affordable Care Act (also known as PPACA), and identified a potential gap in the scope of prescription drug coverage to be offered by private insurers offering plans under the state and federal “Exchanges.” At the time of that article, much uncertainty surrounded the program. No one knew if the states would build exchanges, if the federal government could substitute its exchange for those states that did not build out their own programs, and most importantly, whether Americans would enroll in the program and purchase the heavily subsidized coverage available through the qualified health insurance plans being offered.
Eight months later, we can answer some of those questions: 17 states and the District of Columbia built their own exchange networks through which private insurers qualified health insurance offerings that met the “essential benefits” requirements of federal law. In the remaining 34 states, the federal government launched the federal exchange (or created a so-called Partnership exchange), and notwithstanding a disastrous rollout of the federal website which captured the attention of the country, close to nine million Americans enrolled in the program, smashing even the most aggressive enrollment predictions. And payments are catching up to enrollments. As of August 31, 2014, approximately eight million of the newly signed up have also paid for their coverage.
The federal government spent billions of dollars to achieve such outstanding enrollment statistics, and devoted extensive attention—up to the personal attention of the President—to get Americans into the program. Private health insurers provided a wide and robust range of plan offerings with more than 280 insurers offering a combined 20,000 different insurance plan options across the different coverage regions in the United States. Yet, with all the focus on getting the country into the program, was anyone actually looking at what the program would offer? Stated differently, the core question we highlighted last year remains: Is the coverage really there?
What Does Coverage Look Like Today?
The preliminary data suggests that, at least for 2014 (the first year of the program) exchange plan coverage is less than meets the eye. For example, McKinsey recently published an analysis of hospital coverage offered through exchange plans, and found a prevalence of so-called “narrow networks” throughout all plans as measured by the number of hospitals in each plan area at which a plan member could get treatment.1 In an apples-to-apples comparison, in 2013 McKinsey found that 80% of commercial plans covered had “broad” networks in their service areas, meaning that over 70% of the hospitals in a service area were included in the coverage network available to enrollees. Yet, for the 2014 exchange plans, only 59% of the plans offered broad coverage, and narrow or ultra-narrow hospital coverage doubled from 18% to 35% of the plans.2
Less Expensive, Less Coverage
For those new insurers who had not previously offered commercial coverage in 2013, but started offering exchange coverage in 2014, the figures were even worse with the vast majority only offering narrow network coverage. While McKinsey appropriately noted that the narrow exchange coverage was less expensive than commercial plan coverage, the relative savings for ACA enrollees will not be felt—given that these beneficiaries were uninsured—and had not previously been paying commercial plan rates. Indeed, McKinsey found that 44% of enrollees who were not part of a commercial plan in the recent past were not even aware that their plans had narrow networks.
Pharmacy access is emerging as similarly limited. As we predicted in 2013, plans were given wide latitude to determine which drugs were considered “essential” for their formularies and were allowed to exclude or otherwise limit access to many (in some cases all) branded medications from their offerings. Another June 2014 report, authored by Avalere,3 confirmed that plans took advantage of the discretion given by the government and for the 19 classes of medications for the most serious illnesses—AIDS, transplants, mental illness, cancer and autoimmune diseases like Crohn’s—if the medication was even available, a large percentage of plans only provided the medication for a typical co-pay over 30% of the drug cost, and in many cases over 40% of the cost.
Prescription Drug Exclusions
In 2012 and 2013, numerous providers urged the Department of Health and Human Services to set clear coverage guidelines to ensure that adequate provider networks and access to the full range of medications—especially for the six classes of drugs that Medicare had previously recognized as “protected” given that drugs within their respective therapeutic classes were not interchangeable. The government, however, opted to focus its attention and budget on bringing enrollees into the program without focusing on the scope of coverage that would be available to those beneficiaries once they enrolled. For those with prior commercial coverage through an employer, for example, the new plans will surely be a step down. And for others with only the most general of expectations, the limited number of hospitals at which they can be treated, or expensive co-pays and exclusions for the prescription drugs they need, may be a surprise indeed.
Conclusion: In the movie Field of Dreams, James Earl Jones’ voice urges Kevin Costner to “build it, and they will come.” In the case of the ACA exchanges, it appears the federal government’s attitude was “come, and we hope they build it.” While at some basic level the scope of coverage offered within the exchange plans is surely an improvement over the absence of coverage that was previously a fact of life for the seven to eight million Americans that enrolled, it is hard to see how the coverage these Americans purchased will actually meet their expectations, and whether the currently limited coverage available in most bronze and silver plans will be enough to sustain enrollment in the program in 2015 and the years to come.
For those used to employer-based coverage, there is little doubt that the ACA plans will offer less. It stands to be seen whether limited access to branded medications, narrow networks, and other coverage limitations will be enough to keep everyone in the program.
1. Hospital Networks: Updated National View of Configurations on the Exchanges, McKinsey Center for Health System Reform, June 2014, available at: http://healthcare.mckinsey.com/sites/default/files/McK%20Reform%20Center%20-%20Hospital%20networks%20national%20update%20%28June%202014%29_0.pdf.
2. McKinsey Report, pages 5-6.
3. An Analysis of Exchange Plan Benefits for Certain Medicines, Avalere, June 2014, available at http://www.phrma.org/sites/default/files/20140521_FINAL%20PhRMA_High%20Coinsurance%20and%20Tier%20Placement_Avalere%5B7a%5D_0.pdf.