High Cost Meds and ACA

[unic.consulting]

From what I found, there's nothing official about requirements. I have seen a lot more plans with specialty tiers for these drugs however.

To mitigate the cost to patients and encourage treatment, many specialty pharmaceutical manufacturers offer assistance programs to patients. These programs provide coupons to patients for some, or all, of the amount of cost sharing. In the case of Medicare, where such assistance is not allowed under federal law, some manufacturers provide grants to independent nonprofit organizations, which in turn are able to reimburse patients a portion of their share of the costs of medicines.

These discount programs have been criticized by payers and PBMs because they reduce the incentives that are embedded in traditional benefit designs and may lead to overuse. Therefore, even though copayment assistance programs may make a particular product more affordable for an individual patient, some contend that they increase the overall costs to the plan and all members covered under the plan by encouraging the product's use. Manufacturers and patient advocates defend these discount programs, arguing that the cost-reduction incentives of traditional benefit design should not be applied to specialty products because of the seriousness of the diseases they treat and the small patient populations involved. In addition, by making these high-cost therapies more affordable to patients, coupons and copayment assistance can help reduce nonadherence and its consequences, such as emergency department visits and hospitalizations.

 

[AllenChicago]

I like the closing comment: "The plans knew what they were getting into," he said. "They understood that this population was going to look really different."

They knew, but the gov't dictated the risk profiles, age makeup, experience, etc. Carriers had to base premiums on estimates from the gov't that assumed a best-case scenario (40% young and healthy, same drug usage, etc.)

Keep in mind, carriers have to submit next year's rates very soon. This data, this experience, is going to be what they are forced to use. Expect to see some higher rates next year.

It's gotta be pretty spooky for the insurers dealing with this new ACA world. On the one hand, they need to raise premiums 70%. On the other hand, the government says that it will dampen the effects of higher medical claims with R-R-R. But the government says that software isn't built. Then there's the prospect of some states not allowing a rate increase to be approved before the November elections. Oh boy...

 

[RayNY]

Don't forget, RRR will likely not indemnify a company of it's complete loss due to the way it is calculated and distributed. It's quite possible for a company with relatively low market share and bad experience to have to eat a huge loss even after RRR kicks in.

It's always in an insurer's best interest to price the risk accurately, that's just harder to do than ever (especially with rate review and extremely limited experience for this new block.)

Allen, I'd wager they get approved quietly, but are forbidden to release them publicly until after elections when the OEP starts. I agree with you, we're not seeing them before elections one way or another.

 

[somarco]

If carriers relied on govt estimates to set rates they were stupid. Most rely on outside sources, such as Milliman, Mercer and other independent actuarial firms to provide rating data.

The few states with GI and community rating was a large enough sample to give them an idea of what to expect. Also, several states have small group laws that (pre-Ocare) had GI and a few also had community rating.

The carriers and actuaries also had info from carriers of last resort and risk pools.

Simply no excuse to claim they are surprised.

 

[AllenChicago]

Allen, I'd wager they get approved quietly, but are forbidden to release them publicly until after elections when the OEP starts. I agree with you, we're not seeing them before elections one way or another.

I don't know Ray. It's a stretch to believe that health insurers will be able to keep the 2015 premiums "secret" until after the election. The Marketplaces reopen for 2015 AEP just 11 days after November 4th.

What about those who purchased new plans this year on/off exchange. Don't insurers have to notify insureds of their new 2015 premium at least 60 days before 1/1/2015? If so, the Obama Admin might issue a Chicago-Style coercive executive order that negates that requirement.

 

[Yagents]

I read somewhere that a maximum loss a carrier can experience is 2%. Anything above that, they share in the reinsurance pool. Same on the upside, max profits is 3%, before they have to give some back to the pool to be redistributed.

It will be interesting to see if HHS allows carriers who low balled premiums, and need the RRR's, be allowed to low ball premiums again in 15'

 

[RayNY]

Allen, I'm sure neither of us would be surprised by either scenario. We just have to sit back and see what happens.

Yagents, you're on the right path, but your details are a bit off. Here's the CMS presentation on the final rule: http://www.cms.gov/cciio/resources/files/downloads/3rs-final-rule.pdf

Basically, if a company's costs are less than 97% or more than 103% of premium collected, a "percentage of the difference" is repaid or paid to HHS. (Percentage of difference is 80% this year, 50% in 2015 according to Kaiser: Explaining Health Care Reform: Risk Adjustment, Reinsurance, and Risk Corridors | The Henry J. Kaiser Family Foundation)

So, more than 3% profit, a portion goes to HHS. More than 3% loss, HHS repays a percentage of your loss. They do not limit you to 3% loss, nor do they re-pay you back to break-even. (No maximum loss.)

Do keep in mind, there is a $10B pool of cash for all insurance companies in all states. It's totally possible for more than $10B of losses to occur, we spent just shy of $900B in 2012 according to CMS, $10B is barely a 1% difference. It's not unreasonable to think that premiums are off by more than a single percent.

 

[Ann H]

RayNY, you are so smart, it's hard to keep up with you!

 

[Yagents]

Yagents, you're on the right path

How did you know that I'm on the yellow brick road?
Thanks for the clarification, not bad considering I was going off memory for something that ultimately doesn't affect me or the client. I'm a "skimmer" when it comes to minutia like that.

 

[RayNY]

If you click your heels three times, can we go back to pre-ACA?

You're right, it's pretty irrelevant to us. It's always good to get a refresher course so we sound smarter to clients. The best part of this forum is the pool of knowledge between all the members.

P.S. Ann, it's become an honor to make a post and not be corrected by you. =P