At the higher tiers, out-of-pocket spending increases considerably and differences between the individual and small group markets widen. For specialty drugs, less than 10 percent of silver plans in the individual market use co-payments that are not subject to the deductible. For those that do, the median co-pay is $550. In the small group market, about one-quarter of silver plans use co-pays before the deductible for the specialty tier, with a median copay of $250. In the large group market, cost-sharing is more moderate; more than 40 percent of plans use co-payment in the fourth formulary tier.
Nearly three-quarters of individual market silver plans employ the most austere type of benefit design in the specialty tier - co-insurance which only kicks in after the deductible is met. The median co-insurance is 40 percent, not insignificant when the average monthly cost of a specialty drug can exceed $5,000. In the small group market, less than one-third of silver plans have this design, and the median co-insurance is somewhat lower at 30 percent.
There are a few mitigating factors. Some plans using co-insurance have a maximum dollar value per prescription, most commonly for the specialty tier, and some plans have a drug deductible that is separate from and smaller than their overall medical deductible. Plans that are combined with Health Savings Accounts allow enrollees to use pre-tax dollars for their out-of-pocket spending. Enrollees with incomes below 250 percent of federal poverty level qualify for Cost-Sharing Reduction plans that require much lower out-of-pocket spending. But the differences between the individual and small group markets in the specialty tier are not trivial, which could be relevant for small employers and brokers that are interested in taking advantage of the recent HRA rule to migrate enrollees to individual coverage.
The benefit design determines how much of the cost of expensive medications is borne by patients with prescriptions versus being shared more broadly among all enrollees. Manufacturers have for many years provided patients with co-pay coupons to offset cost sharing for expensive medications. This essentially negates the impact of the plan cost-sharing design and maximizes expenditures from plans. As a countermove, plans have recently introduced “co-pay accumulators,” which are intended to essentially neutralize co-pay coupons, by prohibiting them from being applied to patient deductibles and maximum out-of-pocket limits. The use of accumulators has become widespread, including in the individual market, where surveys in a number of key states have found co-pay accumulators being used by many carriers, with information about their use sometimes buried deeply within plan documents.
A number of states have passed or are considering passing legislation to limit the use of co-pay coupons, particularly when a generic is available. CMS took a similar position for the ACA market in the recently released Notice of Benefit and Payment Parameters. Yet a number of states have regulated aspects of prescription drug cost-sharing in ways that also seek to reduce exposure for enrollees with prescriptions, by limiting the number of formulary tiers, establishing a maximum co-pay, setting a patient spending cap, and otherwise standardizing benefit design. At the same time, some patient advocacy groups are now asking states to restrict the use of co-pay accumulators. While much of the broader policy discussion about drug costs has focused on list prices, plan design will continue to be an important issue for consumers and many other stakeholders.