Recent judicial decision impacts some service coverages
Last month, a federal district court ruled that certain preventive care mandates violate the Appointments Clause of the U.S. Constitution. The decision specifically targets care recommended by the U.S. Preventive Services Task Force (USPSTF). The Biden administration appealed the decision, but the opinion is in effect unless the judge or an appeals court issues a stay.
Although the opinion is in effect, few employers will change plans midyear and most will wait for a final ruling before making any plan changes. Additionally, the services covered by this ruling and the associated cost are narrower than initially thought.
The Affordable Care Act (ACA) requires employer-sponsored health plans to provide certain preventive services with no out-of-pocket costs for plan members. There are three types of required preventive care:
A list of covered services is available, as well as the authority that recommends each service.
These services are widely used and spare plan members a significant amount of out-of-pocket costs. The Kaiser Family Foundation estimates that in 2018 100 million Americans had cost sharing waived due to this mandate.
Preventive services are inexpensive in the context of total medical expenses. Even PrEP, which is 99% effective at preventing transmission of HIV in high risk individuals, is now available generically and costs just $26 a month. Vaccinations and birth control are cost saving, and the incremental employer spending to eliminate out-of-pocket costs for all these services is modest.
Eliminating out-of-pocket costs for high value services is a fundamental principle of value-based insurance design. Since we know that even modest out-of-pocket costs decrease use, we should offer low or zero cost sharing for the highest value services. Pharmacy benefit managers maintain ACA Preventive Drug Lists that remove cost sharing for targeted prescriptions and over-the-counter medications such as aspirin, folic acid, immunizations, statins, HIV PrEP and contraception.
Last month’s federal district court decision only relates to USPSTF recommendations finalized after the ACA was passed in March 2010.
Most of the requirements for preventive care services without out-of-pocket costs remain in place because they were recommended by ACIP, HRSA or USPSTF before 2010. For instance, recommendations for colonoscopies for those age 50 and above were completed in 2002 and revised in 2008, so they remain in place, but the 2019 USPSTF recommended colonoscopy for those age 45 to 49, would no longer be in place. Here’s a summary of what recommendations are affected.
Implications for employers:
When I started in primary care practice in 1987, the cost for an inhaler for asthma and other respiratory diseases was about $25, which adjusted for inflation would be about $66 today. So it’s puzzling that inhalers for lung disease, which typically contain medication that is off patent for years, retail for $300 to $400 or more. The high prices make those with chronic lung disease less likely to adhere to therapy, which can lead to missed school or work and hospitalizations.
Researchers in Health Affairs reviewed the 53 new inhalers approved since 1986 and found that pharmaceutical companies set up a “patent thicket” creating an average of 10 patents for each medication – making efforts to gain generic Food and Drug Administration (FDA) approval complicated and time consuming. On average, the FDA took 13.5 years to approve generics.
Health Affairs found that 49% of the patents were for the delivery device rather than the medication. Furthermore, many of the extra patents were registered after generic pharmaceutical companies filed for FDA regulatory approval. Brand name pharmaceutical companies often used these patents to sue generic manufacturers to prevent them from competing. Brand name pharmaceutical companies earned over $111 billion after the primary medication patent had expired on these inhaler drugs from 2000-2021.
Implications for employers:
Eli Lilly, Novo Nordisk and Sanofi manufacture almost all of the insulin sold in the U.S, and each has recently announced price cuts of around 75% on some of the older insulin products they sell. Eli Lilly and Sanofi have also announced programs to cap out-of-pocket payments by people with diabetes who have commercial health insurance, too.
This is terrific news for many, although those with diabetes who have commercial health insurance won’t see much difference. Many employers already have programs that cap out-of-pocket costs to no more than $35 monthly for insulin. Employers will be relieved to have this out-of-pocket limit covered by the pharmaceutical company.
Increasing public pressure on pharmaceutical companies certainly helped drive prices down. Stories in the press about young adults with Type 1 diabetes dying after they rationed their insulin are horrifying. The manufacturers also faced competitive pressure from Civica, a nonprofit owned by hospital systems and hired by the state of California to manufacture generic insulin.
Federal policy also played a part in lowering costs. Pharmaceutical companies are required to offer state Medicaid programs rebates if they do not receive the lowest price in the market or if their prices rise more rapidly than inflation. Until now those rebates were capped, but new rules taking effect January 1, 2024, mean that pharmaceutical companies could owe Medicaid programs so much that they would have had to pay the government for each vial distributed. So the major manufacturers of insulin decided they preferred steep price decreases to owing large rebates.
Implications for employers:
It seems like there is a lot of bad news in health policy. It’s distressing to read about high costs, decreasing life expectancy and disparities. A recent JAMA op-ed, The Case for Optimism in Health and Healthcare, brought a brief smile to my face.
Life expectancy for Americans was under 50 in 1900 and rose to 76.8 in 2000. Even with declines in life expectancy due to COVID-19, our life expectancy remains over 76.
The racial life expectancy gap shrunk from 14.6 years to four years over the last century. Much of this was due to improved living standards, as opposed to healthcare. Twice as many adults were high school graduates in 2000 compared to 1960, and the poverty rate was cut by almost half.
The authors note that while life expectancy for 75-year-old Americans is similar to those of other developed countries, we lag in overall life expectancy due to deaths among the young. Our rate of death from automobile accidents has increased more than 20% since before the pandemic, and firearms are now the leading cause of death among those under age 20.
Implications for employers:
Jeff is an internal medicine physician and has led WTW’s clinical response to COVID-19 and other health-related topics. He has served in leadership roles in provider organizations and a health plan and is an Assistant Professor at Harvard Chan School of Public Health.
