Health insurance companies are urging regulators to establish price ceilings for COVID-19 vaccines and therapeutics, cautioning that costs will skyrocket without them.
Once the federal supply of coronavirus vaccines and treatments runs out, health insurers, employers and pharmacy benefit managers must strike deals with pharmaceutical companies on the prices for the Moderna, Pfizer-BioNTech, Johnson & Johnson and Novavax vaccines and treatments such as Pfizer’s Paxlovid and AstraZeneca’s Evusheld. The federal government anticipates that vaccine and drug procurement and distribution will shift to the private sector as soon as January.
For most of the pandemic, federal programs have shielded patients, providers and health insurance companies alike from the true costs of vaccines and medications that fight COVID-19. But one by one, government initiatives are winding down, leaving the healthcare industry and the public to shoulder an increasingly heavy burden even as COVID-19 cases continue to mount.
“This wasn't going to be a perpetual issue where taxpayer funds were used for vaccines for COVID,” said Dr. Amesh Adalja, a senior scholar at the Johns Hopkins Center for Health Security. “There was always going to be a transition point out of the emergency situation, allowing the commercial market to operate the way it does for other vaccines.”
Insurers and employers are concerned the cost of COVID-19 vaccines and therapeutics will balloon when the government stops acting as the purchaser.
Laboratory prices spiked during the height of the pandemic, which could offer a preview of what will happen in the vaccine and drug markets absent further federal action, said Michael Bagel, director of public policy at the Alliance of Community Health Plans, a trade association for not-for-profit insurers. Some labs went out-of-network with insurers during the pandemic and commercial rates for COVID-19 tests nearly doubled, according to a study the health insurance trade group AHIP published last year.
Although large health insurance companies and self-insured employers should be able to bear the costs, startup insurers and smaller businesses are likely to face financial difficulties as the responsibility to pay for COVID-19 vaccines and drugs becomes theirs. The Health and Human Services Department hosted a gathering on the subject last week with representatives from the insurance industry, the provider community and the pharmaceutical sector along with state and local officials and patient advocates.
Without pricing safeguards in place, smaller insurers and employers will face a "Hunger Games" scenario as they battle with vaccine and drug manufacturers over prices and supplies, Bagel said. Moderna, Pfizer and AstraZeneca did not respond to interview requests. The Pharmaceutical Research and Manufacturers of America, a trade group, declined to comment.
Health insurance companies did not account for these costs when calculating premiums for next year, and they will face other expenses when the ongoing federal public health emergency designation lapses, Bagel said. For example, insurers eventually will need to negotiate prices for at-home coronavirus tests, for which they currently pay $12 apiece. The federal government suspended its free at-home COVID-19 testing program last week after funding ran dry.
“Insurers will end up paying quite a bit more than the federal government has been paying,” said Matthew Fiedler, senior fellow with the University of Southern California-Brookings Schaeffer Initiative for Health Policy. They will likely increase premiums as a consequence, he said.
Insurers with fewer members will see more volatility in their earnings when they must pay for COVID-19 vaccines and therapeutics, said Brad Ellis, a senior director at Fitch Ratings. This could push insurtechs such as Oscar Health and Bright Health Group to increase their use of reinsurance, he said.
“It is too early to know exactly what impact this requirement will have on many health insurers,” a Bright Health Group spokesperson wrote in an email. Oscar Health did not respond to an interview request.
Insurers will still need to pay for COVID-19 vaccines without imposing cost-sharing because the Affordable Care Act requires no-cost coverage of vaccines recommended by the Centers for Disease Control and Prevention's Advisory Commission on Immunization Practices.
Health insurance companies aren’t actually required to cover drugs that treat COVID-19. As the government steps back, that creates questions about what insurers will cover what products and how much enrollees will have to contribute. Additionally, Medicare Part D can typically only cover products the Food and Drug Administration fully approved. Many COVID-19 vaccines and therapies, including Paxlovid and Evusheld, currently are marketed under emergency use authorizations.
“It may well be that CMS has some tricks up their sleeve about how they're gonna arrange for coverage for these things, but at least on its face, there are some problems that need to be worked out there, and I think it’s conceivable there are problems that are going to require legislation to sort out,” Fiedler said.
Transitioning COVID-19 vaccines and therapies to the commercial market will be a bigger shift for payers than providers. But health systems that provide a disproportionate amount of care for uninsured patients are concerned about higher uncompensated care costs, said Chip Kahn, president and CEO of the Federation of American Hospitals, which represents investor-owned health systems.
The federal government has stopped reimbursing providers for providing COVID-19 vaccines, tests and treatments for the uninsured and is unlikely to resume those programs, but some states may take action, Fiedler said.