The rationale for using coinsurance is that exposing patients to a percentage of the full price prods them to shift to lower-cost products and services, such as generic drugs. But critics say the growing use of coinsurance worsens affordability problems that have been already exacerbated by the proliferation of high-deductible plans.
“Coinsurance is one of the more insidious ways employers have been shifting costs to employees,” said Sabrina Corlette, a research professor at Georgetown University’s Health Policy Institute. “Unlike with premiums and deductibles, it’s very difficult for enrollees to know what their costs will be in any given year.”
From 2006 to 2016, average annual payments by enrollees in large employer plans toward coinsurance rose 67%, while payments toward copays fell 38%, according to the Peterson-Kaiser Health System Tracker. Meanwhile, average payments toward deductibles soared 176%.
But there is a key difference between coinsurance for medical services and for drugs. For physician and hospital services, patients pay a percentage of the plan’s negotiated price, which is far below the sticker price. For drugs, they generally pay a percentage of the full list price, regardless of rebates received by their plan from the drug manufacturer.
List prices for the most commonly used brand-name drugs increased 7.3% in 2018, according to Express Scripts.
Providers say high cost-sharing for prescription drugs discourages patients from taking needed medications, or causes them to take less than the amount prescribed, which is medically risky.
“Often a physician will write a prescription they feel is appropriate, and they’ll get a call back from the pharmacist saying the patient can’t afford the medication,” said Dr. Gary LeRoy, president-elect of the American Academy of Family Physicians, who practices at a community health center in Dayton, Ohio. “There’s sticker shock over what they have to pay for some of the newer meds. So you have to search for an alternative.”
Even the drug company executives testifying Feb. 26 acknowledged this coinsurance affordability issue. “Patients are made to pay on average 14% of the cost of their medicines, but only 3% of the costs associated with hospital stays,” said Albert Bourla, Pfizer’s chief executive. Bourla backed proposals to peg cost-sharing to a drug’s net price with rebates rather than to the list price.
Enrollees in individual-market health plans have it even tougher, according to a new analysis of silver plans by the Robert Wood Johnson Foundation. In that market, the most common benefit design for the specialty drug tier is offering no coverage until enrollees meet the deductible, after which they must pay 40% coinsurance based on the drug’s list price.
“The cost-sharing is more rugged than in employer plans,” said Katherine Hempstead, a health insurance analyst at the foundation who did the study.
Employer plans with more than 20,000 members are leading the way in establishing hefty coinsurance on brand-name drugs to push employees to use cheaper generic products. Sixty percent applied coinsurance to brand-name drugs through mail-order plans in 2018, while nearly 70% applied coinsurance to these drugs through retail pharmacy plans, according to a Mercer survey. The comparable figures for generic drugs are 34% and 37% respectively.
“Large employers are slowing increases in deductibles at least partly due to concerns about affordability,” said Beth Umland, who heads research for Mercer. “But increasing coinsurance rather than the deductible won’t address that problem.”
With no cap on their out-of-pocket drug costs, Medicare beneficiaries are the most vulnerable to stiff coinsurance payments tied to high list prices for medications, despite recent measures to fill in the Part D coverage “donut hole.” Enrollees in most other types of insurance are relatively protected by the Affordable Care Act’s out-of-pocket maximums.
One million Part D enrollees with out-of-pocket costs above the catastrophic threshold spent more than $3,000 out of pocket on their prescriptions in 2015 due to coinsurance, according to the Kaiser Family Foundation.
That’s why Wyden, the Trump administration, and the Medicare Payment Advisory Commission all have proposed capping Part D out-of-pocket spending on drugs, even though that would modestly increase Part D premiums. The administration has proposed putting a $5,000 annual limit on beneficiary drug costs.
Others, including drugmakers, favor factoring in manufacturer rebates to lower the price on which coinsurance is based, thus reducing how much beneficiaries would pay out of pocket.
Whatever the approach, many experts argue urgent action is needed to protect Medicare beneficiaries and commercially insured patients as coinsurance payments based on rising list prices for drugs bite into household budgets.
“Coinsurance is a mysterious percentage of a mysterious charge,” said Jack Hoadley, a research professor emeritus at Georgetown University. “It would be better if you just set a max of $100 for any given one-month supply of a drug, because otherwise it can cost far more than anyone can afford.”