Specialty Drug Benefit Design and Patient Out-of-Pocket Costs in the ACA Health Insurance Exchanges

Insurers often place specialty drugs, a group of pharmaceutical products that are generally very high cost, on the highest cost sharing tiers in their benefits. As a result, patients taking these drugs may incur much higher out-of-pocket costs for their medications than they would if they were to take a lower cost generic or branded product. Since specialty drugs can represent significant therapeutic advances over alternative therapies, patients may end up incurring high out-of-pocket costs in order to access the most appropriate medication for their condition. With the introduction of the health care exchanges via the 2010 Affordable Care Act, previously uninsured patients were able to access health insurance. For those patients taking specialty drugs, however, the question remains whether the ACA went far enough in ensuring affordable access to health care.

Our paper simulates the potential out-of-pocket costs in health exchange plans for patients taking three specialty drugs: adalimumab (to treat rheumatoid arthritis), ritonavir (HIV/AIDS), and interferon beta-1a (multiple sclerosis). We use the publicly available benefit design data for 2015 for the 37 states offering coverage via healthcare.gov, and calculate annual expected out-of-pocket costs for patients as though they were enrolled in each exchange plan. We assume that each patient takes the specialty drug once per month over the course of the entire year, and make use of the Medical Expenditure Panel Survey (MEPS, 2012) to identify patients taking these drugs in order to identify additional pharmaceutical use. We also assume some level of medical services utilization, as exchange plan benefits often combine both medical and pharmacy utilization.

We find that patients taking these medications can expect to incur lower annual out-of-pocket costs as the actuarial value of the benefit increases; that is, patients can expect lower out-of-pocket costs if they enroll in Platinum plans as opposed to Silver or Bronze plans. This relationship holds even when adding the total annual premium patients can expect to pay, both for patients receiving the low-income subsidy and those not receiving the subsidy. However, the magnitude of the differences in out-of-pocket cost estimates is much smaller when adding premium than when only considering out-of-pocket costs. In addition, our results indicate that the catastrophic cap on out-of-pocket spending acts as an important benefit for patients taking expensive medications, as patients will hit the cap in the vast majority of plans. As part of our next steps, we plan to use utilization patterns observed in MEPS to consider demand effects that may alter the estimates of out-of-pocket costs for patients enrolled in the exchanges.