News & Commentary

Adverse Tiering Costly for Members


Price transparency along with cost sharing limits are two ways health insurers can avoid adverse tiering, and the bad publicity (and possible litigation) that goes with it, according to a study in the New England Journal of Medicine (NEJM).

Last May, two health advocacy groups filed a complaint with the Office for Civil Rights at HHS, accusing four insurers of selling benefit packages in Florida that discriminated against people with HIV/AIDS by putting the drugs for treating the condition on the top tier of their formularies.

That spurred Douglas B. Jacobs and Benjamin D. Sommers, researchers at the Harvard School of Public Health, to investigate the causes and consequences of adverse tiering. They reported their results in the Jan.29 issue of NEJM.

The researchers looked at silver plans listed in the federal health exchange in 12 states—six with insurers mentioned in the complaint (Delaware, Florida, Louisiana, Michigan, South Carolina, and Utah) and six of the most populous states without those insurers (Illinois, New Jersey, Ohio, Pennsylvania, Texas, and Virginia).

Jacobs and Sommers reviewed the formularies and benefit summaries for nucleoside reverse-transcriptase inhibitors (NRTIs), a class of drugs that is a mainstay of HIV/AIDS treatment. They defined adverse tiering as placing all NRTIs on tiers with a coinsurance or copayment level of at least 30%. They used the drug prices paid by Humana, which publishes those prices online, to estimate cost.

Here’s what they found:

  • Evidence of adverse tiering by 12 of the 48 plans. Seven of the 24 were in the states listed in the HHS complaint and five in the six other states.
  • Drug costs for enrollees in the adverse tiering plans were more than triple ($4,892 vs. $1,615) than enrollees in the other plans.
  • Half of the adverse tiering plans had a drug-specific deductible compared with 19% of the other plans.
  • Once lower premiums and ACA caps on out-of-pocket expenses were factored in, someone with HIV/AIDS enrolled in an adverse tiering plan would still pay $3,000 more than someone enrolled in the other plans.

They also mention two other consequences: financial hardship for those who are affected and, over time, adverse selection working to the disadvantage of health plans that don’t use adverse tiering.

Jacobs and Sommers say that price transparency by itself could actually make adverse selection worse. To avoid that, they propose establishing “protected conditions” for which there would be an upper limit on cost sharing.

Protected conditions are nothing new, Jacobs and Sommers note, pointing to the precedent of Medicare Part D and drugs for HIV, seizures, and cancer.

The Harvard researchers also float the idea of requiring health plans to offer drug benefits that meet a set actuarial value. In their explanation, that would mean that the percentage of drug costs paid by a health plan would have to meet a certain threshold of, say, 70%.

When the HHS complaint hit the news in May, the health plans responded in several ways: that they viewed HIV drugs to be specialty drugs and covered in the same way as the expensive drugs for conditions like rheumatoid arthritis and multiple sclerosis; that enrollees wouldn’t have to pay anything after they hit ACA limits on out-of-of-pocket expenses; and that they offered a variety of services to their members with HIV/AIDS.

In November, Cigna agreed to restructure its drug plan for HIV drugs. According to the Wall Street Journal, the company entered into an agreement with Florida insurance regulators that, among other things, moved generic HIV drugs to a lower-cost generic tier and limited copayments.