Insurance change favoring generics

High-deductible plans making shift

Starting next year, state employees' high-deductible health insurance plans will no longer pay for dozens of brand-name prescription drugs that have cheaper generic equivalents.

The change is part of an effort to reduce the prescription-drug costs for the plans that cover 28,000 state employees and 47,000 teachers and other public school employees.

Last year, the spending on drugs and related administrative expenses for the plans totaled $152.2 million, accounting for about a quarter of the plans' total spending.

The State and Public School Life and Health Insurance Board approved the rates and benefits for next year for state employees, including the change in drug coverage, last month. The board is expected to approve the details of next year's plans for school employees on July 29.

The benefits for the plans for state and school employees are currently identical, but board members have said that could change next year.

Premiums paid by state employees are lower than those paid by teachers, which officials with the Department of Finance and Administration's Employee Benefits Division have said is because the state employee plans receive more taxpayer funding.

To reduce potential rate increases for teachers, the Legislature passed laws during a special session at the start of this month to exclude from coverage part-time school employees and employees' spouses who can get coverage from their own employers. The laws also limited coverage of weight-loss surgery and directed payroll tax savings to be transferred from school districts to the insurance plans.

Currently, the bronze plan, which now covers about 2,400 state employees, covers 80 percent of a patient's drug costs for a broad range of drugs after the patient meets a deductible for medical and drug expenses.

That deductible is $2,000 for individual coverage or $3,000 for family coverage.

Starting next year, the state employees' bronze plan will be renamed the classic plan, and the deductible will increase to $2,500 for an individual or $5,000 for a family.

The state will also offer another plan, known as the basic plan, which will have a deductible of $6,600 for an individual or $13,200 for a family.

Employees in either plan will be required to have a health savings account, which allows an employee to make contributions that are exempt from federal income tax as long as the money is spent on medical or drug expenses.

Unlike the current bronze plan, the drugs covered by the classic and basic plans will exclude many brand-name drugs that have generic equivalents.

David Keisner, a pharmacist with the University of Arkansas for Medical Sciences College of Pharmacy's Evidence-Based Prescription Drug Program, said the change will help combat drug "coupons" issued by manufacturers. The UAMS program helps manage the insurance plans' drug expenses.

The coupons reduce a patient's out-of-pocket spending for brand-name drugs, removing the incentive for the employee to choose the plan's preferred drug. But the coupons don't reduce the portion of the drug's cost paid by the health plan.

At the same time, the full cost of the drug that is not covered by the plan goes toward an overall cap on the employee's out-of-pocket spending for medical and drug expenses.

That cap for the bronze plan is $6,350 for an individual or $9,525 for a family.

After the cap is reached, the plan pays the full cost of the employees' medical expenses.

"A member could actually reach their out-of-pocket without ever paying anything out of pocket with some of these coupons," Keisner said.

Although he didn't know the precise number, Keisner said few of the 2,400 state employees now enrolled in the bronze plan will be affected because most already take the cheaper generic drugs.

Those who are taking drugs that will no longer be covered will be sent a letter notifying them of the change at least 90 days before the change takes effect, he said.

An excluded drug can still be covered if the employee files an appeal showing a medical reason the patient needs to take that drug instead of the less expensive one.

John Bridges, assistant director of the Arkansas State Employees Association, said he supports changes to improve the finances of the health insurance plans but is concerned about the effect on employees.

He noted that state employees did not receive a cost-of-living pay increase for the fiscal year that started July 1.

"With increased expenses, the paycheck keeps getting smaller and smaller," he said.

The change will not affect employees who enroll in a new plan, known as the premium plan, which will start next year and replace the current gold and silver plans.

Like the gold and silver plans, which cover about 25,600 state employees and 23,000 school employees, the premium plan will use reference pricing for the drugs that will be excluded by the high-deductible plans.

Under reference pricing, the plan charges a $15 co-payment for certain generic drugs. If the member takes a more expensive drug, the member pays the difference between the cost of that drug and the less expensive drug, known as the reference drug.

The extra cost paid by employees for the more expensive drug does not count toward the employee's deductible or out-of-pocket spending cap.

On Jan. 1 of this year, the classes of drugs covered under reference pricing expanded from three to eight.

Employees who were taking drugs that were affected were notified by letter at least 90 days before the change took effect, Keisner said.

Dwight Davis, the Evidence-Based Prescription Drug Program's director, said the expansion of reference pricing drew several phone calls from affected employees but few, if any, appeals.

"We've seen a significant migration to the preferred products in all of the classes where reference pricing has been implemented," Davis said. "After [the employees] understand what the alternatives are, we'll normally see the preferred agents account for significantly more than 90 percent of the market share within those classes."

Cory Biggs, a spokesman for the Arkansas Education Association, said reference pricing could be a "potential nightmare" for new plan enrollees or those who don't realize a drug is subject to reference pricing the first time they fill a prescription for it.

Keisner said information on reference pricing is included in plan booklets, newsletters and emails to employees. Employees are advised to take the plans' list of preferred drugs with them when they visit the doctor, he said.

In the future, he said, officials also hope to be able to alert doctors through electronic prescribing about drugs that are excluded or subject to reference pricing.

"We don't know who's in a doctor's office today getting ready to be prescribed one of those meds," he said.

SundayMonday on 07/20/2014

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