New Avalere Health Study Shows that State Decisions about “Essential Health Benefits” Could Have Profound Effect on Patient Drug Coverage

New Avalere Health Study Shows that State Decisions about “Essential Health Benefits” Could Have Profound Effect on Patient Drug Coverage

Contact: Erica Garland, 202-745-5119, egarland@gymr.com

01.26.12

Washington, D.C. – Given the wide variation in the availability of pharmaceuticals across different health insurance plans, decisions that states soon need to make on benchmarks for essential health benefits (EHB) could significantly affect the availability of drugs for individuals who purchase their insurance through health exchanges, according to a new Avalere Health study. The study showed that the selected small group plans' coverage of drugs in the classes included in the study far exceeded the U.S. Department of Health and Human Services' (HHS) proposed one drug per class requirement. On average, the selected small group plans cover approximately 70 percent of the drugs available in the chosen classes, while the Federal Employees Health Benefits (FEHB) plan, another benchmark option states can select, covers all available drugs through its "open" formulary. For example, for antidiabetic agents, FEHB covers all 53 brand and generic products, while the small group plans that could be used as benchmarks cover between 31 and 36 products.

*The FEHBP Standard Option is an open formulary—covering all commercially available drugs approved by the U.S. Food and Drug Administration. FEHBP-covered drugs represent all drugs available in the therapeutic class.
Source: Avalere Health analysis using publicly available commercial formularies.

"This study clearly shows that the rules set by the federal government and states will matter - particularly for low-income beneficiaries who will access subsidized insurance pharmaceuticals under the exchange," said Bonnie Washington, senior vice president. "The law links the essential benefits to typical employer coverage, and our study found that both the Federal Employees Health Benefits Plan and the small group plans that we examined currently cover a substantial number of brand and generic drugs in selected therapeutic areas."

Background on the EHB Bulletin and Benchmark Options

On December 16, 2011, HHS released an informational bulletin presenting its intended regulatory approach on the essential health benefits that plans must cover under the Affordable Care Act (ACA). For 2014 and 2015, HHS' proposed approach gives states latitude to select a benchmark plan from a list of options; the benefits and services in the selected benchmark plan would become the EHB package for the state. For the 2014 benefit year, the benchmark plans in each state will be identified in the third quarter of 2012.

HHS proposes to give insurers flexibility to design benefits and formularies based on the benchmark plan's design, allowing some substitutions to covered services and other adjustments to benefit and quantity limits. With respect to drug coverage, the bulletin grants insurers significant flexibility in terms of formulary design, requiring plans to cover at least one drug per class in all of the categories and classes represented on the benchmark plan's formulary.

As HHS determines its approach to defining the minimum level of "essential health benefits" that must be covered by new individual and small group insurance plans beginning in 2014, the Avalere analysis examines formulary coverage among plans that states may select as benchmarks for this purpose. Drug coverage varies among these plans - meaning states' selection of a benchmark could have a significant impact on prescription drug access for state residents.

Analysis and Findings
Using five plans serving as proxies for the benchmark plan options states may select, Avalere researchers examined the number of drugs each plan covered in selected therapeutic classes. The analysis found that:

All of the plans analyzed consistently covered a significant number of drugs in each class, well beyond the HHS' proposed one-drug-per-class minimum.
The FEHB plan, BlueCross BlueShield Standard Preferred Provider Organization, is the most generous of proxy plans, as this plan has an open formulary—covering all commercially available drugs approved by the U.S. Food and Drug Administration.
On average, the selected small group plans covered approximately 70 percent of the drugs available in the chosen classes; in large classes, such as antidiabetic agents, small group plans cover more than 30 products.
For most of the classes in the study, plans covered at least half of the brand-name products and half of the generic drugs available in each class.
HHS' proposed benchmark approach and one-drug-per-class minimum requirement for the pharmacy benefit would provide health plans significant flexibility in designing formularies that meet federal standards and could result in significant plan-to-plan and state-to-state differences for consumers.

Implications for the Consumer
States' selection of EHB benchmark plans will have important implications for consumers' access to services and the affordability of the benefits, both inside and outside of the health insurance exchanges. States have less than one year to consider their options. As states begin selecting EHB benchmark plans, it will be important to understand the differences in covered services among the benchmark options, including prescription drug access

This research was conducted by Avalere Health funded, in part, by Pfizer. Avalere maintained full editorial control and the conclusions expressed here are solely those of the study's authors .

Avalere Health is an advisory services company whose core purpose is to create innovative solutions to complex healthcare problems. Based in Washington DC, the firm delivers research, analysis, insight, and strategy for leaders in healthcare business and policy. Avalere's experts span 170 staff drawn from the federal government (e.g., CMS, OMB, CBO, and the Congress), Fortune 500 healthcare companies, top consultancies, and nonprofits. The firm offers deep substance in areas ranging from healthcare coverage and financing to the changing role of evidence in healthcare decision-making. Its focus on strategy is supported by a rigorous, in-house analytic research group that uses public and private data to generate quantitative insight. Through events, publications, and interactive programs, Avalere also translates real-time healthcare developments into actionable information.

Learn more at www.avalerehealth.net.

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