Specialty Drug Costs Continue To Vex Employer-Sponsored Health Plans

 

Specialty drug costs continue to vex employer-sponsored health plans |  BenefitsPRO

Source: BenefitsPRO, by Scott Wooldridge

new report from Pharmaceutical Strategies Group finds that specialty drugs continue to be a top focus for plan sponsors, in part because they tend to be very expensive.

The drugs tend to also be highly complex and require special handling or administration, the report noted. At the same time, the drugs can have great value: extending life for some patients and keeping them productive and relatively healthy, even when conditions are not cured outright.

Related: ‘Super spenders’ accrued $2.1 billion in specialty drugs costs 

“Today, advances in drug therapy allow many patients living with conditions treated by specialty drugs to live decades longer than in the past,” the report said. “As a result, today, many specialty drugs are being used as long-term, chronic therapy for a significant portion of patients.”

Very high costs lead to an “appetite for disruption”

The report noted, as many other sources have, the financial burden that specialty drugs present, both to plans and to enrollees. “Patients who use specialty drugs often have additional health care costs such as non-specialty drugs, doctor’s office visits, outpatient hospital visits, and lab testing to monitor their condition, among others,” the study said. “The monthly total cost of care for a member who uses at least one specialty drug averages $4,846 for the plan and $574 for the member. Annualizing these costs equate to average plan costs of $58,157, and average member costs of $6,894, using the monthly average. These costs are in addition to health care premiums and deductible costs.”

To address high costs, plan sponsors are trying a variety of approaches, the report said, including the use of prior authorization, step therapy, and quantity limits as management strategies. More than 50% of employers use at least one strategy to increase the use of biosimilar drugs. And 8% of plans are currently using alternative funding models, while 31% are exploring their use.

An eye on utilization—but complexity remains a problem

Plan sponsors also are putting a premium on appropriate utilization. This is by far the top priority of plan sponsors, the report found: 37% said reducing inappropriate utilization of specialty drugs was a top goal. The next-highest goal was reducing patient out-of-pocket costs (18%), followed by improving specialty drug adherence and persistency (15%).

The report also stressed the importance of reporting on a plan’s drug spend: “Timely, accurate, and actionable reporting is key to measuring how a plan is doing in specialty drug benefit management,” the report said. “When done well, reporting can highlight areas of opportunity to improve clinical and financial outcomes.”

Among the barriers to reporting is the fact that patients with these conditions often see multiple doctors at multiple facilities. In addition, a single patient’s prescriptions often cannot be filled all at one facility, adding to the complexity.

PSG officials said there was a range of reporting for different areas of specialty drug utilization: “More than 80% of plan sponsors have access to reporting on their total health care costs,” said Tracy Spencer, senior vice president and practice leader of employer groups, labor, and health systems at PSG. “However, clinical outcomes of adherence, persistency and clinical efficacy were reported less often (71% and 31%, respectively). The impact of specialty medications on employee productivity had the lowest reporting rate at 23%.”

The Problem of Inaccurate Provider Directories

Health plans have been creating contracted network offerings at an unprecedented rate since the implementation of the Affordable Care Act (ACA). But some consumers are complaining that the provider network information from their health plan is misleading and inaccurate, according to a report by Berkeley Research Group. As a result, new federal and state regulations require health insurers to maintain and provide consumers with an accurate listing of providers, facilities and physicians participating in their networks. The repercussions of inaccurate provider directories can be significant, posing risks to consumers and health plans.

Inaccurate directory information may limit a consumer’s ability to verify if a preferred doctor is in-network or to know how many and what types of providers would have to be accessed under a particular product offering. Additionally, the consumer may be at risk of being charged higher out-of-network rates when providers are erroneously listed as being in-network. These inaccuracies also put health plans at greater risk of litigation, government penalties, and investigations, and significant administrative costs associated with rectifying inaccurate directories.

Consumers typically use provider directory information to make decisions in real time. However, the frequency with which health plans update their provider directories varies significantly. Many states only require an annual update. Additionally, states must decide whether penalties should be imposed on health plans when directories have errors, particularly when patients incur out-of-network costs because of it. Regulators may also require health plans to allow consumers to re-enroll in a new health plan if their provider has been misrepresented in a provider directory.

However, variation also exists across health plan types, with HMOs being the most regulated with respect to network adequacy, followed by PPOs and EPOs.  In a study published by JAMA Dermatology, researchers at the University of California, San Francisco, tried contacting 4,754 dermatologists listed in the three largest Medicare Advantage plans in 12 metro areas. Nearly half of the names were duplicates, and only about half the remaining—26% of the total—were at the listed address, accepted the plan and were offering appointments. The California Department of Managed Health Care (DMHC) performed a survey of Blue Shield of California showing that a significant percentage (18.2%) of the physicians listed in the directory were not at the location listed in the provider directory and that a significant percentage (8.8%) were not willing to accept patients enrolled in the plan’s Covered California products, despite being listed on the website as doing so.

Anthem customers filed 176 complaints on network issues FROM January 1 to August 31, 2014, and Blue Shield saw 130 complaints. A study into the availability of providers in the Medicaid Managed Care program performed by the Department of Health and Human Services’ Office of Inspector General offers perhaps the most glaring results. Forty-three percent of providers were not participating in the Medicaid managed care plan at the listed location and could not offer appointments. Thirty-five percent of providers could not be found at the location listed and were therefore not participating at the location listed by the plan. Another 8% of providers were at the location listed but said that they were not participating in the plan. In some cases, these providers had participated in the plan in the past; in other cases, the providers had never participated in the Medicaid managed care plan.

Health plans find it increasingly difficult to maintain accurate participating provider information in their provider directories for reasons including the following:

  • Increasing complexity in the insurance products being offered to customers.
  • The dynamic nature of participating provider information.
  • Limited resources to maintain provider directories.

One reason is that health plans are attempting to lower costs by constructing provider networks that include only certain providers within a health system. A 2014 McKinsey study of products being sold on the ACA health insurance exchanges describes partial health system participation. The study found that Forty-four percent of ultra-narrow, silver-tier products exclude at least one hospital from every single participating health system. Another 31% of the products exclude at least one hospital from at least one health system. The costs for such ultra-narrow networks are 13% lower. But these arrangements add complexity to the process of capturing the relevant information in a health plan’s provider system and ensuring that these data are propagated correctly to its provider directories. Third, a provider practicing multiple specialties or at multiple locations may be participating with a health plan for only one specialty or at one location.

Any time one piece of information for a provider listed in a health plan directory changes, the entire directory is technically inaccurate until it is updated with the accurate information. The process required by a health plan to maintain accurate participating provider information in its provider directories is complex and requires substantial resources. All of this must be performed by health plan resources that are often limited and subject to medical loss ratio (MLR) requirements.

Last Updated 05/25/2022

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