Essential Questions for Essential Benefits

The future of medication coverage under the Affordable Care Act (ACA) gained clarity based on recently released federal guidance for Essential Health Benefits (EHB) required by the ACA. When coupled with ACA cost-sharing direction, the resulting rules will likely define this pharmaceutical market for decades. In addition, federal allowances for state flexibility on these coverage decisions are likely to add to the importance of state health insurance exchanges in this developing market.

Christopher J. Piazza

The ACA requires qualified health plans (QHPs) made available in state health insurance exchanges to offer 10 EHBs, one of which is prescription medications. As required by the ACA, the EHBs are to be based on offerings of typical employer plans as determined by the HHS Secretary. The new guidance was issued as a bulletin from the Center for Consumer Information and Insurance Oversight (CCIIO), the entity in the Centers for Medicare and Medicaid Services (CMS) charged with implementation of the ACA. The recommendations considered input from a number of sources about typical coverage, including an ACA-required survey of employer-sponsored coverage from the Department of Labor (DOL) and a report HHS commissioned from the Institute of Medicine (IOM) on "typical" employer plans. The DOL and IOM reports focused on the state of coverage, but did not recommend coverage details for exchanges. The CCIIO now seeks further input on the regulatory approach HHS plans to put forward for EHBs.

The extent to which medications need to be covered and the permitted degree of cost-sharing present key care issues. However, the CCIIO separates what is to be covered—a central EHB element—from cost-sharing provisions. Thus, the guidance generally focuses on what should be covered, not the financial extent to which it should be covered.

From a coverage perspective, the Massachusetts health reform law is instructive. In 2006 it established a statutory requirement that health plans provide prescription drug coverage. At question was the acceptability of generic-only plans as the program was implemented. Eighteen months after the enactment of the law and subsequent debate, generic and brand coverage were required for minimum creditable coverage among plans in the commonwealth. Given that experience, concerns about generic-only coverage under the ACA have persisted. However, generic-only coverage is generally not considered to be "typical" as required by the ACA. A report from Milliman focusing on medication coverage in plans offered by employers found that health plans "almost always cover both brand and generic drugs." Regardless, vigilance may be prudent.

Four Approaches

Given the latest guidance from CCIIO, the EHB is initially expected to be based on one of four benchmark plan types selected by each state, in an approach based on that used for the Children's Health Insurance Program (CHIP). They include, as listed in the bulletin: "1) the largest plan by enrollment in any of the three largest small group insurance products in the state's small group market; 2) any of the largest three state employee health benefit plans by enrollment; 3) any of the largest three national FEHBP plan options by enrollment; or 4) the largest insured commercial non-Medicaid Health Maintenance Organization (HMO) operating in the State."

An examination of drug coverage under plans that comprise the four benchmark plan types will help assess the implications of state selection of one plan over another for drug coverage. This is important because the benchmark chosen by the state will impact what must be covered on a formulary. If the benchmark covers a medication in a drug category or class, then all plans in that state exchange must offer "at least one drug in the same category or class," although variability will be allowed for what drugs are actually selected, following the flexibility of Medicare Part D. Using this approach, the extent to which drug categories or classes contain multiple-source medications presents the potential for largely generic formularies should the one-drug minimum be applied. Thus, safeguards are in order.

One approach to assure appropriate coverage would be the establishment of protected classes of drugs for plans offered in the exchanges as used by Medicare Part D, including antidepressants, antipsychotics, anticonvulsants, immunosuppressants, antiretrovirals, and antineoplastics (only those not covered under Part B). Medications that fall into one of these classes under Medicare Part D must include all of the medications in that class for coverage. Final regulatory guidance for drug coverage in EHBs may provide further input on this front.

Whose Bottom Line?

As previously noted, the CCIIO bulletin suggests that the EHB will focus on what is considered a "covered service" and not a plan's cost-sharing feature. Hence, issues of deductibles, copayments, and coinsurance are expected to relate to the actuarial value of a plan based on the "metal level" of coverage (bronze, silver, gold, and platinum). Here, states may play a role in the review of such analyses that can likewise relate to medication cost-sharing. While issues of copayments (a flat payment per prescription) versus coinsurance (a percent charge of prescription cost) will be important to consider, it appears these costs will be limited to overall out-of-pocket caps for the program—or at least they should be. Attention to this detail is important to assure patients on costly and multiple medications are protected.

Ultimately, states will influence essential medication coverage via their exchange or department of insurance by virtue of the EHB benchmark they select and their anticipated review of actuarial equivalence. In addition, state determination of which health plans are allowed into an exchange will have an indirect influence on the application of these provisions by virtue of the coverage choices plans make.

Collaboration is Key

As all of these issues are addressed, engagement with key government decision-makers is essential. Certainly, input to the CCIIO guidance by the Jan. 31 deadline and subsequent related regulations will be a critical step as federal guidelines are developed. Given the importance of benchmark selection and plan offerings in a state exchange or state insurance exchange boards, staff and advisory committees should also be considered for appropriate interaction. Of course, such interactions with the exchanges will largely be driven by the degree to which states actually establish such entities.

In October 2011, the National Conference of State Legislators (NCSL) reported that 14 states have enacted exchange legislation in 2010 or 2011, with only Massachusetts and Utah passing exchange laws prior to the enactment of the ACA. At the same time, NCSL reported that 16 states failed to pass such a law in 2011. As the deadline for exchange creation approaches, pressure will mount for state action. Failure by states to establish such an entity will result in the federal government creation of a state exchange, altering the eventual focus of input.

Within the states, a growing number are completing their exchange planning reports, which illustrates the challenges ahead for ACA implementation. Many of the emerging details articulate the importance of the organization of the exchange and its board membership composition. Establishing a balance of interests should be an important first step in making sure no single perspective dominates the direction of key decisions. In addition, many states call for the creation of advisory committees that may influence exchange decisions and more directly address clinical, coverage and cost decisions.

Following the creation of the exchange boards, a key development to watch for is the drafting of state exchange plans of action. While not universally included in emerging state legislation, the development of such plans can be expected due to requirements for an "exchange plan" as called for in current draft regulations. Such plans may offer direction on the issues previously discussed above, including the approach for the selection of the EHB benchmark.

There are a number of factors that will influence the final determination of essential medication coverage, including EHB and cost-sharing provisions defined at the federal and state level. The decisions made in the coming months and years will have profound implications for medication coverage and covered patients for perhaps a generation. Now is the time for biopharmaceutical companies and others concerned about medication coverage to prepare and provide their perspectives to key decision-makers in order to assure that patients have access to the care they need.

Christopher J. Piazza, RPh, is Principal at Lighthouse Health Policy Consultants. He can be reaced at chris.piazza@lighthousepc.com