As a follow-up, I consider five questions about healthcare reform that could radically alter CMS’s forecasts and disrupt the channel:
- Will private exchanges take off?
- Will employer-sponsored insurance collapse?
- Will copay cards be banned on the public exchanges?
- Will narrow pharmacy networks dominate public exchanges?
- What happens to Pharmacy Benefit Manager (PBM) profits?
1) Will private exchanges take off? In its forecasts, CMS didn’t consider the recent trend toward private employer-sponsored insurance exchanges, exemplified by Walgreen’s recent announcement. (See Walgreen to Shift Health Plan for 160,000 Workers.) If a Walgreen’s employee buys insurance on a private exchange, is it still Employer-Sponsored Insurance (ESI)? Or, is it really an Employer-Subsidized, Individually Purchased Private Insurance (ESIPPI)? If the latter, then the insurance spending looks comparable to a government-subsidized plan purchased on a public exchange. I suspect that CMS will wrestle with this topic in next year’s projections.
2) Will employer-sponsored insurance collapse? More than two years ago, I wondered: Will Exchanges Crowd Out Employer Coverage? This unresolved question has become even more politicized, so I have not revisited the article the issue and its many highly partisan forecasts. However, we can easily imagine this scenario, especially for firms with large numbers of lower-wage workers. And I’m not even considering the potential impact on part-time work as employers try to avoid the law's penalties.
3) Will copay cards be banned on the public exchanges? Put another way: are the public exchanges really public spending? As I note in yesterday’s post, CMS classifies exchange-purchased policies as “private health insurance.” But according to the CBO’s May 2013 estimate, more than 80% of individuals who purchase coverage through the marketplaces will get federal subsidies to reduce the cost. Some legal experts argue that the government funding turns these plans into a federal health program, which also means that these plans are subject to anti-kickback laws. Here’s a great background article: Permissibility of Pharmaceutical Copayment Coupon Programs Under ACA. Stay tuned for more on this debate. (Hat tip to RxObserver.com.)
4) Will narrow pharmacy networks dominate public exchanges? Medicare Part D beneficiaries annually choose their own new plan, rather than having a benefit administrator or insurance plan choose small set of options. Part D's individualistic model is allowing preferred pharmacy networks to explode, with four out of ten seniors picking a plan with a preferred pharmacy network for the 2013 benefit year. (See Final 2013 Part D Data: Preferred Pharmacy Networks Still Win Big, But CMS is “Concerned.”) The individually purchased private insurance plans within public exchanges are starting to experience the same dynamic. Many exchange health plans can only deliver low costs with narrow provider networks, as the New York Times reluctantly noted in Lower Health Insurance Premiums to Come at Cost of Fewer Choices. So, how limited will pharmacy networks get due to Obamacare?
5) What happens to PBM profits? Pharmacy Benefit Managers (PBMs) will gain from healthcare reform, since they will administer expanded prescription drug insurance for plans sold through health insurance exchanges. However, for PBMs, health plans have lower margins than do traditional commercial employer business. Thus, I expect a PBM to see its profit squeezed if self-insured employers (1) stop offering health insurance and shift employees to the public exchanges or (2) shift employees to individually purchased plans on private exchanges.
Riddle me this, dear reader. What’s on your mind about healthcare reform and drug channels?