Tuesday, December 07, 2021

Employer Pharmacy Benefits 2021: Patient Specialty Costs Rise with Coinsurance and Accumulators

It’s time for our annual deep dive into employer-sponsored coverage for prescription drugs.

For 2021, employers backed away slightly from high-deductible health plans. However, their pharmacy benefit designs increased the use of coinsurance for specialty and fourth-tier drugs. These designs have significantly raised patients’ out-of-pocket obligations and are likely to have reduced adherence.

Manufacturers’ patient support funds help offset patients’ higher expenses. But employer plans are rapidly adopting copay accumulators, which allow payers and PBMs to absorb these funds.

Read on for my overview of cost sharing tier structure, copayment vs. coinsurance, out-of-pocket obligations, and accumulators—presented with this year’s dose of horrible Drug Channels tiers/tears puns.

Please join me for my upcoming live video webinar, Drug Channels Outlook 2022, on December 17, 2021, from 12:00 p.m. to 1:30 p.m. ET. Hundreds of people from your competitors, customers, and suppliers have already signed up. Will you be there, too?


We rely on the Kaiser Family Foundation (KFF) 2021 Employer Health Benefits Survey, which you can read online for free.

This survey tracks employer-sponsored health benefits at nearly 1,700 companies. Fellow data nerds can click here for the full methodology.

Employers remain one of the largest payers of prescription drugs, though their share has been declining. Nearly all large employers and more than half of all small employers offer health benefits to employees. More than 99% of covered workers in these plans have a prescription drug benefit.

Employers offer plans with and without high deductibles. For 2021, 28% of employees were enrolled in High-Deductible Health Plans with a savings option (HDHP/SOs). For our analyses of 2021 plan designs, we consider two types of HDHP/SOs:
  • HDHP/HRA: A plan with a deductible of at least $1,000 for single coverage and $2,000 for family coverage, offered with a Health Reimbursement Arrangement (HRA),

  • HSA-Qualified HDHP: A high-deductible plan that meets the federal legal requirements for permitting an enrollee to establish and contribute to a Health Savings Account (HSA).
For simplicity of presentation, we refer to both types of plans as HDHPs/SOs. As we discuss below, benefit designs and cost sharing for prescription drugs in HDHP/SOs differ from those of plans that lack high deductibles. Plans that lack significant deductibles include health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point-of-service (POS) plans.


For consumers with third-party pharmacy benefit insurance, the share of a prescription’s cost is usually linked to benefit cost tiers—categories that define a plan member’s copayment or coinsurance. In general, prescription drug plans financially reward patients for using generic and lower-tier drugs. They require the patient to pay progressively higher copayments or coinsurance for drugs on higher tiers.

For more background on pharmacy benefits and comparisons among payers, see chapters 5 and 6 of our 2021 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers.

Here are the Kaiser survey’s definitions for common terms used in its report and the charts we share below:
  • Generic drugs: Drugs that are no longer covered by patent protection and thus may be produced and/or distributed by multiple drug companies.
  • Preferred drugs: Drugs included on a formulary or preferred drug list; for example, a brand-name drug without a generic substitute.
  • Nonpreferred drugs: Drugs not included on a formulary or preferred drug list; for example, a brand-name drug with a generic substitute.
  • Fourth-tier drugs: New types of cost sharing arrangements that typically build additional layers of higher copayments or coinsurance for specifically identified types of drugs, such as lifestyle drugs or biologics.
  • Specialty drugs: Specialty drugs such as biological drugs are high cost drugs that may be used to treat chronic conditions such as blood disorder, arthritis or cancer. Often times they require special handling and may be administered through injection or infusion.
Note that I have reproduced the definitions above exactly as they appear in the KFF report. For instance, fourth-tier drugs are not really a “new type” of coverage at this point. I also didn’t correct KFF’s grammatical errors.


The chart below summarizes the structure of different benefit plans:
  • In 2021, more than half (55%) of employees in plans without high deductibles are enrolled in plans with four or more tiers. An additional 37% of employees are in plans with three tiers. These results are comparable to the 2019 and 2020 figures.
  • For HDHPs in 2021, four-tier plans are now the most common, accounting for 44% of enrollment. That figure was 36% in 2020 and 27% in 2019. Three-tier plans now account for 31% of enrollment.

    The share of employees in HDHP/SOs with no cost sharing tiers dropped, from 17% in 2020 to 8% in 2021. An additional 9% of employees in high-deductible plans have no cost-sharing after the deductible is met. Only 2% of employees in traditional plans face either of these tiers.
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Below, we compare cost sharing for prescription drugs in HDHPs/SOs with plans that lack high deductibles.

The first chart below shows the utilization of copayment vs. coinsurance in employer-sponsored plans without a high deductible. The prevalence of copayments (instead of coinsurance) was roughly comparable for drugs on the first three tiers. However, the use of copayments for higher-tier drugs dropped, from 62% of plans in 2020 to 45% of plans in 2021. The 2021 figures for fourth-tier drugs were close to the pre-pandemic figures from 2019.

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By contrast, HDHP/SOs continue to favor coinsurance on lower tiers. For second- and third-tier drugs, the share of employees with coinsurance in HDHP/SOs is much higher than the share in more traditional plans. The coinsurance share of these lower tiers decreased compared with the 2020 figure. However, the prevalence of coinsurance for fourth-tier drugs in HDHPs increased, from 30% in 2020 to 48% in 2020. The 2021 figure for HDHPs is comparable to the 42% figure for traditional plans, shown above.

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The 2021 survey asked employers at firms with 200 or more workers about separate specialty drug tiers. In 2021, half (49%) of covered workers are enrolled in a plan that has a separate tier for specialty drugs. In plans with a specialty drug tier, 42% use coinsurance on that tier. Unfortunately, KFF did not report results by plan type for specialty drug coverage.


The chart below shows average copayments and coinsurance rates for employer-sponsored prescription drug plans with three or more cost sharing tiers. (The data are not available for HDHP/SOs vs. other plans.) The copayment levels and coinsurance rates are similar to the figures for the 2020 benefit year, although the copayment amounts grew compared with the previous year’s figures.

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The proliferation of benefit designs with four or more tiers has made out-of-pocket expenses especially significant for specialty drugs. Plans place therapies for such illnesses as cancer, rheumatoid arthritis, multiple sclerosis, and HIV on specialty tiers. These pharmacy benefit designs have shifted out-of-pocket spending for prescription drugs from flat copayments toward deductible and coinsurance spending.

Coinsurance amounts are typically based on the negotiated rate between a pharmacy and payer. These amounts approximate a drug’s undiscounted, pre-rebate list price. Consequently, out-of-pocket coinsurance amounts can be quite high, especially for more expensive specialty drugs. It also means that most patients pay a much greater share of the prescription's net price than might be apparent from the coinsurance percentage.

Many people with employer-sponsored insurance also have no out-of-pocket maximum for fourth-tier and specialty drugs, which raises their spending further. For 2021, 25% of all workers have no out-of-pocket maximum for fourth-tier specialty drugs, and 24% have no limit for specialty drugs.

Any prescription cost sharing in these plans is of course subject to a plan's overall out-of-pocket maximum. However, the obligation can be very high. For single coverage in employer-sponsored plans, 72% of workers faced an out-of-pocket maximum greater than $3,000. An additional 27% had an OOP max greater than $6,000.


In response to benefit designs that create high out-of-pocket cost burdens, pharmaceutical manufacturers offer copayment offset programs (also called copay cards or coupons). These programs support beneficiaries with commercial insurance. Normally, a manufacturer’s payments from a copay program count toward a patient’s deductible and annual out-of-pocket maximum.

For the first time, the KFF survey asked about copay accumulator adjustment, which excludes the value of a manufacturer’s copayment support payments from the patient’s annual deductible and out-of-pocket maximum obligations.

For 2021, more than one in four large companies now uses accumulators. (See chart below.) Smaller companies are less likely to have implemented these programs.

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Most of the drugs subject to accumulators are single-source therapies with no equivalent generic version or therapeutic alternative. Accumulator programs therefore have the greatest effect on patients with disease states that are treated with specialty medications.

Consequently, patients taking specialty drugs lose big from accumulators, while plans profit from the subsequent lower spending. From my perspective, it's simply wrong for PBMs and insurers to absorb patient assistance funds and double-dip on deductibles for drugs without effective alternatives.

Even long time pharmaceutical industry critics now agree that copay support is “helpful for patients who require a brand-name drug for which there are no lower-cost alternatives.”

Twelve states have passed laws that ban or restrict the use of accumulators, though state laws don’t apply to most employer-sponsored plans.

Adoption of copay accumulator adjustment and the closely related copay maximizers appears ot be higher in non-employer plans. I hope to provide updated data soon.


In the exclusive video below, ? & The Mysterians forecast how the number of pharmacy benefit tiers may expand. Click here if you can’t see the video.

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