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Better Shop Around: Out-of-Pocket Prescription Drug Costs in Covered California Plans

Avalere Health

Consumers with chronic diseases face challenging trade-offs when choosing health coverage, especially when it comes to out-of-pocket drug costs. We offer five examples.

Note: The original version of this report contained an error. Data for out-of-pocket costs in Figure 6 on page 13 have been corrected as of June 8, 2015.

With the 2014 launch of Covered California, the state's health insurance marketplace, large numbers of consumers gained access to affordable insurance covering vital health services, including prescription drugs. Many were previously unable to purchase health insurance in the individual private insurance market due to cost or pre-existing conditions.

Researchers examining the health plans offered through Covered California in 2014 found significant variation in prescription drug coverage, particularly for drugs treating medication-reliant chronic conditions, such as bipolar affective disorder and rheumatoid arthritis (RA). Because plans with these benefit designs are offered both on and off Covered California, and because these designs remained virtually unchanged from 2014 to 2015, these findings are broadly applicable to the individual market for both years.

Better Shop Around: Out-of-Pocket Prescription Drug Costs in California Standard Benefit Plans describes how consumers' out-of-pocket costs were affected by the variation and formulary design choices. The report details the steps Covered California is taking for the 2016 benefit year to address concerns about high out-of-pocket costs for some prescription drugs. It also identifies additional steps that can help consumers with chronic conditions understand the out-of-pocket costs associated with different health plans.

Research findings:

  • Because California standardizes benefit designs, prescription drug formulary placement was the primary source of out-of-pocket cost variation across different plans.
  • For consumers with significant health needs earning no more than 250% of the federal poverty level, enhanced silver plans, which have cost-sharing reductions that lower the amount consumers pay out of pocket with no increase in premium compared to standard silver plans, dramatically reduced expected enrollee costs.
  • Some unsubsidized consumers benefited from paying higher premiums for a platinum plan, which reduced their total annual costs.
  • Regardless of income, medication-reliant consumers faced front-loaded spending at the start of the year because of specialty tier costs and deductibles.
  • Among consumers with medication-reliant chronic conditions, those who rely on specialty drugs experienced higher out-of-pocket costs than those who don't use specialty drugs.
  • While standard benefit designs limit variation across plans, consumer costs still varied based on an enrollee's particular health care needs. Even for patients with the same chronic condition, variations in disease severity and comorbidities led to significant differences in patient costs.

The full report is available under Document Downloads.

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