Featured Health Business Daily Story, April 28, 2014
INSIDE HEALTH INSURANCE EXCHANGES is a hard-hitting newsletter with news and strategic insights on the development and operation of public and private exchanges.
With rate proposals due beginning next month, early pharmacy claims might be all health plan actuaries have to go on when setting prices for qualified health plans (QHPs) that will be sold through public exchanges next fall (HEX 4/3/14, p. 1). Based on preliminary pharmacy data from two large pharmacy benefit managers (PBMs), exchange enrollees appear to be less healthy than are people covered by individual policies sold outside of the exchanges. And that could translate to more costs for carriers once those members reach their out-of-pocket maximums.
During the first two months of 2014, exchange enrollees were more likely to use costly specialty drugs when compared to those with coverage outside of the exchanges, according to preliminary claims data released April 9 by Express Scripts. The analysis evaluated 650,000 pharmacy claims for public exchange enrollees and other commercial members from Jan. 1 through Feb. 28. According to the early data, six of the 10 costliest medications used by exchange enrollees were specialty drugs versus four of the top 10 used by commercial health plan enrollees. Of total prescriptions filled for exchange plans, 1.1% were for specialty drugs, compared with 0.75% in commercial plans — a near-50% difference.
When setting rates a year ago, actuaries anticipated that people who purchased coverage through an exchange would be older and less healthy than the commercially insured population. They also assumed there would be pent-up demand for pharmaceuticals and care. It’s too soon to know if their predictions a year ago will jibe with the actual results.
“This early glimpse is crucial for insurers as they plan to set rates for next year and may not have time to assess much more than this,” says Julie Huppert, vice president of healthcare reform at Express Scripts. “To keep this sustainable and affordable for payers and patients, it’s important to look at the dynamics around deductibles and out-of-pocket maxes, so each group can plan accordingly.”
Prime Therapeutics has seen similar results. Compared to its commercial book of business through February, the PBM says new individual enrollees had twice as many 90-day prescriptions as would be expected in an average commercial book of business.
“What that may mean is there was an unmet need for people with chronic illnesses to get maintenance medication,” says Michael Showalter, Prime’s chief marketing officer. “From a payer perspective, that may be concerning, but it depends on how you priced for the product in the first place.”
Showalter tells HEX that the average commercial book of business has 10.25 prescriptions per person per year. The average among new individual enrollees, according to January and February claims, was 10.95, about 7% more. Prescription drugs can be a harbinger of what total medical costs might be. “The question for each payer out there is ‘how much more?’ Is 700 basis points [i.e., seven percentage points] what they priced into their underwriting model? If it was, they’re in good shape and won’t have to increase rates next year,” he adds.
Once exchange enrollees meet their annual deductibles and out-of-pocket caps, health insurers will need to cover all of the costs. Bronze and silver plans make up the vast majority of exchange enrollment, and those products tend to have higher deductibles than do individual commercial plans sold outside the exchanges. For carriers, prescription drug costs among non-exchange plans, according to Express Scripts data, are now 35% higher than for exchange plans. But that will change once exchange members hit their deductibles, explained Deutsche Bank Equity Research analyst Scott Fidel in an April 9 note to investors.
Fidel also warned that the Express Scripts data could point to elevated medical loss ratio risks for new exchange members. “It is important to note that the [managed care organizations] largely assumed that there would be some pent up demand among new exchange enrollees and priced for higher utilization among this new cohort of members. What remains unclear is how the [pharmacy] utilization observed by [Express Scripts] compares to what MCOs built into exchange premiums,” he wrote.
Express Scripts is WellPoint, Inc.’s PBM partner, and WellPoint appears to have the largest public exchange enrollment of any insurer. WellPoint’s management is expected to discuss its exchange enrollment April 30, when the company releases first-quarter 2014 earnings.
Prior to the launch of exchanges, Prime Therapeutics provided prescription services to one out of every seven people on the individual market, primarily through its relationship with 20 Blue Cross and Blue Shield plans. Showalter anticipates that the ratio through exchanges will be the same.
The use of HIV drugs among exchange members was four times higher than for those enrolled in non- exchange commercial plans, at more than six prescriptions per 1,000. Although the top 10 therapy classes between the two groups were similar, the proportion of prescribed pain medications was 35% higher among exchange enrollees, while anti-seizure meds were 27% higher, antidepressants were 14% higher and contraceptives were 31% lower. Fidel said that “these metrics point to higher prevalence of chronic conditions and less healthy lifestyles for exchange members.”
While people with chronic and complex conditions were expected to enroll in coverage through the exchanges, Huppert tells HEX the early prescription drug usage was higher than anticipated. “We were a little surprised by the amount of specialty drug use and the higher prevalence of HIV. Seeing the higher use of specialty medications reinforces the need to surround these patients — many of whom may be new to treatment or insurance — with care to ensure adherence with their therapy and optimal outcomes,” she says.
Prime Therapeutics’ top five drug categories by total cost among all individual enrollees were pharmaceuticals prescribed to treat diabetes, autoimmune diseases, pain, HIV and multiple sclerosis. “These are not acute issues. These represent some serious latent demand in the marketplace,” says Showalter. “But the good news for payers, depending on their confidence in their reinsurance and risk-corridor programs, is the government put those in to protect against uncertainty in the first two years.”
Huppert tells HEX that the exchange populations and non-exchange commercial populations had very similar profiles regarding top chronic conditions. “However, the data does suggest that the early enrollees may have a higher prevalence of complex conditions, but since this data is only through Feb. 28, it doesn’t capture the last-minute enrollees who some suspect may be younger or healthier. Future analysis will give us a better picture what those lives look like.”
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