A fight between the Washington state insurance commissioner and the state’s largest seller of individual health insurance is spotlighting problems in that increasingly troubled market. The spat arose over insurers’ efforts to curb soaring premiums by restricting or eliminating prescription drug benefits.
Experts say they haven’t yet seen similar moves by insurers in other states to axe drug coverage from policies sold in the individual market. But some predict expensive drug benefits will offer an inviting target.
Since 2009, Premera Blue Cross’s LifeWise unit has sold a high-deductible plan called Wise Essentials Rx, the only catastrophic-type plan in the state offering drug coverage. Its enrollment quickly zoomed to 45,000. But that plan and Lifewise’s standard plan covered only generic, not brand-name, prescriptions.
Earlier this year, Premera’s two main rivals, Regence BlueShield and Group Health Cooperative, filed requests to switch their standard plans for individuals from full to generic-only drug coverage. Group Health said it doesn’t favor a generic-only benefit but feared its plan otherwise would get swamped with sicker enrollees who couldn’t get brand-name drugs in other plans. All three insurers have reported losing money in the individual market.
Those requests prompted Insurance Commissioner Mike Kreidler to issue an emergency rule in February barring generic-only coverage. He said patients with multiple sclerosis, some types of cancer, AIDS, rheumatoid arthritis and certain forms of mental illness can’t necessarily be treated effectively with generics. The insurers’ moves, he warned, would leave most Washingtonians in the individual market without adequate drug coverage.
Average annual prescription drug claims per health plan member nationally totaled about $800 in 2010, according to IMS Health, a consulting company. Costs are far higher for people with serious chronic conditions. Annual brand-name drug costs for multiple sclerosis patients, for example, can exceed $50,000.
In response to Kreidler’s rule, Regence and Group Health withdrew their bids to switch to generic-only coverage.
Premera reacted differently. In April, it told LifeWise members that it planned to eliminate all drug coverage in the catastrophic plan, effective Aug. 1.
Kreidler spokeswoman Stephanie Marquis said Premera’s elimination of drug benefits was part of its effort to “get rid of high-cost patients.”
But Premera spokesman Eric Earling denied that. He explained that adding full drug coverage to the LifeWise catastrophic plan would hike monthly premiums by hundreds of dollars, making it unaffordable for many. Adding brand-name coverage to the standard LifeWise plan will boost premiums by 7.2 percent. “Customers are very price sensitive, and the catastrophic plan hits a good sweet spot,” he said.
After Aug. 1, Earling said, Lifewise catastrophic plan members who get sick and need drug coverage can apply for a standard Lifewise plan with drug coverage. If they don’t pass the medical screening, they can seek coverage in the state high-risk pool, though that has very high premiums.
Some Lifewise members have complained about Kreidler’s rule, saying they were happy to have a relatively affordable plan with at least some drug coverage. “The last thing anyone in state government should do is limit access to health care and consumer choice,” Republican State Sen. Linda Evans Parlette, a pharmacist, recently wrote.
But others supported the commissioner’s move. Patrick Nelson, a LifeWise member and insurance agent who received notice LifeWise was terminating drug coverage after he was diagnosed with metastatic lung cancer, told the Seattle Times that Kreidler was “just trying to referee some fairness” into health insurance.
Starting in 2014 when the federal Affordable Care Act takes full effect, all health plans will have to provide full drug benefits including brand-name products.
This story first appeared on Kaiser Health News, an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.
