Association for Public Policy Analysis & Management

Research Objective: Insurers often place specialty drugs, a group of pharmaceutical products that generally have very high costs, on the highest cost sharing tiers in their benefits. Since specialty drugs may represent significant therapeutic advances over alternative therapies, patients may end up incurring high out-of-pocket costs in order to access the most appropriate medication for their condition. The purpose of this analysis is to estimate and compare annual out-of-pocket costs for patients taking specialty drugs under health insurance plans available through healthcare.gov in 37 states, looking both within and across metal levels.

Study Design: Our paper simulates the potential out-of-pocket costs in health exchange plans for sample patients taking three specialty drugs: adalimumab (to treat rheumatoid arthritis), ritonavir (HIV/AIDS), and interferon beta-1a (multiple sclerosis). We use the publicly available benefit design data for 2015 for the 37 states offering coverage via healthcare.gov, and calculate annual expected out-of-pocket costs for patients as though they were enrolled in each exchange plan. We assume that each patient takes the specialty drug once per month over the course of the entire year, and make use of the Medical Expenditure Panel Survey (MEPS, 2012) to identify patients taking these drugs in order to identify additional pharmaceutical use. We also assume some level of medical services utilization, as exchange plan benefits often combine both medical and pharmacy utilization.

Principal Findings: We find that patients taking these medications can expect to incur lower annual out-of-pocket costs as the actuarial value of the benefit increases; that is, patients can expect their average out-of-pocket costs to be $3300-$4000 lower if they enroll in Platinum plans as opposed to Bronze or Silver plans. This relationship holds even when adding the total annual premium patients can expect to pay, both for patients receiving the low-income subsidy and those not receiving the subsidy. However, the magnitude of the differences in the average out-of-pocket cost estimates reduces to $1500-$2000 when adding in the premiums. We also find broad variation in the out-of-pocket costs within the Silver and Gold metal tiers (with differences of at least $3000 from the 10^th percentile to 90^thpercentile plans), which suggests that patients taking specialty drugs should carefully compare options within a given metal level in terms of cost sharing for their current medications. Finally, our results indicate that the catastrophic cap on out-of-pocket spending acts as an important benefit for patients taking expensive medications, as patients will hit the cap in the vast majority of plans. This finding suggests that recent policy discussions related to possible changes in the catastrophic spending limits may have important implications for patients with high health care costs.