When the design of employers' health benefit plans is chiefly driven by efforts to lower their costs, employees may suffer the consequences, according to opponents of stringent health care cost-containing measures.
Health care utilization management (UM) tactics may be effective in controlling employers' spending, the critics say, but they are not as effective in controlling health care costs for employees and can create unintended barriers to treatment.
That's the position advocated by CancerCare, a nonprofit that provides cancer patients with support services and information. The organization recently published a toolkit of best practices for prescription drug benefits to help benefits managers, HR professionals and executives navigate and understand the consequences of health care use-management strategies, specifically around prescription drugs. The price-controlling features that CancerCare is most critical of include:
- Formulary design—the list of drugs approved by a health plan's pharmacy benefits manager (PBM), CancerCare said, is often influenced more by PBM profit than efficacy or list price, leading to restrictive formularies that can put needed drugs out of patients' reach.
Advocates of formulary management have said this tactic promotes "clinically sound, cost-effective medication therapy and positive therapeutic outcomes."
- Step therapy—a protocol that requires patients to first try one or a series of PBM-preferred drugs before being allowed the drug prescribed by their clinician. "Step therapy can cause delays in effective treatment, increased costs to patients and adverse side effects or medical setbacks," CancerCare said.
Health insurers have said that "prior authorization and step therapy ensure that medically sound and cost-effective medications are prescribed appropriately."
- Specialty pharmacies—when patients are required to use specific, often PBM-owned, specialty pharmacies, "it limits their choice as consumers and may result in difficulties receiving and refilling prescriptions," CancerCare said.
Advocates of specialty pharmacies have said they "are better suited than traditional pharmacies to monitor and track the use of specialty drugs and have the necessary training and expertise to handle their distribution."
- Co-pay accumulator programs—these exclude the dollar amount of financial co-pay assistance, such as discount coupons from drug companies, from deductibles and out-of-pocket totals, "making it more difficult for patients to afford their medication while allowing health plans and pharmacy benefit managers to get paid twice," CancerCare said.
Defenders of these programs have said they discourage employees from buying overly expensive prescription drugs.
"When cost is the dominant factor in guiding employers' benefits decision-making, employee health can pay the price," said Patricia J. Goldsmith, CancerCare's chief executive officer. "Employers must take care to balance cost savings with the real needs of their employees, especially those with serious or chronic illnesses."
In January, CancerCare collected responses from 50 executives responsible for employee benefits at large U.S. employers. Almost all respondents (94 percent) said employer health care costs were more influential than any other factor, including employee costs and care access, when they made health benefits decisions.
Employers, for their part, are struggling with escalating costs fueled by higher insurance premiums—up 47 percent between 2011 and 2021, according to a Commonwealth Fund study—and often use UM features to keep health care spending from spiraling out of control.
However, among the unintended consequences of doing so, CancerCare said, is delaying or denying necessary and time-sensitive care, as when patients can't afford to buy prescribed medications.
The position is supported by researchers at the nonprofit Kaiser Family Foundation, which surveyed 1,146 U.S. adults last fall and reported that because of the high cost:
- 29 percent of adults were not taking medicines as prescribed.
- 19 percent didn't fill a prescription.
- 12 percent cut pills in half or skipped a dose.
Thirty percent of those who report not taking their medicines say their condition got worse as a result.
High Deductibles and HSAs
Another critical look at the benefit design features intended to reduce health care spending suggests that high-deductible health plans (HDHPs) and health savings accounts (HSAs) are only working effectively for some groups of employees and not for others.
An April Issue Brief by the nonprofit Employee Benefit Research Institute (EBRI) analyzes data in EBRI's HSA database, with account information on more than 11 million HSAs. Among the findings:
- Accountholders living in ZIP codes with a higher percentage of white or Asian residents contributed more and accumulated larger balances than their counterparts living in ZIP codes with a higher percentage of Black or Hispanic residents.
- Male accountholders made larger contributions and had higher balances than their female counterparts.
- Higher-income accountholders tended to have larger balances and contributed more to their HSAs relative to lower-income accountholders.
"There is ample evidence supporting health inequities across race, gender and income lines," EBRI Researcher Jake Spiegel said. "To the extent that accountholders take advantage of the benefits HSAs offer, these accounts may reduce health inequities. However, when HSAs are not well-utilized, they may compound inequities."
Smaller balances and contributions, he added, "may leave these accountholders less prepared to weather a large, unexpected medical expense. If accountholders do not take full advantage of the tax benefits HSAs offer, or do not save a sufficient amount, they may find it more difficult to pay for medical expenses, delay necessary care or forgo treatment altogether—each of which can have an adverse effect on financial or physical health."
Commenting on these findings, Christine Benz, senior columnist for personal finance website Morningstar, tweeted: "It's well-known that HSAs are most beneficial for the 'healthy and wealthy,' but these findings are stark and good food for thought. I love my HDHP/HSA, but is the push toward 'consumer-driven' health care adding stress and misery to a lot of people's lives?"
EBRI's findings are echoed in other research:
- The Centivo Healthcare and Financial Sacrifices Survey, 2021, which investigated health care affordability among 805 U.S. adults with employer-based insurance, found that "workers face mounting health care affordability issues, and health plan cost-sharing features such as high deductibles are an underlying cause."
- A 2020 study published on the JAMA Network website, based on a survey of more than 1,600 U.S. adults enrolled in an HDHP and using an HSA to save for health care, found nearly one-third had not contributed to their HSA in the last year. Less education and lower health insurance literacy were associated with not making contributions.
HR consultants at Mercer recently highlighted steps employers can take to make HDHPs and HSAs work better for all employees.
Mercer principals John Coleman and Rebecca Gobbo, and partner Dorian Z. Smith, blogged that a more equitable approach would be to offer fixed co-pays—after the deductible is met—for HDHP participants who use high-quality providers. "This could help steer employees to high-quality providers since co-pays are familiar and easy for employees to understand," they wrote. "Adding co-pays may also alleviate affordability concerns about co-insurance and its financial impact."
Sprucing up employer contributions to HSAs can also help. Last year, they noted, a Mercer survey found that:
- The median employer HSA contribution was $500 for employee-only and $1,000 for family coverage among U.S. employers with 500 or more employees.
- Median employer HSA contributions have remained the same since 2010, despite HSA-eligible plan deductible increases of 23 percent for employee-only and 33 percent for family coverage over the same period.
"In an inflationary environment, now is the time for employers to revisit the possibility of increasing their HSA contribution levels," the consultants advised. "If budgeting for an increase in employer HSA contributions for all employees is cost-prohibitive, evaluate providing additional HSA contributions for lower-paid employees (e.g., salary-banded HSA contributions)."