Savvy Employers Alter Status Quo to Address Drugs, Deductibles and Disincentives for Treatment

Pharmacist showing medicine bottle to customer

By Lisabeth Buelt, Jennifer Graff and Kimberly Westrich, National Pharmaceutical Council

Rather than facing sticker shock as deductibles for medicines and doctor visits reset each January, some patients were met with a pleasant surprise at the pharmacy this year. For certain patients with high-deductible health plans (HDHPs), their health plan paid for at least part, perhaps even all, of their chronic illness medicine. Thanks to a recent Internal Revenue Service (IRS) rule, HDHPs with health savings accounts can now cover an expanded list of preventive services and medications before patients meet their plan’s annual out-of-pocket deductible. While still early in the adoption, this policy change — and others — can help remove disincentives for patients to receive high-value care.

Patients face multiple barriers when seeking high-value care, including high out-of-pocket costs. Higher annual deductibles and patient cost-sharing are associated with lower use of recommended preventive care services and medications. That’s why the IRS has historically exempted most vaccinations, cancer screening, and other preventive services from deductible requirements. However, until the 2019 IRS guidance, plans could not include high-value medications for common chronic conditions such as heart failure, heart disease, asthma, or diabetes as preventive treatments. Instead, patients paid deductibles of at least $1400 for an individual or $2800 for family coverage before their health plan reimbursed a dollar.

In the first year after the new guidance, many savvy employers took advantage of the expanded list of services permitted. The Kaiser Family Foundation’s 2020 Employer Health Benefits Annual Survey found one in five employers waived some cost-sharing for prescription drugs to encourage employees with chronic illnesses to adhere to their treatment plan. For larger employers, uptake was even higher. Nearly one in three (29%) employers with 200 or more employees and one in two (48%) employers with 5000 or more employees said that they changed the services or products that individuals with chronic conditions could receive before meeting annual deductibles requirements.

While it is encouraging to see more employers offer pre-deductible coverage for certain preventive prescription medications, there is much work to be done. For each employer offering first-dollar coverage, another employer did not. All patients who take high-value chronic care medications and are enrolled in HDHP-HSA eligible plans would benefit from more uniform uptake of this policy across employers.

Although the IRS rule change was an important first step, additional progress is needed to encourage high-value care for all patients:

  1. Broaden awareness among employers who may not yet offer plans with pre-deductible coverage for high-value care.
  2. Learn about the specific changes made to the benefit designs. What treatments and services are offered pre-deductible and for which chronic conditions?
  3. Evaluate the impact on patients’ treatment initiation, adherence, health outcomes, and employer costs.
  4. Encourage other modernized benefit designs that recognize and reward high-value care for patients, such as value-based insurance design and variable copays based on value, not formulary tiers.

The Kaiser Family Foundation employer survey demonstrates that there’s interest among employers to implement innovative, evidence-based benefit designs that promote improved patient access to high-value care. Although the survey findings show promise for the uptake of modernized benefit designs, additional policy efforts are needed to reduce patient barriers and incentivize high-value care.