Rethinking Benefit Design: Eliminating Inefficient Hurdles

By Kimberly Westrich, MA and Lisabeth Buelt, MPH, National Pharmaceutical Council

Utilization management strategies such as step edits and prior authorization are burdening stakeholders across the health care system, from the payers who implement them to the patients and providers who must navigate them, according to a recent article in Health Affairs. The paper estimates that utilization management costs about $93.3 billion annually for payers, manufacturers, physicians, and patients combined.

The authors conclude that the entire health care system would benefit from a reduction in utilization management. Reforming health benefits by overhauling existing utilization management practices and adjusting patient cost-sharing to incentivize high-value care would help achieve more affordable, patient-centered care.

The Problems with Today’s Health Benefit Designs

Utilization management strategies are resource intensive and financially costly for all stakeholders, and they can have unintended clinical consequences that harm patients, making them ineffective for managing health care utilization and costs. The Health Affairs article asserts that in recent years, insurance companies have increasingly relied on utilization management to try to control their rising costs. To support this point, the authors cite an National Pharmaceutical Council study that found roughly a third of large commercial payers now impose access restrictions on specialty drugs that are more stringent than those on the Food and Drug Administration (FDA) label.

In addition to coverage restrictions, payers are also instituting higher patient cost-sharing through steeper deductibles, copayments and coinsurance for prescription drugs. Although these measures are implemented to contain costs and reduce inappropriate use of health care services, they often result in patients encountering structural and financial barriers to accessing appropriate, high-value care. 

Solutions Focused on Patients

Implement Step Therapy Best Practices

Health plans should follow step therapy best practices that ensure clinically recommended and cost-effective patient care. As referenced in the Health Affairs article, NPC recently convened a multi-stakeholder roundtable to 1) assess the appropriateness of step therapy, 2) identify consensus regarding the development, implementation, communication, safeguards, and evaluation criteria for step therapy and 3) categorize these criteria as standards or best practices. This analysis found that although some stakeholders — including payers, provider organizations, and patient groups — disagree on when step therapy is appropriate, they do agree on a set of criteria to guide the implementation of step therapy protocols. Moreover, most of these criteria can — and should be — achieved today.

Reduce Patient Cost Sharing When Clinically Appropriate

Payers should ensure that their prescription drug formularies align patient cost sharing with appropriate care. Sometimes patients with the same or similar conditions may need different treatments due to their genetic characteristics, comorbidities, or disease severity, requiring them to pursue medications on higher formulary tiers and thus incur more out-of-pocket (OOP) expenses. Cost sharing based on formulary tier rather than medical appropriateness can inadvertently negatively impact patient access, treatment adherence, affordability, and ultimately patient health.

To explore the trade-offs associated with variable cost sharing, NPC convened an expert roundtable of patient, payer, and employer representatives who identified five guiding principles for when higher cost sharing for patients is less acceptable, including when patients need a higher-cost treatment due to their biology or genetics.

Provide Pre-Deductible Coverage for High-Value Medicines

Benefit designs should incentivize access to high-value medicines. As health care costs have risen over time, high-deductible health plans (HDHPs) have become more popular, causing patients to pay significant OOP costs for health care. Higher cost sharing can often lead to poor patient adherence to prescribed medications, resulting in inadequate disease control and additional health care utilization (e.g., hospitalization or emergency care). However, payers, including employers, are now beginning to offer coverage for medicines used to treat common chronic conditions before patients meet their deductible, eliminating a key financial barrier that previously impeded patient access to appropriate, high-value care.

The goal of utilization management programs and patient cost sharing is to contain costs and incentivize appropriate health care utilization. Unfortunately, these strategies can have unintended clinical consequences and come at a huge administrative and financial cost to patients, health care providers, and even payers themselves. Building better, more patient-centric benefit designs will improve delivery of high-quality, affordable care.