Adverse Effects
Healthcare & HIV Advocates Accuse Insurers of Discriminatory Pricing
by Larry Buhl

HIV/AIDS healthcare and consumer advocates are praising recent promises by some health insurers to lower the out-of-pocket costs for HIV medications, but they’re not breaking out the champagne just yet.

In March, Coventry Health Plan announced that it would dramatically reduce out-of-pocket costs for HIV medications in individual plans purchased on Health Insurance Marketplaces established under the Affordable Care Act (ACA). The change, starting June 1, will drop out-of-pocket costs for HIV medications from almost $1,500 a month to $5–$100 per prescription.

Coventry’s price reduction was in response to pressure from requests from HIV/AIDS patient advocates, including AIDS Foundation of Chicago (AFC) and AIDS Legal Council of Chicago (ALCC).

[pull_quote_right]The analysis showed Coventry and two other plans placed all commonly-used HIV medications on specialty tiers[/pull_quote_right]In December 2014, AFC released an analysis of plans offered by Coventry and other companies on the Illinois Health Insurance Marketplace. The analysis showed Coventry and two other plans placed all commonly-used HIV medications on specialty tiers, an industry practice known as adverse tiering, which in effect makes medication unaffordable for people living with HIV. AFC and ALCC also said that adverse tiering may deter people living with HIV from enrolling, which is, in effect, discriminatory.

Aetna, Coventry’s parent company, quickly followed suit, announcing that effective June 1, its oral HIV medications would be re-classified and placed on either generic or non-preferred brand tiers, and patient cost-sharing for the products would be fixed dollar copayments of between $5 and $100 after deductibles are met. New HIV drugs will be placed on their respective tier as they come onto the market.

When asked whether Aetna would also lower prices and co-pays on top tier medications for other chronic illnesses, a spokesman from Aetna told A&U that the company routinely evaluated plans and formularies “to ensure they align with the current standards of care and deliver the best value to our customers.”

As far as HIV meds go, Coventry and Aetna are doing the right thing, says John Peller, CEO of AIDS Foundation of Chicago. But he adds that other companies have not yet followed suit, and that insurance companies might keep using loopholes in the ACA to implement policies like adverse tiering until the federal government puts some consistent national policies on specialty medications.

“Five years after the ACA passed, the federal government still had not released the definition of discrimination,” Peller tells A&U. “Section 1557 of ACA says plans can’t discriminate on basis of race and health and disability but they have not defined what discrimination looks like in a health plan. We think we are seeing a clear case of discrimination [through adverse tiering].”

Consumer advocates say people who live in states with many choices of insurance companies are lucky, but those living in states and areas with few options may have to pay exorbitant rates for meds.

Deterring the costliest patients

Healthcare advocates say insurance companies can get away with discriminatory drug pricing, for now, due to vague wording in the Affordable Care Act, or Obamacare.

Before the ACA went into effect in 2014, many people with HIV who needed individual coverage couldn’t get a plan at any price. Luckier ones were accepted to plans with onerous premiums. Now, insurers have to take anyone who can pay, and in states where there’s robust competition and subsidies from Medicaid expansion premiums are often significantly lower than privately purchased plans before 2014.

But there is no specific provision in Obamacare that prohibits insurers from charging whatever they want for medications. And that’s where, advocates say, insurers will keep finding ways to gouge their customers and deter the costliest—in other words the least desirable—customers from signing up.

A study released in March in the New England Journal of Medicine concluded that some insurance companies are setting the price of HIV meds high to make their plans less welcoming to patients with chronic conditions, including HIV/AIDS.

The study’s researchers at the Harvard T.H. Chan School of Public Health, used marketplace to analyze forty-eight health insurance policies across twelve states. Combing through the fine print they found that, in 2014, twelve out of forty-eight policies covered nucleoside reverse-transcriptase inhibitors and generic versions in tiers with at least a thirty-percent co-pay. Some policies did not cover HIV/AIDS drugs at all.

Their calculations showed that the average annual cost for a customer per HIV in the twelve plans was more than triple what customers in the other plans paid, $4,892 compared with $1,615.

The researchers also found that premiums in plans with the highest out-of-pocket costs for HIV drugs were lower than other plans, but they estimated that anyone on HIV meds would still pay an average of $3,000 more each year.

Doug Jacobs, a med student at the University of California, San Francisco, and co-author of the study, says that insurers have long used formularies, lists of covered drugs, and high out-of-pocket costs, to steer patients toward generics or medications with a more favorable price, but he believes that his research shows formularies can also be priced to ward off people with pre-existing conditions.

“Historically insurance companies put premiums at unaffordable levels for those most at risk of needing expensive medications and procedures,” Jacobs says.

“Now that the ACA prevents companies from doing this, and a huge amount of people are eligible for affordable health care. Now insurers are using different ways to discriminate on the basis of health status, and adverse tiering is one way.”

Jacobs adds it’s not just the pricing structures that need to be reevaluated, but the lack of transparency around drug pricing that causes people to get lost in the fine print of or experience sticker shock well after they’ve met their deductibles for the year.

“There is a link on to the formulary so customers can see the drug tier, but it doesn’t say what the drug tier means. Tier four can correlate to a fifty-dollar copay, or could be fifty percent co-insurance. To find out they have to go to Summary of Benefits and Coverage, which may say they’ll have a fifty percent co-pay, but that still isn’t helpful. It’s fifty percent of what? Insurance companies don’t publish the cost of the drug. Consumers have no idea what they are expected to pay.”

Jacobs and his co-author noted that adverse tiering strategies can also be used to discriminate against any patients with chronic expensive-to-treat illnesses, including cancer, rheumatoid arthritis, and diabetes.

Profit motive

Insurers’ pricing and payment obfuscation is deliberate, and as is every new provision, a way of making sure they continue to boost profits, according to Consumer Watchdog a consumer information group based in Santa Monica, California.

In December Consumer Watchdog filed a lawsuit against Aetna alleging that the company’s mail order requirement for drugs puts patients’ privacy at risk, is unreliable, and violates the ACA by discouraging people with HIV and AIDS from signing up for the company’s insurance. In recent years Consumer Watchdog filed similar lawsuits against United Healthcare and Anthem Blue Cross of California. Both cases were settled, and those insurers now allow customers to opt out of the mail-order requirement.

Jerry Flanagan of Consumer Watchdog is the lead attorney for the Aetna lawsuit, and he tells A&U that in-house mail-order drug policies, like adverse tiering, are new ways insurance companies can maximize profits without raising premiums.

“Insurance companies don’t like to explain what they’re doing, and when they do tell you, it’s usually along the line of ‘we’re raising your rates because medications are expensive.’ There’s a kernel of truth because specialty meds the class of drugs to treat chronic illnesses is a big cost driver.

“But at the same time the companies are complaining about the high cost of specialty meds to customers and regulators, they’ll brag to their shareholders that by moving HIV meds to an in-house mail order company they’re going to make a whole bunch of profit.”

Some of that profit is enabled by a new middleman, the Pharmaceutical Benefit Manager or PBM—an in-house division of the insurance company that works out the deals with the pharmacies, determines what the charges will be, issues drug enrollment cards, and handles mail order.

“In the United Healthcare suit we quoted out of their statement to shareholders that they expect to see huge profit growth from moving specialty meds to their PBM,” Flanagan tells A&U. “It’s the same with Aetna. They want to tell that to Wall Street so analysts say thumbs up on the stock, while to the public they wring their hands over the cost of medications.”

The theory is, mail order plans save money, at least for the insurer, by cutting licensed pharmacists out of the equation. But for HIV-positive patients like Jim Ballard, mail order saved him nothing, and it complicated his healthcare. Ballard, a retired real estate attorney, was a party to a class action suit against Aetna’s mail-order mandate and tells A&U that the plan may have saved money for someone but was downright dangerous for the customers.

“Meds weren’t being delivered, medicines that had to be refrigerated were left on doorsteps or destroyed and the company refused to replace them. It was essentially your fault as the receiver of the drugs to make sure you got them.”

Just as troublesome, Ballard says, was the lack of conflict checks with mail order. “They wanted you to obtain the expensive HIV meds from the mail order, but if you were on other medications not on that list you didn’t have to go through mail order. When you got sick it’s hard to run your own conflicts check. You didn’t talk to a pharmacist, you talked to someone in cube 23 B and you can be on hold for thirty minutes.”

Flanagan says, in addition to demanding more stringent federal oversight, consumers have another potent weapon against price gouging and policies that may adversely affect those with HIV and other chronic conditions: the bully pulpit. “Companies don’t want to look like they’re beating up on the HIV/AIDS community,” he says, adding that public attention to adverse tiering led to Coventry and its parent company Aetna to reverse its policies.

In addition to announcing lower prices for HIV meds, Aetna now allows patients to opt out of the mail order channel.

Regulators to the rescue
Adverse tiering may be on its way out by the end of the year. In February, the federal Centers for Medicare and Medicaid Services issued a rule for 2016 that prohibits plans placing “most or all drugs that treat a specific condition on the highest cost tiers” and that charge more for single-tablet regimens than for treatments that require patients to take multiple pills.

Price structures may become more understandable as well. In December, 300 patient groups sent a letter to US Health and Human Services Secretary Sylvia Burwell demanding increased protections for patients with policies on the exchanges under ACA. In March, Burwell responded by mandating that all 2016 health plans must submit their formulary information and notice of benefits and payment parameters in a clear, understandable way.

There have been Congressional bills, like the one sponsored by Rep. David McKinley (R-WV) in 2013 that would limit out-of-pocket costs for medications. But most consumer advocates and patient groups see little chance of any reforms passing in the current Congress.
In the meantime, consumers are on their own to figure out which policies pay how much and under what conditions.

Flanagan tells A&U that if and when adverse tiering goes away, it won’t be the last time consumers will face health insurance pricing schemes aimed at increasing the companies’ bottom line.

Ballard’s advice to people with HIV is to “get a good lawyer” to figure out policies and protect themselves from price gouging. That an attorney has to say that he needed a lawyer to understand the fine print of his own policy, he admits, says a lot about the health insurance industry.

Larry Buhl is a radio news reporter, screenwriter, and novelist living in Los Angeles. His podcast on employment issues, “Labor Pains,” can be found at