People with health coverage – including those who buy it through government insurance exchanges and Medicare beneficiaries – are likely to pay more out-of-pocket next year for so-called “specialty drugs,” which treat complex conditions, according to two studies from consulting firm Avalere Health.

More than half of the “bronze” plans now being sold to individuals through federal and state marketplaces for coverage that begins in January, for example, require payments of 30 percent or more of the cost of such drugs, Avalere said in a report out Tuesday. That’s up from 38 percent of bronze plans this year.

In “silver” level plans, the most commonly purchased exchange plans, 41 percent will require payments of 30 percent or more for specialty drugs, up from 27 percent in 2014.

As the cost of prescription medications rise, insurers are responding by requiring patients to pay a percentage of specialty drug costs, rather than a flat dollar amount, which is often far less. Insurers say the move helps slow premium increases.

But “in some cases this could make it difficult for patients to afford and stay on medications,” Avalere CEO Dan Mendelson said in a written statement.

While there is no standard definition of such drugs outside of the Medicare program, they are often expensive medications used to treat serious, chronic illnesses, such as multiple sclerosis, rheumatoid arthritis, hemophilia, some cancers and hepatitis C. While lists of specialty drugs can differ by insurer and by policy type, drugs can include arthritis treatments Enbrel and Humira, cancer drugs Gleevec and Tarceva, hepatitis C treatment Sovaldi and MS drugs, Betaseron and Copaxone.

While they add up to only about 1 percent of all prescriptions written, specialty drugs account for 25 percent of spending on all drugs – an amount expected to rise rapidly, according to various studies.

An earlier Avalere analysis found that for the first time since Medicare’s drug program began in 2006, all of the stand-alone drug insurance plans place some drugs into specialty “tiers.” Two thirds of those plans require patients to pay a percentage of the costs of drugs in those tiers, rather than a flat dollar payment.  Medicare plans can place a product into a specialty category only if the price negotiated with the drugmaker exceeds $600 a month.

Increasingly, health plans –including those offered to people with job-based coverage – require hefty payments, sometimes 20 to 40 percent or more of the total cost of medications that insurers classify as specialty drugs.  That’s a change from the flat dollar payments of $10 to $30 or $50 that many patients have become accustomed to for other types of drugs.

There is a limit to how much patients must pay, but it’s often high: Most policies have an annual out of pocket maximum, which is often several thousand dollars.

The new Avalere study looked at plans sold in the federal exchange and in New York and California, which run their own marketplaces.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

Exactly what would happen to the Affordable Care Act if the Supreme Court invalidates tax credits in the three dozen states where the federal government runs the program?

Legal scholars say a decision like that would deal a potentially lethal blow to the law because it would undermine the government-run insurance marketplaces that are its backbone, as well as the mandate requiring most Americans to carry coverage.

In King v. Burwell, the law’s challengers argue that Congress intended to limit federal tax credits to residents of states running their own insurance exchanges. Currently only 13 states and the District of Columbia operate exchanges on their own; another 10 are in some sort of partnership with the federal government. Federal officials run the rest.

The court is slated to hear the case in early 2015. Should it find that subsidies in federally run exchanges are not allowed, “I don’t think there are any rosy scenarios,” said Timothy Jost, a law professor at Washington and Lee University and a supporter of the law. “It’s a complete disaster.”

The immediate impact is that the Internal Revenue Service would stop paying subsidies to those in federally run exchanges. In 2014, more than 4.6 million people were getting those subsidies but the number may grow to as many as 13.4 million by 2016, according to the Kaiser Family Foundation, (Kaiser Health News is an editorially independent program of the foundation.)

Most of those who lose subsidies would no longer be required by the “individual mandate” to have insurance, because they would fall into an exemption in the law for those who have to pay more than 8 percent of family income for health insurance premiums.

“Since a lot of people can’t afford insurance without the tax credits, you’re looking at a lot of people shedding coverage,” says Nicholas Bagley, a law professor at the University of Michigan.

Those who hang onto their coverage and pay the entire premium without help “are likely to be sicker on average than the people who shed their coverage because they’re the ones who need insurance the most,” he said.

Indeed, the insurance industry, through its trade group America’s Health Insurance Plans, argued in a legal brief for a related case that the elimination of the federal exchange subsidies could seriously undermine those markets, creating an insurance death spiral.

“When healthy individuals opt out of the individual insurance market, those who are left are, on average, less healthy (and therefore prone to higher-than-average medical expenses),” AHIP said in its brief. “A sicker pool of consumers results in higher premiums, which causes an additional relatively healthy subset of participants to drop out, which in turn results in a further increase in premiums.”

Eliminating subsidies for individuals also would eliminate the so-called “employer mandate” that seeks to require larger firms to provide coverage. That’s because the employer mandate merely requires employers to pay a fine if their employees obtain subsidies on the exchange. If there are no subsidies, there are no employer fines and thus effectively, no mandate.

Meanwhile, says Jost, “hospitals that have started to have some real relief from uncompensated care are right back taking care of uninsured people.” That problem could get worse because some people who had coverage in the old, unreformed individual market might have to drop it due to cost.

So what could be done? Some argue that states that rely on the federal government to run their health exchanges could establish their own marketplaces. But legal experts say that’s problematic as well.

“The practical obstacle is that creating an exchange is not child’s play,” says Bagley. “An exchange has to be a governmental entity or a nonprofit entity. They’ve got to be able to carry out a variety of functions,” including working with consumer assistance groups and overseeing compliance with the law’s requirements.

While some have suggested that states could create a “virtual” exchange on paper and contract with the federal government to run it, Bagley says the law on the subject is pretty explicit. “States would have to do more than just the bare minimum,” he said.

Timing and financing would also pose practical problems. The final deadline for states to apply for federal funding to establish an exchange has passed. And a decision from the Supreme Court is likely to come in late June of next year, which is after another deadline (June 15) for states to use their own funds to establish an exchange in time for the 2015-16 open enrollment season.

The political obstacles are potentially even bigger. In six states, even if a governor wanted to establish an exchange for his or her state, the state legislature has specifically taken that authority away, according to the National Conference of State Legislatures. Georgia became the seventh state earlier this year.

“What that means is that in many of these states that don’t have exchanges, state legislatures will have to get involved,” said Bagley. And many of those legislatures “are full of new members after the mid-term elections who specifically campaigned against the ACA.”

Still, some say the predictions of doom are overblown.

The main thing an anti-subsidy ruling would do is force Congress back onto the playing field to reopen the law, said health economist Tom Miller of the American Enterprise Institute.

“Congress will step in,” he predicts. “We’re going to have the kind of political give and take which was abbreviated and artificially truncated when the law was passed. It’s not a pretty process, but that’s why we have a government and we elect people.”

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

Do it or else. Increasingly, that’s the approach taken by employers who are offering financial incentives for workers to take part in wellness programs that incorporate screenings that measure blood pressure, cholesterol and body mass index, among other things.

The controversial programs are under fire from the Equal Employment Opportunity Commission, which filed suit against Honeywell International in October charging, among other things, that the company’s wellness program isn’t voluntary. It’s the third lawsuit filed by the EEOC in 2014 that takes aim at wellness programs and it highlights a lack of clarity in the standards these programs must meet in order to comply with both the 2010 health law and the landmark Americans with Disabilities Act.

Honeywell, based in Morristown, N.J., recently got a reprieve when a federal district court judge declined to issue a temporary restraining order preventing the company from proceeding with its wellness program incentives next year. But the issue is far from resolved, and the EEOC is continuing its investigations. Meanwhile, business leaders are criticizing the EEOC action, including a recent letter from the Business Roundtable to administration officials expressing “strong disappointment” in the agency’s actions.

In the Honeywell wellness program, employees and their spouses are asked to get blood drawn to test their cholesterol, glucose and nicotine use, as well as have their body mass index and blood pressure measured. If an employee refuses, he’s subject to a $500 surcharge on health insurance and could lose up to $1,500 in Honeywell contributions to his health savings account. He and his spouse are also each subject to a $1,000 tobacco surcharge. That means the worker and his spouse could face a combined $4,000 in potential financial penalties.

“Under the [Americans with Disabilities Act], medical testing of this nature has to be voluntary,” the EEOC said in a press release announcing its request for an injunction. “The employer cannot require it or penalize employees who decide not to go through with it.”

Honeywell sees the situation differently. “Wellness is a win-win,” says Kevin Covert, vice president and deputy general counsel for human resources at Honeywell. In time, the company expects to see lower claims costs while workers avoid health problems. Sixty-one percent of employees who participated in the company’s screening last year reduced at least one health risk, he says.

Further, Covert says, it’s easy for employees and their spouses to avoid the tobacco surcharge. Smokers can take a 15-minute online tobacco cessation course, while non-smokers can simply call up the health plan and certify that they don’t smoke.

“The way they described the program was quite hyperbolic,” Covert says.

Employers are watching the Honeywell case closely because many have similar incentive-based wellness plans, says Seth Perretta, a  partner at Groom Law Group, a Washington, D.C., firm specializing in employee benefits.

Eighty-eight percent of employers with 500 workers or more offer some sort of wellness program, according to a 2014 national survey of employer-sponsored health plans by the benefits consultant Mercer. Of those, 42 percent offer employee incentives to undergo biometric screening, and 23 percent tie incentives to actual results, such as reaching or making progress toward blood pressure or BMI targets.

Despite employers’ enthusiasm for wellness programs, “there’s no good research that shows these programs actually improve health outcomes or lower employer costs,” says JoAnn Volk, a senior research fellow at Georgetown University’s Center on Health Insurance Reforms.

The health law encourages employers to offer workers financial incentives to participate in wellness programs. It allows plans to incorporate wellness incentives — both penalties and rewards — that can total up to 30 percent of the cost of employee-only coverage, an increase over the previous limit of 20 percent. If the wellness activity aims to help someone reduce or quit smoking, the incentive can be even higher, up to 50 percent of the plan’s cost.

Under the ADA, employers aren’t allowed to discriminate against workers based on health status. They can, however, ask workers for details about their health and conduct medical exams as part of a voluntary wellness program. What constitutes a voluntary wellness program under the law? Employers, patient advocates and policy experts want the EEOC to spell out what “voluntary” means under the ADA and clarify the relationship between the  health law and the ADA with respect to wellness program financial incentives.

“The EEOC has chosen litigation over regulation,” says J.D. Piro, a senior vice president at Aon Hewitt, who leads the benefits consultant’s health law group.

The EEOC is always reviewing its guidance, but there’s no timeframe for issuing further guidance, says spokesperson Kimberly Smith-Brown.

Consumer advocates say it’s critical not to confuse incentive programs with comprehensive workplace wellness.

“The incentives are meant to engage employees,” says Laurie Whitsel, director of policy research at the American Heart Association, “but they’re not the comprehensive programming we’d like to see employers offer.” It’s really important to have a culture of health, Whitsel says, including an environment that supports a healthy workplace, from a smoke-free work environment to healthy food in the cafeteria.

Patient advocates voice another concern: That wellness program financial penalties may be so onerous they actually limit people’s access to the medications and primary and preventive care they need to get and stay healthy.

“When penalties become that high, it really is a deterrent to affordable, quality health care,” says Whitsel.

Please contact Kaiser Health News to send comments or ideas for future topics for the Insuring Your Health column.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

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