Expensive specialty medicines used to treat cancer and chronic illnesses have forced some very ill Americans to choose between getting proper treatment and paying their rent.

To ease the financial burden, the California agency that governs the state’s Affordable Care Act marketplace issued landmark rules recently that will limit the amount anyone enrolled in one of those plans can be charged each month for high-end medicine.

The agency said its rules, set to take effect in 2016, “strike a balance between ensuring Covered California consumers can afford the medication they need to treat chronic and life-threatening conditions while keeping premiums affordable for all.”

Mikkel Lawrence, a retired middle school teacher in California, is the kind of patient lawmakers had in mind when they designed the new policy.

Lawrence has hepatitis C, a virus that can damage the liver. Most people who have the virus don’t have any symptoms, sometimes for decades. But for some people like Lawrence, waves of intense fatigue hit several times a day.

Lawrence said he sometimes gets up in the morning, eats breakfast, and then heads straight back to bed for a nap. “I get really bad tired spells. It’s like you have to go to sleep,” he said. “It takes away probably three or four hours of my waking day.”

There’s also an increased risk of liver cancer or liver failure. So when Lawrence heard last year that there was a new drug regimen that could cure his disease, he went straight to his insurance company.

“The first thing they did, of course, was deny it,” Lawrence said.

But the real problem, once he did get approval, was the price tag. Each pill costs $1,000.

“The first quote I got was $140,000 — and I would be responsible for $14,000 of it,” he remembered.

Lawrence, 71, lives on Social Security. There was no way he could come up with $14,000 on his own.

“I went to everybody I knew of and fussed and fumed and all that stuff,” he said.

Eventually, Lawrence got financial aid from a nonprofit to help him cover his out-of-pocket costs. Every morning at 10 a.m., he stood over his bathroom sink and swallowed two capsules.

“I’d go, ‘There’s one thousand. And there’s another thousand,’” he said.

Health advocates hear scenarios like this all the time from patients with a range of chronic conditions, including hepatitis C, HIV, multiple sclerosis, and rheumatoid arthritis.

Last year, more than a half-million patients in the U.S. had medication costs that exceeded $50,000, according to a recent report from Express Scripts, a company that manages prescription benefits.

“We’ve heard stories of people who’ve emptied their retirement savings to cover their drug needs,” said Betsy Imholz, special projects director at Consumers Union, an advocacy group. “It’s a really frightening, wild west situation for people who need these specialty drugs.”

She and other advocates took their concerns to Covered California, the agency that implements the Affordable Care Act in the state. In May, the health exchange became the first in the country to put a cap on how much consumers pay for these drugs.

Starting in 2016, most people will pay a maximum of $150 or $250 per prescription, per month. These caps are for Covered California’s so-called silver and platinum plans. Bronze plans will have caps of $500.

This policy will apply only to the 2.2 million people who buy coverage on the individual market. A bill under consideration in the California legislature would extend that protection to many people with employer-based plans, as well.

Several other state legislatures are considering similar specialty drug price caps, some as low as $100.

Covered California board member Marty Morgenstern said the agency should do even more by going to the root of the problem: the pharmaceutical companies.

“They charge irrational prices,” Morgenstern said, “on specialty drugs, and on all drugs, as a matter of fact.”

He said the health exchange should band together with other agencies in the state to negotiate lower drug prices.

“Medi-Cal, Covered California, Calpers [the benefit group for state employees], workers comp, the prison system, the state mental hospital system — we buy a hell of a lot of drugs,” he said. “I’m just wondering if there’s some way we can leverage that, to have some impact on the drug companies.”

Gov. Jerry Brown called for a task force earlier this year to do just this, after realizing the new hepatitis C drugs alone would cost the state more than $200 million in the next fiscal year.

Insurance companies in California have also been calling for lower drug prices.

“This is unsustainable, and it’s going to have a major impact on the price of health care,” said Nicole Kasabian Evans of the California Association of Health Plans.

Insurers see a correlation between the cost of a drug and adherence, she said. Patients who can’t afford what they’re prescribed will sometimes split pills or not take them at all.

“If you ultimately have to go back and take a second round, because you didn’t take it right the first time, or you never took it and you develop a more serious health condition, it’s not good for the consumer,” Kasabian Evans said. “And it costs the health care system more money.”

Insurers say it’s only a matter of time before the costs of specialty drugs will force them to raise monthly premiums for everyone in the health plan.

The pharmaceutical industry adamantly defends its prices.

“The cost and time it takes to bring new medicines to the marketplace is increasing, as biopharmaceutical companies go after harder and harder to treat diseases,” said Robert Zirkelbach of the Pharmaceutical Research and Manufacturers of America, the drugmakers’ trade group known as PhRMA.

He said you have to put drug prices in context. Hepatitis C drugs, like the ones Mikkel Lawrence takes, are expensive. But the cost of treating the complications of Hep C is much higher.

“The average annual cost of a patient with liver cancer today is over $110,000. If that patient needs to get a liver transplant, the cost is over $500,000,” Zirkelbach said. “We’re talking about a medicine here that cures the disease.”

In most people, but not Mikkel Lawrence. Turns out that $140,000 hep C regimen he took last year didn’t work. He fell into the 5 percent of patients who don’t respond.

But now he’s caught wind of a new drug that’s coming through the pipeline. And he’s already drafting a series of emails and letters to get it approved by his insurance plan.

“As soon as they’re out, I’m taking them,” he says.

This story is part of a reporting partnership that includes KQED, NPR and Kaiser Health News.

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

Christine White pays $300 a year more for her health care because she refused to join her former employer’s wellness program, which would have required that she fill out a health questionnaire and join activities like Weight Watchers.

“If I didn’t have the money … I’d have to” participate, says White, 63, a retired groundskeeper from a Portland, Ore., community college.

Like many Americans, White gets her health coverage through an employer that uses financial rewards and penalties to get workers to sign up for wellness programs.  Participation used to be a simple matter — taking optional classes in nutrition or how to stop smoking. But today, a small but growing number of employers tie those financial rewards to losing weight, exercising or dropping cholesterol or blood-sugar levels — often requiring workers to provide personal health information to private contractors who administer the programs.  The incentives, meanwhile, can add up to hundreds, or even thousands, of dollars a year.

Employers say wellness programs boost workers’ health and productivity while helping companies curb rising health care costs. President Barack Obama’s signature health law allows employers to increase those financial incentives.  But asking workers to undergo medical exams or share personal health information is sharply limited by another law, the 1990 Americans With Disabilities Act (ADA), which prohibits such questioning — except under limited circumstances, such as by voluntary wellness programs.

So what is a voluntary wellness program and when do employer incentives cross the line to become coercive?

A proposed rule published this spring by the Equal Employment Opportunity Commission – the agency charged with protecting workers against discrimination – attempts to strike a balance between employers who want to use incentives to drive worker participation and consumer advocates who see penalties as de facto coercion. The plan drew about 300 comments from employers and consumer groups by a June 19 deadline, with plenty of criticism.

The equation tilts too far against workers “when … employers can charge you a couple thousand dollars more for refusing to give private medical information, [that] doesn’t sound very voluntary to me,” said Samuel Bagenstos, a University of Michigan Law School professor.

But many employers say the proposal doesn’t clear up conflicts between the health law and the ADA. In addition, it restricts their ability to offer rewards, which are needed to “engage employees and their families to be aware of their … lifestyle risks,” said Steve Wojcik, vice president of public policy for the National Business Group on Health. The EEOC has not set a timetable for issuing a final rule.

Employers Want More Flexibility

Under the proposal, wellness programs would be considered voluntary so long as the employer rewards or penalizes an employee no more than 30 percent of the cost of health insurance for a single worker. Since the average cost for such coverage is $6,025 a year, the 30 percent limit would be about $1,800.

Employers cannot fire workers for declining to participate nor can they deny them coverage, the proposal says.  They also must give workers a notice explaining what medical information will be obtained by the wellness administrator — often a private contractor — and how that might be used.

Some employers say the rule could force them to cut the size of wellness programs’ financial incentives or penalties, particularly for families and smokers.  Such limits could mean “advancements in workplace health improvement may come to an end,” wrote the Northeast Business Group on Health, a coalition of large employers, insurers and benefit consultants.

Consumer groups are also unhappy, saying the proposal strips workers of important protections against health or disability-related discrimination by loosening earlier government definitions of what constitutes voluntary.

“It walks back people’s rights,” said Jennifer Mathis, director of programs for the nonprofit Bazelon Center for Mental Health Law, a legal advocacy organization for people with mental disabilities. In its comments, the group said the proposal would allow “employers to use steep financial penalties in wellness programs to force workers to disclose sensitive medical information.”

Interest in workplace wellness programs began two decades ago, prompted by employers’ rising health care spending. Today, a growing percentage of companies ask workers to answer lengthy questionnaires about their health, including their exercise and drinking habits and whether they are depressed. Some employers also require testing of cholesterol levels and blood sugar to assess who might be at risk for heart trouble, diabetes or other problems.

About 56 percent of employers with wellness programs offered financial incentives last year, according to benefits firm Mercer, with 23 percent of large employers tying those incentives to showing progress on health care goals, such as exercising more, losing weight, dropping cholesterol levels or improving blood sugar readings.

While aimed at preventing illness and encouraging a healthy lifestyle as a way to reduce health care costs, there is wide debate over whether the programs achieve those goals.

Obamacare Ok’d Bigger Incentives

The health law permits employers to offer incentives or penalties of up to 30 percent of the cost of a health insurance plan – up from 20 percent under a previous regulation – if they set specific health goals for workers, such as quitting smoking or achieving certain results on medical tests. Most employers’ incentives are still well below those levels.

How does that square with the ADA’s restrictions on employers asking for personal medical information? That’s where it gets complicated. The EEOC long defined voluntary wellness programs under the ADA as those where “an employer neither requires participation, nor penalizes employees who do not participate.”

But what constitutes a penalty? Prior to the proposed rule, it was clear that employers who tried to charge workers the full cost of their insurance, or who barred them from coverage for refusing to participate, could run into trouble, said Sarah Millar, a partner at law firm Drinker Biddle in Chicago.

“What was not clear was at what point between zero and 100 percent [of the cost of employee health coverage] does a program not become voluntary?” she said. “Now, as long as it’s below 30 percent and meets certain disclosure requirements, then a program is still considered voluntary.”

Some consumer advocates say that level is punitive.

“Medical questions that an employee may only decline to answer if he or she agrees to pay thousands of dollars more for health insurance can hardly be called ‘voluntary,’” the Bazelon center  wrote. The group wants the government to prohibit penalties for those who decline to answer such questions.

Consumers Seek Privacy Protections

Consumer groups also want increased privacy protections for those who share their health information with a wellness plan.

The proposed rule says employers whose wellness programs are tied to their health insurance benefits must tell workers specifically what information will be gathered and with whom it might be shared.

Still, Anna Slomovic, a researcher at the George Washington University Cyber Security Policy and Research Institute, says that provision should be broadened to encompass wellness programs that are unrelated to a health plan.

“This leaves unregulated a number of wellness programs … even though these programs collect personal health data,” she said in her comments. The protections should include all data, “including that collected via fitness trackers and mobile apps.”

Many employers also asked the administration to allow them to impose penalties of up to 50 percent of insurance costs for tobacco users, which the federal health law allows.

“This is potentially putting a wrench in the system for some employers,” said Seth Perretta, a principal at the Groom Law Group in Washington D.C. “If it’s finalized, it would force them to reduce incentives back to 30 percent.”

Additionally, employers want to be able to charge workers 30 percent of the cost of more expensive family coverage, if the family is also eligible to participate in the wellness program — something the federal health law allows but the proposed rule does not. That could dramatically increase the dollar amount of the financial incentive or penalty.

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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