How to Discriminate Against Pre-Existing Conditions in Two Easy Tiers

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Via ProPublica, here’s an editorial published yesterday in the American Journal of Managed Care:

For many years, most insurers had formularies that consisted of only 3 tiers: Tier 1 was for generic drugs (lowest co-pay), Tier 2 was for branded drugs that were designated “preferred” (higher co- pay), and Tier 3 was for “nonpreferred” branded drugs (highest co-pay)….Now, however, a number of insurers have split their all-generics tier into a bottom tier consisting of “preferred” generics, and a second tier consisting of “non-preferred” generics.

Hmmm. What’s going on here? In some cases, this new non-preferred tier is reserved for higher-priced medicines. That’s pretty easy to understand: insurers are trying to motivate their patients to choose cheaper drugs when they’re available. That’s the same reason copays are lower for generics compared to brand name drugs.

But it turns out that sometimes all the generic drugs for a particular disease are non-preferred and therefore have high copays. What are insurance companies trying to motivate in these cases? Charles Ornstein takes a guess:

The editorial comes several months after two advocacy groups filed a complaint with the Office of Civil Rights of the United States Department of Health and Human Services claiming that several Florida health plans sold in the Affordable Care Act marketplace discriminated against H.I.V. patients by charging them more for drugs.

Specifically, the complaint contended that the plans placed all of their H.I.V. medications, including generics, in their highest of five cost tiers, meaning that patients had to pay 40 percent of the cost after paying a deductible. The complaint is pending.

“It seems that the plans are trying to find this wiggle room to design their benefits to prevent people who have high health needs from enrolling,” said Wayne Turner, a staff lawyer at the National Health Law Program, which filed the complaint alongside the AIDS Institute of Tampa, Fla.

If all your HIV drugs are expensive, then people with HIV will look for another plan. Technically, you’re not discriminating against anyone with a pre-existing condition, but you’re sure giving them a reason to shop around someplace else, aren’t you?

At the moment, this practice appears to be confined to just a few insurers and a few classes of drugs. But if it catches on, it will prompt everyone to follow suit. After all, you can hardly afford to be the insurance company of choice for chronically sick people, can you? This is worth keeping an eye on.

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