Stupid Insurance Tricks
March 21, 2023 12:13 PM   Subscribe

My health insurance company forces me to participate in a "copay-assistance program" that does not benefit me in any way. I don't need anything resolved, but I'd like to understand why this is legal. Looking for people who understand how insurance works and not "it's probably in your contract" answers.

I have cancer and am kept alive by extremely expensive drugs - like $18K per month expensive, but I fortunately have great insurance. My insurance policy limits my copays to $300 and my annual out-of-pocket expenses to $2000. Except last year I was advised to apply for a copay assistance program from the drug company, and now they pretty much require me to.

I realized after I applied for this program that it does not benefit me in any way because I will always reach the out-of-pocket cap no matter what. Also, there's an additional weird complication where the assistance runs out very fast because it's applied to a much more expensive copay than what I actually have. So it's basically one giant corporation passing money over to another giant corporation for two months while claiming they're benevolently giving me thousands of dollars. So this year, I decided not to sign up. I got a call saying my copay was reverting to 30% of the cost of the drug - so $6000 for one month. That's way more than the regular copay and way over my maximum out of pocket. My company hires insurance brokers who work on any problems like this, and they told me that I had to apply for the copay assistance program again, which involved a lot of time on hold and also just irritates the shit out of me because of the pretense that it's a good thing I should be grateful for. This got my copay down to zero, which I said does not matter at all because my other medical expenses will bring me to the out-of-pocket cap.

What I don't understand is how my not applying for this copay completely throws our policy out the window in terms of what the insurance company pays for - why because this program exists and I applied for it last year, I don't have the option of paying a $300 copay. Before I knew this program existed, I just merrily paid $300 per prescription until I reached the out-of-pocket max. The insurance broker seem to have trouble even understanding this question because as far as they are concerned, yay - zero copay.

As I said, nothing needs to be resolved. I'm just really irritated at this extra annoyance in my life, though one thing I've learned from having cancer is that nobody in the medical/insurance system has any respect for your time.
posted by FencingGal to Work & Money (12 answers total) 3 users marked this as a favorite
Why this is legal (zoomed out) - the pharmaceutical lobby in the US is the biggest lobby in the US. By a lot.
posted by aniola at 12:25 PM on March 21 [3 favorites]

Your insurance company doesn't want to pay expenses it doesn't have to. The copay assistance program shifts expenses from the insurance company to the pharmaceutical company. Hence, it's in the insurance company's interest to have you sign up. As you've seen, insurance companies have ways of incentivizing you to decrease their costs - they just make it a pain for you if you don't.
posted by saeculorum at 12:29 PM on March 21 [12 favorites]

Response by poster: Yes, it's obvious why they would want to do that, and I know that insurance companies are big lobbies. But that doesn't mean they can do anything they want. They can't just empty money out of my bank account because they feel like it and then we say "yes, they're a big lobby." What I want to know is specifically why they can decide not to adhere to a contract. I would really like to hear from people who understand how this works.
posted by FencingGal at 12:44 PM on March 21 [1 favorite]

Best answer: It's not clear to me what the actual contract violation is.

First, health insurance contracts typically renew yearly. It might be possible the new co-pay just happens to correspond with the yearly renewal.

Second, health insurance contracts are rarely/never as simple as, "subject to a deductible/co-pay, health insurance company will cover all of FencingGal's medical expenses." They usually include a number of provisions requiring you to cooperate with them to reduce their costs. For instance, if you are injured in a car collision at someone else's fault, your health insurance coverage will cover you - but also require you to cooperate in recovering their costs from the other party in the car collision, even though that doesn't directly benefit you. Roughly speaking, the insurance is a guarantee the costs will be covered - but it'd be pretty uncommon for an insurance company to say the costs will be covered by them specifically.
posted by saeculorum at 12:58 PM on March 21 [6 favorites]

Response by poster: Yes, that's more what I'm looking for. Thank you.

It's not a change with the new policy. I've read the provisions for the new policy. They said that the change was that I had to re-enroll in copay assistance because of the new year.
posted by FencingGal at 1:11 PM on March 21

I'm assuming you're in the USA because you are posing this question.

I would ask your state insurance regulators about this specific issue. The state has oversight of health insurers in order to license them to offer policies. You might start with a call to your state Attorney General's office for guidance on who, specifically, to ask.

I have to add, as a wrangler of insurance for patients for many years, that this practice does not surprise me, and most patients would not care who pays for their astronomically expensive medication as long as they, the patient, do not have to pay. I believe pharma charges a whopping price intentionally in order to compel insurers to pay a larger "discounted" rate. As they say, it's a feature, not a bug.

I would be interested to know what you discover - please post!

On edit: Is this med so new that there was not previously a PPA? Maybe this is routine practice but the patient assistance program is new?
posted by citygirl at 1:14 PM on March 21

Response by poster: A number of years ago, I called the state insurance regulators because Blue Cross had sold my company policies that weren't in compliance with the Americans with Disabilities Act. The person I talked to said my employer had the option of purchasing a policy that was in compliance. They were extremely uninterested in the fact that Blue Cross was selling illegal policies in my state (there is absolutely no doubt that that is what was happening). At that point, I figured the regulators were there to protect the insurance companies, so I'm not going to call them again.

Blue Cross reps, by the way, had told me that it was up to individual employers to decide when to comply with the ADA, which was very much not true. Fortunately, my employer did decide they wanted to comply with federal law, so they got our policies changed, but I always regretted not at least contacting noted Michigan hell-raising attorney Geoffrey Fieger in case he wanted to look into it.
posted by FencingGal at 10:43 AM on March 22

What does your health plan's "brochure", which should detail what the copay/coinsurance rate is for medical services and different types of pharmaceuticals, say about the copay/coinsurance rate for 'specialty medication', which is what most cancer drugs get billed under? That information should be available and will indicate if the insurance is charging what they should charge.
posted by Theiform at 11:52 AM on March 22

Best answer: You're probably aware of the way hospitals price things, where there is one price that is listed, but then various insurance companies will have negotiated a different price - and typically a different price for each insurance company as well.

I won't try to explain exactly why the system works that way, or the details of how, but I'll just say that it has something to do with what the federal government will pay for Medicare & Medicaid patients, and the price they list is less the actual price and more the opening sally in a price negotiation - both with the insurance companies and also any uninsured individuals.

Now prescription drug coverage is like that, but even more so. The drug company sets the price, but then they negotiate the "real" price with each individual insurance company. And part of that negotiation will be incentives for the insurance company to produce X number of sales of that drug, and if they reach various targets they they will get a kickback, and possibly even various levels of sales goals with increasing kickbacks for increasing sales levels (technically, they probably consider it a bulk pricing discount but I would personally consider a type of kickback or bribe that really should be illegal. The problem with it, beyond the usual reasons things like bribes and kickbacks distort the market and are or should be illegal, is that amounts to an incentive to insurance companies to lean on doctors and patients to use more of certain drugs, and less of others. The companies due this is various ways, some open and some rather underhanded. But they are doing this not to improve HEALTH outcomes but rather to improve their own PROFIT margins. And worse, the fact that they are making decisions to push certain drugs and discourage use of others, based purely based on their own bottom line, is not disclosed to either doctors or patients. Regardless of my personal opinion, though, or the distortion of the market and to medical best practices this kind of pricing incentive brings, all sides seem to consider it to be a 100% legal and normal industry practice).

One thing that is going on here is, the insurance companies have formularies that list drugs they will pay for, and to what degree they will be reimbursed. There are generally something like 3 levels on the formulary - low, medium, and high cost to the consumer. Then there are drugs not listed on the formulary which will not have their cost covered at all by the insurance company.

So . . . if you are a drug company, you want your drug listed on the insurance company formulary, and you want it listed at the level that provides the lowest cost to the consumer. If you're one of those drugs that consumers can get for $5/month or whatever, you're going to sell a bucketload of that drug and make a boatload of profits.

Flip side, the insurance company is VERY unlikely to put your $25000/month medication on the $5/month formulary list. So this is where actual market forces come to bear in the negotiation: The drug company wants to sell more units, which requires offering a low price to the insurance company, which will make it possible for them to list it on the formulary. But they can't offer a too low price, or they will still lose their shirt overall. So they are trying to offer a price that is high enough to recoup R&D costs plus profit, yet low enough to entice the insurance company to put the new drug on their formulary list.

So that is one piece of the puzzle. Insurance companies and drug companies and the federal government are all engaged in this kind of dance around drug pricing, and there are certain kinds of market forces coming to play - just not the normal market forces that we as consumers are used to thinking about. This is more the type of market where a few gigantic corporations on one side negotiate with a few gigantic corporations on the other side - and with the federal government playing a few roles, from regulatory to insurance company (Medicaid & Medicare).

Another piece of the puzzle is how drug companies are going to (and, really, need to) price a product that has relatively large R&D costs but will sell relatively few units over its lifetime on the market.

The drug industry that has created a new drug, at great expense. Keep in mind that by far most of the expense is not in producing the drug, but in the research, development, patient studies, etc etc etc, needed to get the drug through the various regulatory requirements and to market.

So you have a drug that, let's just say for example, costs $40/dose to actually produce but which the company figures they must charge $200 or $500 or $1000 or $5000 or some other amount per dose, to recoup all of the R&D costs plus production costs.

So, where do you price this new drug?

On the one hand, if you price it at even $45/dose you are going to make some profit. And any profit is better than no profit, right?

On the flip side, if your average price is less than (let's say) $2000/dose you are never going to recoup the full cost of developing that drug and bringing it to market.

So you are the marketing manager of Giant Drug Company #1, and how do you price this new drug?

The short answer is, you use some form of differential pricing.

That means you charge various consumers different price points depending on what they can afford or are willing or are able to pay.

So are probably going to sell some doses at even $50 or $100/dose. But obviously, you can't sell them ALL at the rate. But some people don't have insurance, if they don't have insurance they probably don't have thousands and thousands of dollars to pay for medication even if they really need it, you sell it to them for $100 - and that is a pretty high price for them, about the most you are reasonably going to get out of them, and a price that still brings you some profit.

Then you get to people who have insurance. Here you negotiate with the insurance company, as described above, and agree on some price the company will pay and some price the customer will pay. The prices here will vary depending on negotiations with each insurance company, but in general you will be able to get a lot more per dosage.

Finally, you have the Medicare/Medicaid payments. Remember all the debate about whether or not the government can negotiate with drug companies over prices? Even now, they still can't negotiate most drug prices. So if Medicare or Medicaid authorizes use of this drug, then they are probably paying the full list price. Score!

And - a great reason to set your drug price as high as you think you can possibly get away with!

(Someone who understands Medicare/Medicaid drug approval & pricing better than I is welcome to correct and/or fill in details. But you will notice that when you apply for the special pricing deal from the drug company, very often people on Medicare & Medicaid are excluded from applying for these subsidies. That is because the companies are planning to get full price for the drug in these cases, and many some other regulatory reasons as well.)

One other reason the drug companies are willing to subsidize the monthly cost to consumer to some reasonable amount, even for insurance companies that don't yet cover any of the cost of that drug, is they are trying to build a market for the drug - both in general and with each specific drug company.

If they can go to the insurance company and say, hey, even though this drug isn't on your formulary, we are selling X thousand units per month of our medication to your customers using our subsidy program, then that gives them leverage with the insurance company to negotiate getting that drug onto their formulary. That is when they will start to make an actual profit selling the drug.

It's a bit of a loss leader type thing, where they are selling a new drug to consumers at a loss in order to help build a market for that drug. This applies more directly to mass market type drugs - you might have seen this with the recent introduction of Mounjaro - and less to a more niche situation like cancer drugs. But the general idea is the same: You have a very expensive but (possibly) very good new drug. But no one will realize it is a good drug, perhaps even worth the high cost, unless you can get people (and doctors, and insurance companies) to try it, and to do that you have to have some way to offer it to people at a more affordable price. As more people try it, and it proves helpful, then the drug companies will use that data to negotiate the price they really want for the drug, with the insurance companies.

Finally, in your specific case, almost certainly the drug company and your insurance company have negotiated a certain price for that drug, but part of that agreement is to have patients apply for the copay assistance program. Part of that program might be some differentiated pricing for the consumer - maybe people at higher income levels will have to pay a higher copay, or that type of thing. Regardless, it is probably part of the contractual arrangement between the insurance company and the drug company.

That's what I know based on my spouse working for a Fortune 5 insurance/medical services company in the data services division, working part of the time directly on these prescription drug pricing issues. However the whole system is super complicated and arcane, with the details very much screened from public view, so some of the above may not be complete or accurate.
posted by flug at 1:59 PM on March 22 [5 favorites]

Response by poster: Thanks everyone. I'm understanding a little more about how weird copays can be. But there are some things that I still don't understand.

Before the insurance brokers advised me to apply for copay assistance, I had six months of getting this medication with a $300 copay until I met the maximum out-of-pocket, at which point it changed to zero. That was my understanding of how my health insurance worked. And it completely worked like that until I applied for copay assistance for the first time. The insurance company did not tell me I needed to apply for it. The insurance brokers brought it up as a great, helpful thing for me. (Reader, it was not.)

I don't understand how the maximum out-of-pocket can become no longer applicable because I applied for copay assistance once. While copays can be tricky and complicated, my understanding was that was iron clad.
posted by FencingGal at 5:08 AM on March 23

You mentioned other medical expenses besides those covered by the copay assistance program. The copay assistance program should be covering your copays for your medication, which should also go to your out-of-pocket maximum. If the copay is now $6000, which is more than your out-of-pocket maximum, then after the copay assistance program has paid for your copay, then you shouldn't owe any copays, coinsurance, or any other expenses for the rest of the year.
posted by Theiform at 3:30 PM on March 23

It's possible they change their policies (or possibly agreement with the drug company etc) with the new year. A bunch of our insurance details changed (for the worse) on January 1st, even though we have the same company and same general policy.

Not saying that is the answer, but it could be.
posted by flug at 4:12 PM on March 28

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