A few weeks ago, I wrote about how the incentive structure of private insurance that is mandated to take all applicants creates an incentive for plans to get fugly in their benefit design for known, high cost currently sick individuals. This was most readily visible with how some insurers in some states treated HIV/AIDS drugs as all high cost tier where the patient was on the hook for the full cost of the drug until their out of pocket limit was satisfied.
Once one plan in a market decides to make themselves as unattractive as possible, every other plan has to either follow suit in making themselves unattractive or be willing to take on massive health costs as they become the preferred plan for HIV positive individuals…. a region will see either the “nice” plan become a “nasty” plan as a self-defense measure or that “nice” plan will leave the market so the new baseline is “nasty”. It is Gresham’s law for health insurance.
The easy and no way in hell it is happening any time solution to this problem is single payer as that removes the incentive to play buggar thy competitor. The much more plausible solution is a regulatory solution. And that is what it looks like will happen.
From the Washington Post:
Some plans are requiring patients to pay 30 percent or more for drugs that go for several thousand dollars a month. HIV drugs, certain cancer medications, and multiple sclerosis drugs are among them….
Although the law sets an overall annual limit on what patients are required to pay, the initial medication cost can be a shock….
For 2015, the administration says it will identify plans that require unusually high patient cost-sharing in states where Washington is running the exchange. Insurers may get an opportunity to make changes. Regulators will collect and analyze data on insurers’ networks.
This is a start but the problem with outlier analysis is that is presumes the outliers are the problem. They can be. But if there are local markets where all players went the fugly route at the same time, there are no outliers. Stronger regulation, or clearer and faster risk transfer payments would be needed to minimize the incentive to create fugly plans.