Source: The White House via Flickr.
The Affordable Care Act enrolled millions of Americans in health insurance plans during its first open enrollment period, which began in October of 2013 and ended in March 2014, and the first real-time results of exchange members' impact on drug spending are rolling in. According to the data crunchers at pharmacy benefit manager Express Scripts (ESRX), here are five key findings from year one of Obamacare that you ought to know about.
No. 1: Putting plans to work
Express Scripts found that nearly half of all people enrolling in health insurance through the exchange are using their insurance to fill prescriptions. Despite many Obamacare enrollees being low income earners, 49% of plan members have filled at least one prescription. That suggests that utilization of the drug benefit within exchange-offered plans may be likely -- over time -- to mirror the 55% utilization of drug benefits offered through non-exchange plans. The key takeaway here is that access to insurance trumps income when it comes to visiting a doctor to receive a prescription.
No. 2: Procrastinators were younger and poorer
As expected, early adopters of the exchanges were older patients with pre-existing conditions. Those who enrolled in health insurance through the exchanges in the final month of open enrollment last year were, on average, four years younger and had lower incomes than early exchange enrollees.
Source: Express Scripts.
Additionally, far fewer late enrollees suffer from chronic diseases such as heart disease or depression. This finding suggests that those who enrolled through the exchanges later improved the demographics of insurer patient pools, making plans offered by health insurers such as Anthem and Cigna more profitable than they would have been otherwise.
No. 3: Big demand for specialty medicine
Express Scripts discovered that exchange patients are 59% more likely to fill a prescription for pricey specialty medicines than non-exchange members.
This is due in part to a large number of HIV patients being insured through the exchanges who were previously unable to sign up for insurance through commercial or individual markets. As a result, HIV treatments are the most prescribed specialty medicine, accounting for nearly 60% of all specialty scripts. That's far higher than the 20% rate for non-exchange plans.
Source: Express Scripts.
Overall, specialty drugs accounted for 1.3% of all prescription drug scripts on exchange plans, but just 0.8% for other health plans. The increasing use of specialty medicine, and the likely improving adherence rates for people newly covered by exchange insurance, could increase HIV script volume for market share leading drugmakers like Gilead Sciences.
No. 4: Perfectly happy to save money where possible
Although diseases like HIV mean specialty medicine demand is higher in exchange plans, those patients who don't require specialty medicine appear more than willing to embrace less-expensive generic medicines when available.
Regardless of age or income, the use of generic drugs among exchange enrollees is higher than non-exchange members. Overall, 87% of exchange member scripts were filled with a generic alternative, and that is 6% higher than the generic fill rate for non-exchange plans. What's the reason behind exchange members' embrace of generic drugs? Higher co-pays and out-of-pocket expenses.
Since more exchange members select lower premium cost bronze and silver plans than gold plans, which offer more comprehensive coverage, their share of costs is higher than people covered by insurance through employers. If this means exchange members remain more sensitive to prescription costs than non-exchange members, it could mean exchange plans prove to be quite revenue-friendly to generic drugmakers like Teva Pharmaceuticals.
No. 5: Thin insurer margins
Industry-wide estimates peg the operating profit margin for insurance plans offered through the exchanges at between just 3% and 5%, and Express Scripts' data indicates that exchanges will remain a big-volume, low-margin business for insurers.
Although exchange member demographics are broadly similar to non-exchange members, the increased use of high-cost specialty medicine means these plans are more expensive to insurers. The higher cost of caring for these members could fall over time as more healthy hold-outs enroll through the exchanges to avoid the uninsured tax penalty, but for now, insurers will need to focus on wellness programs and negotiations with providers and drugmakers if they hope to improve the profitability of exchange products.
One more thing
As of the most recent report from the Department of Health and Human Services, 7.3 million Americans have signed up for health insurance through the exchanges during the current second open enrollment period, which ends March 15th. Of those 7.3 million, the vast majority likely receive subsidies that help pay their monthly premiums. According to The New York Times, 90% of people signing up through the federal exchange healthcare.gov during the first open enrollment period get government help with their premiums.
However, those subsidies could be in jeopardy given that the Supreme Court is set to hear a court case regarding whether or not the ACA language specifically allows the federal government to make subsidy payments on behalf of people enrolling through the healthcare.gov website. If the Supreme Court ultimately disallows healthcare.gov subsidies, the impact of exchange enrollment on companies like Anthem, Gilead Sciences, and Teva Pharmaceuticals could be greatly reduced or disappear altogether.
