Benefit Management

The cost of providing health benefits to employees grew more than was projected in 2023 and is expected to rise by an eye-popping rate of 7.8% by 2025, according to an annual survey of large companies from the Business Group on Health. And to address those rising costs, employers are demanding greater accountability from their health plans, PBMs and other vendors.

“Health care costs is really the headline story of this year’s findings,” Ellen Kelsay, Business Group on Health president and CEO, said during an Aug. 20 virtual press briefing. Health care trend — or the rise in spending — was 6.8% in 2023, which was up from 4.6% in 2022 and greater than the 5.9% estimated trend.

Now that CMS has revealed the prices of the first 10 drugs subject to Medicare price negotiation, all eyes are on how Part D plans will cover those drugs on their formularies in 2026, when the new prices go into effect.

To that end, a recent poll from Zitter Insights offers some clues about how payers and PBMs are thinking about this thorny question.

The flash poll was conducted after CMS revealed the results of the first round of the Medicare Drug Price Negotiation Program, which was authorized by the Inflation Reduction Act. Through that process, Medicare for the first time set a Maximum Fair Price (MFP) for 10 branded drugs selected due to their high cost and lack of generic or biosimilar competition.

More than 30 states last year considered or introduced legislation to reform prior authorization, due in large part to lobbying from physician groups that indicate they are being subject to more PA requirements from insurers, according to a recent analysis from the Georgetown University Center on Health Insurance Reforms (CHIR). While health plans in recent months have touted their reduction in PA mandates, Sabrina Corlette, one of the report’s authors and CHIR’s co-founder, says providers and their staff still are spending numerous hours each week on PA and identify it as a major burden.

Corlette and her colleagues primarily focused on four states — Arkansas, Illinois, Texas and Washington — that have enacted comprehensive PA reform in the commercial insurance market.

While the Inflation Reduction Act (IRA) had multiple provisions affecting a variety of industries, including energy, agriculture and manufacturing, the prescription drug aspects of the law have arguably gotten the most attention, both positive and negative. Those provisions impact several industry stakeholders, with pharmaceutical manufacturers and health insurance plans in particular shouldering new responsibilities. In response, Medicare plans are expecting to take various actions, such as increasing premiums, and even commercial plans have begun to modify their drug management approach, according to research from Zitter Insights.

In a Paperwork Reduction Act (PRA) notice issued on Aug. 9, CMS informed Medicare Advantage organizations of its plans to collect more granular information on service-level decisions, including both initial determinations and appeals. Sources say this approach aligns with CMS’s continued focus on health equity and transparency, and it could lead to greater oversight of prior authorization decisions.

To plan sponsors, the transmittal should not have come as a surprise, given that the 2024 MA and Part D rule finalized in April affirmed CMS’s authority to collect detailed information from MA organizations and Part D plan sponsors. “An example of increased data collection could be service level data for all initial coverage decisions and plan level appeals, such as decision rationales for items, services, or diagnosis codes to have better line of sight on utilization management and prior authorization practices, among many other issues,” CMS stated in that rule.

Most state Medicaid programs require managed care plans to cover some common treatments and medications for substance use disorder (SUD), according to a study published this month in Health Affairs. However, Lauren A. Peterson, one of the study’s authors, tells AIS Health, a division of MMIT, it is “concerning” that only half of the states that contract with managed care plans require coverage of all treatments and services recommended by the American Society of Addiction Medicine (ASAM).

While Peterson, a Ph.D. candidate at the University of Chicago, acknowledges that “states are really making a commitment to cover [SUD treatments],” she says she and her co-authors agree with ASAM that all SUD treatments should be available.

Doctors are increasingly turning to artificial intelligence (AI) chatbots to fight back against health insurers’ claim denials and prior authorization requests, The New York Times reported. Tools like ChatGPT and the HIPAA-compliant Doximity GPT are helping justify treatments they say patients need by drafting letters in seconds that cite scientific studies to back up their arguments. One doctor told the publication that Doximity GPT cut the time he spent on prior authorization requests in half. Major insurers, meanwhile, are facing increasing scrutiny — and a spate of lawsuits — over their use of AI for tasks like denying large batches of claims or determining the length of patients’ post-acute rehabilitation stays. An AHIP spokesperson told the Times that the insurer trade group welcomes efforts to streamline the prior authorization process, including those that involve the “appropriate use” of AI.

White bagging continues to be a sore subject for providers, according to a June 21 Avalere Health report. As in past reports, providers surveyed by Avalere are concerned that white bagging can harm patients and lead to wasted medication — which can add up, since payers only use white bagging strategies for expensive specialty medications. The report also raised concerns that payer ownership of specialty pharmacies raises conflicts of interest and could accelerate provider consolidation.

White bagging is a payer practice that significantly changes the customary dispensing and billing arrangements around provider-administered drugs. Until recently, providers used the “buy-and-bill” framework with regard to such drugs. In buy-and-bill transactions, which still account for the vast majority of specialty pharmacy care, providers purchase a specialty drug, stock it in their facility and charge a payer for it after administering the drug to a patient.

While use cases for artificial intelligence are still largely being tested in health care, AI may be helpful right now for health plans seeking to manage their provider directories — a troublesome task that even the largest payers struggle to handle.

“There’s a lot of hype here, and really, so far, not much has really materialized,” said Neel Butala, M.D., cofounder of HiLabs, during a June 25 AHIP webinar.

“However, there’s a big appetite [for AI]…everything ranging from automating administrative tasks, apps, data analytics, to risk prediction, and even you know, personalized medicine. AI has applications in each of these buckets with varying ranges of maturity. And we feel, right now at least, that the easiest thing for people to engage AI in right now is automating administrative tasks. And this is because it improves efficiency; has direct, easily measurable ROI; and it’s pretty low risk for health plans in particular, as it's not really directly involved in member care. And finally, an easy win here can help any AI across an organization that can then be used…for other types of applications that are more advanced, that have a big impact.”

A recent survey from the Pharmaceutical Strategies Group (PSG) found that 33% of health plans and employers provide coverage for GLP-1 medications for obesity and 91% cover them for Type 2 diabetes. While an additional 19% of respondents said they were considering covering the drugs for obesity, plans and companies that do not cover the medications indicated they were primarily concerned with their high costs or considered them as lifestyle drugs rather than as pharmaceuticals to treat obesity as a disease.

“In an ideal world, if these drugs were really cheap, everyone would cover them for obesity,” says Morgan Lee, Ph.D., PSG’s senior director of research and strategy and one of the report’s authors. However, she notes GLP-1 medications such as Novo Nordisk’s Wegovy (semaglutide) and Eli Lilly & Co.’s Zepbound (tirzepatide) have a wholesale acquisition cost of about $13,000 per year, and more than 40% of the U.S. population is obese. If 40% of a payer’s members take GLP-1s, Lee says the financial impact could be “terrifying.”