To better understand how copay accumulators work, it is helpful to imagine one patient as an example. Let’s call her Jane. Jane has a chronic disease that requires a biologic drug treatment that has a listed price of $10,000 per month ($120,000 annually) for the remainder of her life. Jane’s insurance plan requires her to pay 25% of the cost ($2,500) each month, a deductible of $3,000 and an OOP cap of $7,500. Affordability is a problem for the patient. A third party decides to help by paying Jane’s portion for 4 months. In the first month $2,500, the Jane’s portion (the co-insurance requirement) is paid, and the deductible is reduced by $2,500 leaving a balance of $500 for the deductible.
In the second month, another $2,500 is paid by a third-party. This month $500 is credited toward the remaining deductible balance and $2,000 is credited to the $7,000 OOP cost maximum leaving $5,000 balance on the OOP maximum. In months three and four the same payments are paid through the third party. At this point, the deductible and maximum limit on OOP cost have been reached. For the remaining 8 months of the year, the insurance company will pay the full amount of the costs for Jane’s treatments.
This scenario is what has historically happened – until a little more than five years ago. That’s when insurers and PBMs began implementing accumulator programs.
Under the accumulator program, the Jane is totally on the hook to pay out of their personal pockets the deductible and OOP cost. Any third-party contributions are not credited to her deductible or OOP maximum but are collected by the PBM. Under the scenario above, in month five, Jane will have to come up with $2,500 to pay for her life-saving treatment out of her personal funds. In the following months, Jane will have to continue paying until the deductible and OOP costs are met which will be another three months.
Adding insult to injury, the cost of treatments is based upon retail costs. Most if not all drugs are purchased at a discount to insurers. Many are in the 25-30% range. In the above example, it means that Jane is paying 25% of the list price ($10,000) when in fact the drug costs ($7,000). The insurer pockets the difference.
The PBM and insurer received the four payments from the third party ($10,000). The four months of payments from Jane ($10,000). They, potentially, pocketed $2,500 (the potential difference between Jane’s cost and the cost they paid for the treatment). And instead of paying for Jane’s treatments for six months, they pay them for two. Jane’s cost in the example increased by $10,000. Copay accumulator programs shift the burden back to the patient which the discount programs (third parties) tried to help shoulder. Many patients cannot afford to pay that amount in medical costs.
Click here to read Part 1 of the series, an introduction to copay accumulators.
Larry LaMotte is the Senior Policy Advisor for the Chronic Care Policy Alliance and California Chronic Care Coalition. He is also the owner and Principal Consultant at Advocacy Options, whose mission is to aid patient advocacy organizations in assuring their patient constituency have access to care through research funding, patient centric laws, and regulations.