Travis Manint - Advocate and Consultant Travis Manint - Advocate and Consultant

Closing the EHB Loophole: Louisiana Leads, But National Action is Needed

"Jason," a Utah AIDS Foundation client, confronted a brutal truth in the wake of his HIV diagnosis: a healthcare system more interested in profits than patients. Faced with a staggering $3,200 co-pay for his HIV medication—well beyond his financial reach—Jason's plight was exacerbated by his insurance company's implementation of a co-pay accumulator policy. This policy effectively nullified the assistance he once relied on, leaving him stranded without his medication for months. "I felt scared and discouraged when I was told I have a $3,200 co-pay to pick up my HIV meds. I don’t even make that much money each month," Jason shared, his voice a stark indictment of a system failing its most vulnerable. His story, spotlighted by The Utah All Copays Count Coalition, underscores a pervasive issue: patients across the nation are cornered into impossible choices between health and financial ruin, casualties of an insurance industry's practices that blatantly prioritize margins over meaningful care.

Understanding the Problem

Jason's heartbreaking story sheds light on interconnected issues fueling the healthcare affordability crisis: co-pay accumulators and the Essential Health Benefits (EHB) loophole. These tactics have a devastating effect on patient well-being, so let's break them down:

Co-pay Accumulators: A Profit-Driven Scheme at the Expense of Patients

These programs allow insurers to take the value of manufacturer-provided coupons or patient assistance and apply it towards an annual deductible, but not towards a patient's out-of-pocket maximum. This means even with generous assistance, patients can face thousands of dollars in additional costs, forcing them to ration medication or abandon treatment altogether. The numbers reveal the widespread impact:

  • The AIDS Institute reports that co-pay accumulator adjustment programs (CAAPs) are present in a shocking 66% of individual Affordable Care Act (ACA) marketplace plans nationwide, with some states showing 75-100% of available plans utilizing these tactics.

Co-pay Maximizers: A Further Threat to Affordability

Insurers are increasingly employing an even more severe tactic known as 'co-pay maximizers'. These programs set a patient's co-pay to the full amount of available assistance, even if it's intended to cover an entire year's medication cost. Unlike accumulators, which prevent assistance from counting towards the out-of-pocket maximum, maximizers essentially 'use up' all available assistance in a single payment. This leaves patients facing the full, often unaffordable, cost of medication for the rest of the year. The combined use of maximizers and accumulators is becoming increasingly common, leaving patients with limited options and magnifying the financial burden of life-saving treatments. A staggering 72% of commercially insured beneficiaries in the United States were enrolled in plans with co-pay maximizers as of 2023, according to a Drug Channels analysis.

This highlights the alarming prevalence of these practices and the immense pressure they place on patients struggling to manage chronic conditions.

The Essential Health Benefits (EHB) Loophole: Insurers Exploit Gaps in Coverage

Under the ACA, states have flexibility in selecting the 'essential' healthcare services that insurers must cover. Some insurers manipulate this system by classifying necessary medications (especially for chronic conditions) as 'non-essential'. This lets them continue using co-pay accumulators and maximizers on these medications, further undermining patient affordability.

  • Centers for Medicate & Medicaid Services’ (CMS) data reveals that in many states, critical treatments for chronic disease management are not guaranteed coverage under 'essential' benefits. This means patients could be subject to accumulators and maximizers indefinitely, locked in a cycle of escalating costs even when reaching their out-of-pocket maximums.

The takeaway is clear: these practices prioritize the shareholder profits of insurance companies over the health and well-being of patients, especially those battling chronic and complex conditions.

Federal Action – Progress and Pitfalls

The CMS Notice of Benefit and Payment Parameters for 2025 signals a notable yet incomplete step towards remedying the healthcare affordability crisis. It attempts to close the Essential Health Benefits loophole starting in 2027 by mandating routine, non-pediatric dental coverage as an essential benefit. While seemingly tangential, this amendment serves as a precursor to addressing broader coverage issues, demonstrating the potential to mitigate part of the financial burdens that patients like Jason face. However, it underscores a significant gap in the rule's scope—its silence on co-pay accumulators and maximizers.

Limitations of the CMS Rule Change

The rule change’s failure to directly address co-pay accumulators and maximizers leaves a significant gap in patient protection. These payor-driven barriers systematically undermine patient affordability and access, especially for those managing chronic conditions. The absence of direct action against these schemes allows insurers to deploy cost-containment strategies that, while ostensibly designed to control expenditures, place the financial burden squarely on patients.

This oversight perpetuates financial hardship and deepens healthcare disparities. Accumulator and maximizer practices disproportionately affect marginalized populations, highlighting the limitations of regulatory changes that fail to comprehensively address the complex dynamics of healthcare affordability and access.

Without targeted measures to dismantle these financial mechanisms, efforts to expand coverage and close loopholes may achieve only superficial improvements. A significant portion of the population, particularly those managing chronic diseases, will continue to face insurmountable financial barriers to accessing essential treatments. This situation underscores the need for a more holistic approach to healthcare reform—one that confronts the financial mechanisms impairing patient care and seeks to eliminate systemic practices that prioritize profit over patient well-being.

Court Challenges: A Victory Shadowed by Continued Uncertainty

The battle against co-pay accumulators achieved a notable legal milestone when a federal court ruled these practices violated the Affordable Care Act's mandates. Despite this victory, the landscape remains fraught with ambiguity, largely due to the federal government's tepid response. The government’s retraction of its appeal in 2022, while upholding the court's decision, did not establish a nationwide prohibition on co-pay accumulators, leaving insurers in a legal gray area.

The HIV+Hepatitis Policy Institute has spotlighted the risk posed by the federal government's refusal to enforce the court's ruling against co-pay accumulators, shifting focus instead to addressing insurers' classification of certain drugs as “non-essential health benefits.” While the final 2025 Notice of Benefits and Payment Parameters rule curbs the classification of covered drugs beyond state benchmarks as non-essential, the government's inaction on co-pay accumulators marks a troubling disconnect between legal victories and their practical implementation.

This gap between legal wins and real-world application emphasizes the need for interventions at the state level. Louisiana's SB 210 emerges as a key measure, proposing tangible solutions to bridge the gap left by federal inaction and protect patients from the financial burdens imposed by insurers' exploitative tactics.

State Solutions: Louisiana as a Model

Louisiana's Legislative Response with SB 210

In an assertive move to safeguard healthcare affordability and accessibility, Senator Bob Owen's SB 210 targets the mechanisms of co-pay accumulators and the Essential Health Benefits (EHB) loophole. The legislation mandates comprehensive coverage under EHBs and holistic accumulator protections, ensuring all cost-sharing payments contribute towards the ACA's out-of-pocket maximums.

This legislative approach not only challenges the status quo but also highlights Louisiana's proactive stance in addressing healthcare disparities. By mandating that insurers recognize all federally designated EHB services and medications as essential, SB 210 directly confronts insurers' manipulative practices, ensuring patients receive the comprehensive coverage promised under the ACA.

Addressing the ‘Endless Deductible’

In a letter to the Louisiana State Senate Insurance Committee, CANN President and CEO Jen Laws warns that without robust protections like SB 210, insurers can impose what patients call "the endless deductible." This term illustrates the loophole that allows insurers to employ exploitative accounting practices, negating the ACA's intent to cap patient spending on healthcare. SB 210's provisions aim to close this loophole, ensuring patients are not burdened with exorbitant costs for essential treatments, thus preserving the ACA's core promise of affordable care.

In his letter, Laws reveals that Louisiana's health plan benchmarks do not guarantee coverage for essential cancer treatments such as radiation or chemotherapy, underlining the significance of SB 210. By ensuring that expenditures for such critical treatments are counted towards patients' out-of-pocket maximums, the bill offers a lifeline to those facing the daunting financial implications of treating life-threatening conditions. This measure is pivotal in bridging the gap left by the current healthcare system's shortcomings, providing patients with much-needed financial relief and access to life-saving treatments.

A Blueprint for National Reform

Louisiana's initiative serves as a compelling model for tackling the challenges posed by ambiguous EHB classifications, federal inaction, and exploitative co-pay practices. SB 210's success could inspire a wave of legislative efforts across the United States, advocating for a healthcare system that prioritizes patient well-being over payor profits. This approach highlights the potential for state-level innovations to influence national healthcare policy, paving the way for reforms that ensure healthcare accessibility and affordability for all, especially those living with chronic and life-threatening conditions.

Call to Action

The legislative changes proposed in Louisiana represent a critical juncture in the fight for healthcare affordability and access. To realize the full potential of these reforms, a concerted effort is needed from key stakeholders across the healthcare ecosystem:

For U.S. Policymakers:

Legislators at both state and federal levels must embrace proactive strategies to close the EHB loophole and regulate co-pay accumulator and maximizer use. Crafting and enacting policies that guarantee comprehensive coverage of essential health benefits and ensure all forms of patient assistance contribute towards out-of-pocket maximums are essential steps toward protecting patients from undue financial strain. Supporting state-level initiatives like Louisiana's SB 210 can serve as a foundation for broader national reforms, underscoring the importance of legislative action in safeguarding patient interests.

Healthcare Providers:

Medical professionals and healthcare institutions play a crucial role in advocating for their patients' rights and navigating the evolving insurance landscape. By staying informed about the implications of insurance policies on treatment access and affordability, healthcare providers can better support their patients in accessing the care they need. Engaging in policy discussions and supporting legislative efforts to address the EHB loophole and co-pay accumulator issue are necessary contributions to the broader push for healthcare reform.

Community Advocates and Patients:

The voices of patient advocacy groups and people affected by the healthcare system's complexities are instrumental in driving change. By raising awareness about the challenges posed by the EHB loophole and co-pay accumulators, mobilizing communities to demand reform, and sharing personal stories, advocates can influence policy decisions and encourage insurers to prioritize patient needs. Engaging in public discussions and advocating for policies that protect patients from harmful insurance practices are critical steps in building a more equitable healthcare system.

Actionable Next Steps:

  • Reach out to state and federal representatives to express support for policies that ensure comprehensive coverage of essential health benefits and address the challenges posed by co-pay accumulators.

  • Educate oneself and others about the impact of the EHB loophole and co-pay accumulators on healthcare affordability and access, leveraging resources and information provided by reputable patient advocacy organizations.

By uniting in the pursuit of meaningful healthcare reform, stakeholders across the spectrum can contribute to a future where healthcare accessibility and affordability are realities for all, especially for those facing chronic and life-threatening conditions. The journey toward closing the EHB loophole and eliminating unfair insurance practices demands collective action and unwavering commitment to patient well-being. Let's join forces to advocate for a healthcare system that truly serves the needs of its patients, ensuring equitable access to essential treatments and protections against financial hardship.

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Jen Laws, President & CEO Jen Laws, President & CEO

A Patient’s Guide to 340B: Why the Middlemen Matters to You

***This is the fifth report in a six-part series to educate patients about the 340B Drug Pricing Program***

When the 340B Drug Pricing Program was enacted in 1992, there were a few “gaps” between the law’s statutory language and the program’s practical application. Among them was the realization that some covered entities that couldn’t afford to operate their own pharmacy. The Health Resources and Services Administration (HRSA) issued guidance to address the gap. After all, what’s the use of a discount drug program if providers can’t realize those discounts simply because they don’t have a pharmacy?

In 1996, after the urging of some covered entities, HRSA issued guidance telling covered entities and manufacturers that covered entities could contract with a single, independent pharmacy to provide pharmacy services necessary to engage the discount program. The idea was simple: create an access pipeline to the program, so it could be accessed by small providers, but not abused. In 2001, HRSA began to allow a few pilot projects, for lack of a better term, wherein covered entities would have more than one contract pharmacy. In theory, it isn’t a bad idea. Different pharmacies have different distributors, and as such supply can sometimes be an issue (i.e., natural disasters).

Additionally, it allows industrious covered entities to open the door for competition on “value added” services from contract pharmacies – such as programmatic record keeping for the purposes of 340B and/or financial reporting for federal grantees. And since the pharmacy was the one handling the purchasing and distribution of the medications to patients, that’s one less labor task for smaller covered entities to fund. In 2010, HRSA would later expand these pilot project allowance for multiple contract pharmacies per covered entity.

Sounds great, right? More patients have access to discounted outpatient medications, right?

Right? Not exactly!

Under the 340B program, patients don’t always get their share of the savings from the rebates and discounts. Arguably, it would appear everyone is directly benefiting one way or another from the program and its lucrative revenue stream, except for patients.

Contract pharmacies all want their piece of this pie, too. For example, take the dispensing fees that a pharmacy charges to fill a prescription medication. Indeed, dispensing fees for 340B contact pharmacies are so wildly non-standard a Government Accountability Office (GAO) report from 2018 found dispensing fees ranging from $0 to almost $2000 per fill on 340B eligible drugs. Those fees come out of 340B revenue, which could be supporting a patient’s ability to pay copays or the cost of a drug and instead.

Can you imagine, if you will, you’re a person living with HIV or Hepatitis C, living at about 200% of the Federal Poverty Level (FPL; 200% in 2021 is approximately $25,760 per year for a single person), but thankfully receiving insurance coverage for your medical care. Yet, co-pays and deductibles drain your finances when you could be getting your medications at no cost if the pharmacy or covered entity was applying 340B dollars to your bill? How many Rx fills would that be?

If the payer wasn’t applying a co-pay accumulator or co-pay maximizer program, the dispensing fee of two fills could mean extending your ability to access care for an entire coverage year – not just for medications, but for all health care. If the intent behind the 340B program is to extend limited federal resources, ensuring those exorbitant dispensing fees weren’t so exorbitant would certainly be one way to do it. Ultimately, 340B is a pie – when there’s more taken out, hacked at along the payment pipeline of getting medications to patients, there’s fewer resources left for patients to benefit from.

What’s more concerning about the explosive growth in the number of contract pharmacies with their hands in the 340B cookie jar, is HRSA knew when the 2010 guidance was issued that diversion and duplicate discount increases, abuses of the program, would most certainly follow. In part, because the program would grow and at such a pace that HRSA couldn’t keep up. In fact, GAO included that warning in a 2011 report, stating “…increased use of the 340B Program by contract pharmacies and hospitals may result in a greater risk of drug diversion, further heightening concerns about HRSA’s reliance on participants’ self-policing to oversee the program.”

The best part? By the “best”, I mean the worst: contract pharmacies, like non-grantee hospital entities, don’t have to show any benefit to patients for any of the dollars. Clearly, it raises questions over the legislative intent of the program and whether it is being met?

Now, contract pharmacies, like hospitals, like to massage and carefully select data to pitch answers to these concerns (there are a great number of “concerns”) by saying “we served X many 340B eligible patients”. They get around having to say if those patients realized any of those savings and benefitted from the program, without defining what they mean by “eligible”, and without defining “patient”. Contract pharmacies and hospitals get away with not having to provide meaningful information because statutory language doesn’t define “low-income” or “eligible” and regulatory guidance has an outdated definition of “patient”. Regardless of the existing language in regulation, a bona fide relationship should exist in order to call a consumer a “patient”, otherwise this is all just pocketing dollars meant for extending medication access to needy people.

All this lack of transparency fees assessed against the program could easily be solved with merely requiring contract pharmacies to establish a “flat”, reasonable dispensing fee and to describe what those fees actually cover. If the contract pharmacy is providing an additional navigation benefit to patients or an in-house location for a federally qualified health center, reasonable people can see fees being slightly elevated to cover additional costs. However, those costs should be outlined like any other contractor would be expected to do in any other contract for service. Most hospitals already have their own in-house pharmacy, they shouldn’t be contracting that service out and thus giving room for inappropriate 340B related rebate claims. And if HRSA just does not have the capacity to meaningfully audit 340B claims and the use of these dollars, they could at the very least make more room for the other mechanism in the statute for audit: manufacturer-originated audits. That’s right. The statutory language of 340B anticipated HRSA wouldn’t be able to keep up if the program was successful or even particularly abused. So, legislators reasoned if manufacturers were taking a cut of their potential profits through discounts and rebates, manufacturers should be able to audit the claims seeking those discounts and rebates to make sure everything was in line. When a retailer offers a discount to veterans, they typically require proof of veteran status. Why would medication discounts be any different?

In the end, if contract pharmacies don’t have anything to hide, then they need to stop hiding so very much. There are enough hands in the 340B cookie jar that patients are being squeezed out and left with crumbs. When legislators ask “is the intent of the program being met?”, these are the questions on their minds. Patients should have them on their minds as well.

For more information on the issues facing the 340B Program, you can access the Community Access National Network’s 340B Commission final report and reform recommendations here.

Sources:

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