Premium Impact of Expanding Pre-Deductible Coverage to Chronic Disease Management Medications in HSA-Eligible Health Plans

Summary

IRS Notice 2019-45 allows health savings account (HSA)-eligible health plans the flexibility to cover 14 medications and other health services used to prevent the exacerbation of chronic conditions prior to meeting the plan deductible.  There is limited evidence on the impact of expanding pre-deductible coverage on insurance premiums.  In this Issue Brief, we use claims data to quantify the effect of expanding pre-deductible coverage to 116 drug classes used to manage chronic conditions.

Key Findings:

• The impact on premiums of expanding pre-deductible coverage to 116 drug classes related to chronic disease management medications in HSA-eligible health plans is relatively small (range 1.3-4.7 percent). 
• The premium impact was driven by: 1) the amount of increased uptake of drugs as a result of enhanced coverage, 2) elimination of all consumer cost sharing or inclusion of coinsurance in lieu of the deductible, and 3) whether or not increased drug use led to offsets in spending on non-drug medical expenditures (e.g., preventable hospitalitzations).
• Premiums increased the least — 1.3 percent — when employers imposed coinsurance instead of a deductible and when increased use of prescription drugs led to reduced use of other medical services. 
• The most expensive scenario, an increase of 4.7 percent, occurred when increased prescription drug utilization led to no decrease in use of other medical services and employers did not impose any coinsurance (i.e., zero cost sharing).

Overall, health spending averaged $4,947 per person in 2018.  Prescription drugs accounted for $983 or 20 percent of total spending.  The 116 drug classes examined in this study accounted for $798, which was 81 percent of the drug spend and 16 percent of the total spend per person.  Only $108 of the $798 in drug spending on the 116 drug classes, or 2 percent of total spending, was attributable to the deductible.  The remainder was covered by insurance and/or some other form of cost sharing. 

In the absence of utilization increases as a result of covering these 116 drug classes in full, premiums would increase 2 percent.  However, medical cost offsets as well as other forms of cost sharing will reduce the impact of expanding pre-deductible coverage on premiums.  This is evidenced by the 1.3 percent increase in premiums that we found when average coinsurance is imposed instead of a deductible, and medical cost offsets apply.

Our finding that premiums increased little due to the expansion of pre-deductible coverage is also related to the relatively high percentage of users of the 116 drug classes meeting their deductible.  Users of these services are generally high users of health care more generally because of their health conditions.  As a result, even when coverage for services is provided pre-deductible, these users are likely to continue to meet their deductible.  Services that would otherwise be subject to copayments or coinsurance once deductibles are met will be subject to the deductible when other services are no longer subject to the deductible.

Even before there was evidence that expanding pre-deductible coverage had a negligible impact on premiums, there was an appetite among employers for adding more services if allowed by the IRS.  There is also support for expanding pre-deductible coverage among policymakers as evidenced by the Chronic Disease Management Act, which was reintroduced in the U.S. Congress as recently as May 2021.  This bipartisan, bicameral legislation would provide HSA-eligible health plans additional flexibility to provide pre-deductible coverage for services that manage chronic conditions.