Trends in Out-of-Pocket Spending and Laws

A patient’s out-of-pocket costs are for medical care and therapies that are not covered or reimbursed by insurance and can include:

• Deductibles – the amount of money a patient must pay before insurance will pay a claim for a prescription or service;
• Copayments – the flat dollar amount that a patient pays for a prescription or service; and
• Coinsurance – the percentage of the total cost of a prescription or service a patient is responsible for, as opposed to a flat rate.

For many rare disease patients, out-of-pocket costs have grown significantly in recent years. Employers and insurance companies are increasingly shifting the cost of health care onto patients by raising premiums and deductibles as well as changing plan design.¹ These actions can have grave consequences. Exorbitant out-of-pocket costs can force patients to go without needed medications or to use alternative treatments that are not as safe and effective. For example, according to KFF, 28% of all adults report difficulty affording their prescription drugs.² Of those unable to afford their drugs, three in 10 say they have not taken their medicine as prescribed due to cost.³

In recent years, Congress and state legislatures have been exploring different ways to assist patients with increasingly high prescription drug costs with varying and to-be-determined impacts on a patient’s out-of-pocket spending. For example, in August 2022, President Biden signed into law the Inflation Reduction Act, which will limit the out-of-pocket prescription drug costs for Medicare Part D beneficiaries to $2,000 annually. However, that benefit will not begin until 2025 and is only applicable to Medicare beneficiaries who participate in the Part D program.⁴ Additionally, as of November 2023, eight states have established Prescription Drug Affordability Boards (PDABs) to try to address prescription drug costs but the impact on patient out-of-pocket costs in those states has yet to be determined as these PDABs are still being implemented.⁵

It is important to note that state lawmakers do not have authority over all forms of health insurance but, for the purposes of this report, the analysis of out-of-pocket cost protections focuses solely on state-regulated health insurance plans.

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1. 2023 Employer Health Benefits Survey, (2023, Oct 18). KFF. https://www.kff.org/report-section/ehbs-2023-summary-of-findings/
2. Kirzinger, A., Montero, A., Sparks, G., Valdes, I., and Hamel, L., (2023, Aug. 21). Public Opinion on Prescription Drugs and Their Prices. KFF. https://www.kff.org/health-costs/poll-finding/public-opinion-on-prescription-drugs-and-their-prices/
3. Kirzinger, A., Montero, A., Sparks, G., Valdes, I., and Hamel, L., (2023, Aug. 21). Public Opinion on Prescription Drugs and Their Prices. KFF. https://www.kff.org/health-costs/poll-finding/public-opinion-on-prescription-drugs-and-their-prices/
4. Cubanski, J., Neuman, T., & Freed, M. (2022, Sept. 22). Explaining the Prescription Drug Provisions in the Inflation Reduction Act. KFF. https://www.kff.org/medicare/issue-brief/explaining-the-prescription-drug-provisions-in-the-inflation-reduction-act/
5. Datar, S., and Kikora, K. (2023, Aug. 15). States Turn to Drug Price Boards to Reduce Spending. Avalere. https://avalere.com/insights/states-turn-to-drug-price-boards-to-reduce-spending

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Grading Methodology

NORD evaluated state out-of-pocket patient protections on the following:

1. Deductible Protections: States can help protect patients by ensuring there is no deductible to meet for prescription drug costs or by having a limited separate prescription drug deductible.
2. Prescription Drug Cost Caps: States may cap the amount that a patient pays per month per drug or create a fixed copay option that is a flat amount that applies to all prescription drugs.
3. Standardized Benefit Plan Design: The Affordable Care Act (ACA) created health insurance marketplaces through which individuals may purchase health insurance that meets the standards of quality coverage under the ACA. Effective January 2023, states that utilize the federally-facilitated marketplace (FFMs) or operate their own state-based marketplaces on federal platform are required to offer standardized plan options which make it easier for individuals to do an apples-to-apples comparison of different plans. Additionally, states have the flexibility to set additional standards, including creating a standard benefit design specific to prescription drug benefits.
4. Separate Annual Prescription Drug Cost Protections: States may place a limit on the total amount a patient pays on prescription drugs per year.
5. Ban on Copay Accumulator Adjustment Programs: Many patients rely on copay assistance to help pay for their prescriptions. However, in recent years, more insurers are no longer counting funds from copay cards towards a patient’s deductible. Some states have taken action to ban what is now called “copay accumulator adjustment programs” that limit those funds counting towards a patients’ cost-sharing requirements.

The greater the number of protections states have enacted from above, the higher their grade.

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