Trends in Out-of-Pocket Spending and Regulation

A patient’s out-of-pocket costs include their expenses for medical care that are not reimbursed by their insurance. This includes the:

• Deductible: the amount of money a patient must pay before insurance will pay a claim,
• Copayments: the flat dollar amount that a patient pays in addition to a payment made by their insurer; and
• Coinsurance: the percentage a patient is responsible for a prescription, as opposed to a flat rate.

For many rare disease patients, their out-of-pocket costs have grown significantly in recent years, as insurance companies are increasingly shifting the cost of health care onto patients by raising deductibles,¹ increasing patient cost-sharing,² and changing plan design.³ These actions can have grave consequences. Exorbitant out-of-pocket costs can force patients to go without their medication or to use alternative treatments that are not as safe and effective. For example, according to the Kaiser Family Foundation, 26% of all adults report difficulty affording their prescription drugs. Of those who were unable to afford their drugs, three in ten say they have not taken their medicine as prescribed due to cost.⁴

In recent years, there has been a push in state legislatures to assist patients with increasingly high prescription drug out-of-pocket costs, and states have explored different types of legislation with varying impacts on patients’ out-of-pocket spending. It is important to note that state lawmakers do not have authority over all forms of health insurance. Additionally, 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 $2000 annually, but that will not begin until 2025 and is only applicable to Medicare beneficiaries who participate in the Part D program.⁵

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. 2021 Employer Health Benefits Survey. (2021, Nov 10). KFF. https://www.kff.org/health-costs/report/2021-employer-health-benefits-survey/
2. Hempstead, K. (2021, Jun 28). Marketplace Pulse: Cost-Sharing in the Marketplace, 2021. Robert Wood Johnsons Foundation. https://www.rwjf.org/en/library/research/2021/06/marketplace-pulse-cost-sharing-in-the-marketplace-2021.html
3. Brennan, N., Fuglesten Biniek, J., & Hargraves, J. (2020, Feb 13). “Prices Drove Spending Growth: Trends In Employer-Sponsored Insurance Costs, 2014-2018”, Health Affairs Blog. DOI: 10.1377/hblog20200212.537849
4. Hamel, L., Lopes, L., Kirzinger, A., Sparks, G., Kearney, A., Stokes, M., & Brodie, M. (2022, Oct 20). 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/
5. Cubanski, J., Neuman, T., & Freed, M. (2022, Sep 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/

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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. Starting in 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. Given this requirement has been known since April 2022, this year’s report card will grade states on if they offer standardized plan options. 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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