Gene therapies for rare health conditions have the potential to vastly improve or even save a health plan participant’s life, but they often come with a high price tag, sometimes extending into the millions of dollars.
In one example, a treatment for a condition called spinal muscular atrophy (SMA) costs $2 million but is designed to stop progression of the disease with one treatment. Other therapies address conditions like hemophilia A, severe sickle cell disease, retinal disorders and more.
Most self-funded health plan sponsors have relied on their stop-loss policy to cover these high-cost therapies. However, in recent years, vendors including pharmacy benefit managers (PBMs), traditional health insurers and specialty reinsurers have brought new alternative financing models to the market.
In an article in the March/April issue of Benefits Magazine, Wes Smith, FSA, CERA, MAAA, discusses the common characteristics of these new programs and offers considerations for plan sponsors to use when evaluating them. Smith is an actuary and senior vice president at Certilytics.
Smith explains that there are three common options for these financing products.
1. Stop-loss type: Plan sponsors pay a per-employee-per-month (PEPM) or per-member-per-month fee to cover specific gene therapy treatments. Just like a standard stop-loss solution, there is a deductible or threshold set, below which financial risk is retained by the plan sponsor, and above which the risk is transferred (or paid by the reinsurer).
2. Full carve-out coverage: Similar to a stop-loss type product, a plan sponsor pays a PEPM or PMPM premium for coverage. However, these programs fully transfer the financial risk associated with high-cost gene therapies, so there are no deductibles or thresholds to satisfy when a member receives treatment.
3. Payment or installment plans: In this arrangement, the plan sponsor must pay for the full cost of treatment, but it can amortize the amount over a number of years into the future.
The biggest difference between many of these new products and traditional stop-loss insurance is the supplementary features they include, Smith writes. Common offerings are:
- Care management programs to ensure the participant achieves the best clinical outcomes
- Therapy warranties and performance guarantees to help plan sponsors recover costs if treatment outcomes do not meet clinical expectations.
- Data analytics to tie together care management and therapy performance.
Smith suggests that plan sponsors seriously evaluating these options should make sure to ask lots of questions, including the following.
- Does the plan have to be a current customer?
- Are there any limits such as cost thresholds per patient per year?
- Will this solution duplicate existing coverage?
- How does the vendor help manage future cost increases?
- How are newly approved therapies evaluated for coverage and incorporated in the future? How will this affect the fees or premiums currently paid?
- What care management and member support programs are offered?
The issue of paying for these therapies is not likely to go away any time soon, Smith notes. More than 1,000 gene, cell and tissue-based therapies are in development globally, and the U.S. Food and Drug Administration expects to approve ten to 20 annually by 2025.
“The entire industry is grappling with how to cover, fund and ensure the best outcomes for these new treatments,” Smith writes. “Plan sponsors will need to continue to adapt as the environment changes.”
Kathy Bergstrom, CEBS
Senior Editor, Publications at the International Foundation of Employee Benefit Plans
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