Some NY HMOs Impose Consumer Drug Restrictions To Increase ProfitsMay 22, 2008 | Parker Waichman LLP
A report just released this weekend by state Senator Jeffrey Klein (Democrat) reveals that some New York state HMOs restrict patient access to single source drugs or brand name medications for specific ailments that do not have lower cost generic versions. The report includes a survey of the 15 HMOs with drug plans in New York state, including Aetna, Oxford Health Plans, Cigna, Health Insurance Plan of New York, Group Health Associates, and HealthNet of New York and was conducted to determine how and if companies restrict prescriptions to 20 of the most common single-source drugs. The results point to HMOs setting these restrictions to increase their bottom lines and enhance profits.
The survey confirmed that a number of restrictions are placed on consumers, such as a "medical exception," imposing quantity limits, and a “step therapy” rule. A medical exception is when a patient and physician must obtain prior permission from the insurer so that a patient can receive coverage for a prescribed medication. Medical exceptions are granted at the discretion of the insurance company. Step therapy forces patients to try one or more other medications before seeking approval for a prescribed drug. "It's a dangerous situation,” Klein said. “Clearly, when a doctor prescribes a specific medication for a patient and they know that drugs works for a patient, they shouldn't be forced to use a generic drug or cheaper alternative that may not work," he added.
The New York Health Plan Association, representing almost all of the cited HMOs, dismissed the research as "simplistic and broad-brushed hyperbole that demonizes the HMO industry." Leslie Moran, a spokesperson for the trade group, said, "If there weren't control mechanisms, we wouldn't have prescription coverage offered and people would be paying far more—full cost—instead of a copayment.”
Meanwhile, earlier this year State Attorney General Andrew Cuomo launched a lawsuit and an industry-wide probe investigating health care reimbursements. Cuomo believes some companies have been underpaying customers for a decade and may have manipulated data to cheat consumers. In one investigation, two UnitedHealthGroup subsidiaries—United HealthCare Insurance Co. of New York Inc. and United Healthcare of New York Inc.—were found to have manipulated data to severely under-reimburse customers, to the tune of millions. Cuomo said investigators found UnitedHealthGroup and its subsidiaries lied about data and manipulated numbers.
Cuomo plans to file a civil lawsuit to include three other subsidiaries of UnitedHealthGroup and subpoenaed information from 16 insurers, including Aetna, CIGNA, and Empire BlueCross BlueShield. Cuomo's office said they found Ingenix’s reimbursement database—owned by UnitedHealthGroup and used by most major insurers—used data resulting in smaller payouts.
Reimbursement is based on "reasonable and customary" geographic pricing; however, Cuomo said that while the United companies using the data knew customary charges for a doctor's visit might average $200, reimbursement was based on a $77 rate; therefore, customers receiving 80 percent reimbursements would get about $61. "Based on the findings in this investigation," Consumers Union program director Chuck Bell said, "it appears that United Health failed to fulfill the promises it made to cover a fair portion of medical expenses and consumers were stuck with the bill.