Dear Secretary Yellen,

Although many Americans are able to afford the out-of-pocket costs mandated by their health insurance coverage, too many cannot. They cannot afford their out-of-pocket costs (deductibles, copays, or coinsurance) in addition to their premiums. In some cases, this is not because their employer does not want to offer first-dollar, pre-deductible coverage with low or no copays, but because IRS regulations require that, to offer a Health Savings Accounts (HSA), self-insured employers must ensure that their workers pay unnecessarily high out-of-pocket costs.

We ask that the Treasury department remove a barrier to such coverage by making a slight regulatory change that would enable self and fully insured companies to continue to offer HSAs and offer first-dollar coverage of medicines with low/no copays if they so choose.

• Specifically, we ask that the IRS expand and update the preventive care safe harbor to allow pre-deductible coverage of all medications and supplies clinically proven to prevent exacerbation of the disease or the development of a secondary condition, not just “low cost” medicines.

• We also request the safe harbor be updated to include all items and services that HDHPs cover as preventive under the existing safe harbor. For example, the list identifies blood pressure monitors as preventive care when prescribed for hypertension, but not blood pressure medications unless prescribed for someone with CHF , diabetes, or coronary disease.

We want our companies to offer employees the best possible coverage for all medicines to improve the lives and wellbeing of employees and their families. Each of us signing this letter is signing on behalf of a company that would like to offer first-dollar coverage of medicines with low/no copays or else is an employee who would like their company to be able to offer such coverage.

Collectively, the companies we are affiliated with represent 2264 jobs in America.

Re-examining “Skin-in-the-game”

The reasoning for unaffordable out-of-pocket costs seems to be that health plans, Congress, and even the IRS worry that people will over-utilize medicines unless they have financial “skin-in-the-game.” However, academic research finds the opposite – that high out-of-pocket costs result in worse outcomes, ill-advised decision making, and increased patient mortality (1). For example, a recent analysis by IQVIA found that as many as four out of every five cancer patients abandoned therapeutic treatment when their out-of-pocket costs exceeded $250 (2). Conventional “skin in the game” arguments also warrant logical scrutiny: who would wish to take chemo and endure all the potential side-effects unless they had to? The same goes for insulin, or asthma inhalers, HIV/AIDS prevention, or medicines for their eyesight that require injections into their eyeballs.

It is hard to imagine that anyone would over-utilize these medicines. And there is strong evidence that first-dollar coverage would enable many more people to get appropriate care that prevents future costs and absenteeism, which is what many companies want for their employees.

The recent passage of the Inflation Reduction Act (IRA) recognized that there are many seniors on Medicare that were struggling with health costs and set a $2,000 cap on out-of-pocket prescription drug costs. We applaud and share the Biden Administration’s goal to reform insurance by enacting legislation that similarly caps out-of-pocket prescription drug costs at $2,000 per year in the commercial market, particularly for the 165 million Americans with employer-sponsored insurance. We hope that will be enacted soon.

We recognize that there are concerns that capping out-of-pocket costs will increase premiums due to overutilization, but using high out-of-pocket costs to steer patients results in many patients foregoing appropriate care. Some people are functionally uninsured despite being told that they are covered. We need to address our concerns of over-utilization differently. Over-utilization of healthcare can and should be managed through proper prescribing and pricing transparency, not by putting appropriate care out of reach with high out-of-pocket costs, violating the intent of any employer that actually cares about the well-being of their employees.

We understand HSAs’ reputation as only serving higher income employees who have the income to put towards an HSA, but what we are urging would actually benefit all employees (even those without HSAs) since it would reduce the barriers to companies offering first-dollar coverage of medicines with low/no copays.

As things stand now, in order to offer HSAs, companies are forced to opt for plans that make it harder for some workers to afford their medicines. It forces employers to impose cost sharing on employees who have unavoidable medical costs based on disease state or condition. Those medicines, by definition, improve health and prevent disease progression. The high deductible requirement prevents some from accessing the care they need, leading to higher, avoidable costs.

A better way

HSA law already appears to recognize that it’s wrong to force companies to charge deductibles and copayments for some medicines. As you know, preventive care may be covered by employers pre-deductible subject to conditions. The HSA law does not define preventive care, so in 2004 the IRS established by notice a list of preventive health services that include periodic health evaluations, prenatal and well child care, immunizations, smoking cessation and weight loss programs, and screening services.

The IRS issued a Q&A document that clarifies (in Question 27) that drugs and medications may be covered under the safe harbor when someone is at risk for developing a disease that is not readily apparent or that needs to prevent the recurrence of a disease from which the person has recovered. Examples include statins and ACE inhibitors that prevent heart attacks and strokes.

The IRS guidance notes that the safe harbor does not include any service or benefit intended to treat an existing illness, injury, or condition, including drugs or medications used to treat an existing illness, injury, or condition (such as insulin for diabetics). For many employees with chronic illnesses, the minimum deductible requirement and the inflexibility of the preventive care list has become an affordability barrier for known and unavoidable expenses.

Broadening the list of medicines considered preventative may work for some but lacks the flexibility of letting employers do even better. If the government doesn’t consider migraine medicines preventative but an employer wants to remove barriers to their employees getting effective treatments for migraines, why stand in the way of that by forcing the company to choose between offering HSAs and first-dollar coverage of migraine medicines?

Drugs represent a relatively small fraction of overall healthcare costs (~8%); the vast majority of our nation’s healthcare dollars are spent on hospitals and services which workers might incur long after they leave the company, so an HSA can offer peace of mind that some future hospitalization won’t lead to medical bankruptcy. However much an employer might wish to make medicines more available, it’s understandable that many prioritize preserving HSAs for employees who wish to plan for all their future healthcare expenses.

We’re not suggesting that all employers, plans, or government payers be mandated to cover every drug. If they don’t cover a drug, so be it. But if a plan covers a medicine, it’s simply honest to have that plan make the medicine accessible to people regardless of their income with first-dollar coverage. Whereas highly paid employees at a company can likely afford their deductibles and copayments, that’s not always true of those who earn less. So the best way for a company to offer fair and honest health insurance for all employees is to offer first-dollar coverage with low/no copays when the plan claims to cover a medicine.

If a medicine isn’t appropriate for a patient, one would trust a doctor’s medical decision making. If the doctor prescribes the wrong medicine, it’s not unreasonable to have the plan require a prior authorization and employ other utilization management tools to confirm that it’s right (ideally a real-time electronic prior authorization meant to reach the right decision, not a fax-only form meant to deter appropriate use). But when we rely on out-of-pocket costs to force patients to second-guess their physicians, the reality is that it’s low-income workers who forego treatments, including those that aren’t optional.

And so we urge you to:

1. Use your regulatory authority to instruct the IRS to update its existing guidance to expand the list of conditions and services that fall under the preventive care safe harbor and to create a process to ensure the list is regularly updated (ideally, annually). Changing pre-deductible coverage would benefit tens of millions of American workers and would not have to wait for the passage of new legislation in a highly uncertain and divided environment.

2. Support legislation that permanently fixes the law so that if an employer offers a good plan (e.g., beyond the 60% minimum actuarial value), then it can be up to the employer what to offer pre-deductible with low/no copays. In other words, liberate employers who want to offer better coverage of medicines to do so and add pressure to employers who do not offer HSAs to offer pre-deductible drug coverage as well. It’s just one more way to compete for labor, and clearly there are many Americans who would value working for a company that shares a desire for lower out-of-pocket costs.

There are many American employers who would like to offer better access to medicines than we already do. And we hope all employers will consider the merits of making medicines more accessible to employees whether they offer HSA options or not. Medicines reduce suffering and treat and prevent diseases that often otherwise require expensive and burdensome hospital care. Medicines, when properly covered, are also the most equitable aspect of healthcare; almost anyone can take a pill without missing work, but some people skip seeing their doctor or getting a procedure because they can’t take the time away. And medicines are our most cost-effective treatment because they permanently upgrade our ability to fight disease yet uniquely go generic after a patent-defined period, unlike hospitals and other healthcare services.

We urge you to please make these regulatory changes as soon as possible so that America’s employers are able to offer better coverage of medicines for their workers when they would like to. It’s not the only change we need to improve access to healthcare in America but it’s a rational one under the Treasury Department’s authority that’s worth making. You would have the strong support of American workers and many employers like us.

Sincerely,

Peter Rubin
Executive Director
No Patient Left Behind