Fixing the U.S. health care system is becoming more difficult amid the constant addition of new health models, which has prompted debates about how to regulate these models while protecting patients from high costs.
People ages 18 to 34 are among the most uninsured in the United States. The rise in non-government-provided health care coverage has primarily been through student enrollment in employer-sponsored health insurance (ESI).
ESI plans, health benefits paid for by a company, are subject to different restrictions in every state. The Employee Retirement Income Security Act of 1974 (ERISA) places federal protections on ESI to protect enrollees in these plans. ERISA sets minimum standards for the insurance plans employers provide and fosters trust between insurance holders and managers.
Without ERISA’s oversight, funds initially meant to supply employees with health care go toward malicious private sector actors seeking profits. Patients are left with less insurance money to buy medications and must forsake higher-cost treatments that could significantly reduce their quality of life.
Pharmaceutical benefit managers (PBMs), third-party administrators of drug benefits, negotiate prices with pharmaceutical companies offering the drug to the insurer’s plan. Many have criticized PBMs for prioritizing profit over patient access to affordable prescriptions.
Fraudulent practices like spread pricing allow PBMs to inflate costs and pocket revenue from consumers. The resulting out-of-pocket costs, which are often many degrees higher than they would otherwise be, fall to consumers, forcing countless people to forgo life-saving medications.
Delays in receiving medications while waiting for PBM dispensing or authorization cost patients their lives.
Gag clauses are another practice PBMs use to occlude drug price negotiations. These are contracts prohibiting drug companies from telling patients if prescription medications cost less when paid for with cash than when paid for by the patient’s insurance company or employer. In a 2016 survey of over 600 pharmacies, 39% of respondents indicated that gag clauses prevented them from informing patients of lower costs.
In 2021, the Consolidated Appropriations Act outlawed gag clauses by preventing health insurance administrators from restricting pricing information to consumers. Additionally, insurers must now share all relevant pricing data with trusted partners like business associates that invest in the insurance plans and hospital systems benefitting from the plan, as long as sharing the data complies with privacy laws.
While the Consolidated Appropriations Act theoretically curbed the influence of gag clauses and generally promoted transparency, PBM contract templates have continued to deceive and misinform health plans.
PBMs have gotten around regulatory legislation like the Consolidated Appropriations Act by filling contract templates with complex financial jargon, obscuring price transparency when insurance providers use said templates. PBMs functionally operate as competitors in the health care market and have monetary incentives to provide drugs to insurance companies at higher costs. These contract templates often include private data clauses that — though they are not legally gag clauses — effectively limit patient access to price data.
Enforcement is still a work-in-progress and is not yet effective. The Consolidated Appropriations Act requires insurers to complete an annual form attesting that they do not employ secret gag clauses. However, the legislation lacks actual enforcement provisions, saddling patients with the burden of uncovering and responding to deceptive practices.
While PBMs continue to ignore insurance law without penalty, insurance managers exploit patients and providers. The administration of health care should not fall on the shoulders of those who stand to benefit from price-gouging and reducing care quality, no matter how well-hidden the provisions enabling them might be.
