One key feature of the Affordable Care Act (ACA) that has transformed access to health insurance is the prohibition on discrimination based on health status for those buying coverage on their own or through a small employer. Prior to the ACA, states had varying degrees of protection for individuals with pre-existing conditions, but the patchwork of protections left tens of millions of individuals shut out of coverage altogether, or offered coverage that was too costly or excluded crucial benefits. The ACA established a federal floor of protections that ensure access to coverage regardless of health status, and require fair premiums and comprehensive benefits, even for those with pre-existing health conditions.

A significant piece of the comprehensive set of non-discrimination provisions in the ACA is in the Essential Health Benefits requirement. Plans must provide coverage for a minimum set of benefits and cannot employ a benefit design, including cost-sharing, that would discriminate against a set of individuals based on health status, gender, race, or age, as well as other factors.

What do federal rules say about discrimination in benefit design?

Federal rules implementing the Essential Health Benefits requirement have provided some examples of benefit designs and cost sharing that may be considered discriminatory:

• Age limited benefits where there is no medical reason to do so. For example, covering hearing aids only for those under the age of 6;
• Refusal to cover a single-tablet drug regimen or extended release product that is just as effective as a multi-tablet regimen, without an appropriate medical reason to do so; or
• Placing most or all drugs that treat a specific condition on the highest cost formulary tier.

However, federal rules stress that insurers are expected to use reasonable medical management, which would allow limits on access to services and treatments based on medical necessity and clinical guidelines. Furthermore, federal rules note that “a discrimination determination is often dependent on the specific facts and circumstances,” meaning even these few examples, as clear as they may seem, indicate only potential discrimination that warrants a closer look by regulators.

How are these rules being enforced?

As with other ACA insurance standards, states have primary responsibility to enforce the rules, except in a handful of states where CMS has direct enforcement authority. But applying these rules, particularly in an up-front review of plan benefits prior to being available to consumers, is no easy task. Federal regulators have said that plans offered in federally facilitated marketplaces are subject to an “outlier analysis” that reviews plan formularies to see if an unusually high number of drugs are subject to prior authorization or step therapy, typical medical management techniques.

To date, there has been one high profile case of discrimination that would later become one of the few examples of discrimination outlined in federal rules. In May 2014, the AIDS Institute and the National Health Law Program jointly filed a complaint with the HHS Office of Civil Rights (OCR) alleging that four Florida insurers discriminated against HIV/AIDS patients by placing all of the covered retroviral drugs, including generics, on their highest and most expensive cost-sharing tier. OCR provided a copy of the complaint to the Florida Office of Insurance Regulation (FOIR) and FOIR settled with 3 of the 4 insurers to modify their plans to address the discriminatory practices. The complaint with OCR is still pending.

Other states have taken action, as well. For example, Montana’s insurance commissioner, in responding to a complaint from the National Multiple Sclerosis Society regarding discriminatory cost-sharing for specialty tier drugs, used her form review authority to require insurers to offer at least one plan with co-pays for prescription drugs.

However, enforcing these rules is complicated. Besides the few examples of potential discriminatory benefit design and cost sharing to guide enforcement, there is considerable flexibility afforded insurers to use reasonable medical management. That’s because medical management – reviewing benefits for medical necessity and accordance with clinical guidelines for appropriateness – is one of the few tools insurers have to control costs in a post-ACA world where insurers must take all applicants for coverage, regardless of health status. Medical management may be applied appropriately, to better manage care and control costs, or it may be applied in a discriminatory manner, for example, to require step therapy only for drugs that treat certain high cost individuals such as those with HIV/AIDS or multiple sclerosis. Unfortunately, there is no clear bright line between the two that helps regulators or consumer advocates know when medical management crosses from “reasonable” to “discriminatory.”

Looking ahead

Any day now, we expect to see a final rule implementing Section 1557 of the ACA, another significant non-discrimination provision that bars discrimination in federal health programs based on race, color, national origin, sex, age or disability. The reach of the Section 1557 protection will be broader than the EHB-based protections; it is expected to capture not just individual and small employer plans but also large employer plans and potentially self-insured plans, as long as they receive federal health-related funding in some manner. However, it remains to be seen if this critical protection will be any easier to enforce than the EHB non-discrimination rules.