Constraints on Formulary Design Under the Affordable Care Act

Area of Science:

• Health policy
• Pharmaceutical economics
• Insurance regulation

Background:

• The Affordable Care Act mandates essential health benefits (EHB) for health insurance marketplace plans.
• EHB requirements influence prescription drug coverage but not cost-sharing or utilization management.
• Understanding the impact of these regulations on drug formularies is crucial for assessing healthcare access and costs.

Purpose of the Study:

• To analyze the effect of essential health benefits (EHB) requirements on prescription drug formularies in health insurance marketplace plans.
• To determine how EHB mandates influence the number of drugs covered, cost-sharing, and utilization management practices.
• To investigate the mechanisms driving changes in formularies post-EHB implementation.

Main Methods:

• Analysis of a comprehensive dataset of U.S. health insurance formularies.
• Econometric modeling to assess the impact of EHB on formulary size and drug placement.
• Comparative analysis using Medicare Advantage plan formularies and drugs not meeting EHB criteria.

Main Results:

• Mandatory coverage of one additional drug increased average formularies by 0.22 drugs (3.3%).
• Newly covered drugs are 22.3 percentage points more likely to face utilization management.
• EHB requirements also increase the likelihood of drugs being placed on higher, more expensive formulary tiers.

Conclusions:

• Essential health benefits (EHB) requirements significantly alter prescription drug formularies.
• Insurers respond to EHB by expanding formulary size and increasing utilization management for newly covered drugs.
• Findings suggest regulatory mandates, rather than consumer demand or market entry effects, drive these formulary changes.