Before COVID-19 seized the nation’s attention early this year, state policy efforts centered on price transparency for prescription drugs, coverage expansion in the individual market, and increasing Medicaid flexibilities and eligibility requirements. As many state policymakers return later this summer or in special sessions, lawmakers are expected to shift focus to cost sharing, access to quality care, patient out-of-pocket (OOP) costs, and controlling a likely rise in Medicaid spending.

Drug Pricing

State legislatures have prioritized drug price transparency in recent years by focusing on manufacturer reporting and pharmacy benefit manager (PBM) practices. In the short term, the pandemic may turn legislative interests away from prescription drug pricing as policymakers pivot to address more imminent issues, including COVID-19 testing and treatment costs.

In 2019, more than two-thirds of states enacted more than 50 laws addressing drug pricing, affordability, and access. Those laws represent just a fraction of the bills states have considered for drug pricing policy. Between sessions in 2019 and 2020, lawmakers introduced more than 110 drug price reporting bills, including legislation requiring manufacturers to notify states about price increases above a certain threshold. Legislators in more than 35 states proposed over 150 bills concerning PBMs, including removing pharmacist gag clauses and increasing PBM fund retention transparency.

State policymakers may prioritize the costs of COVID-19 treatment options and patient OOP costs for commercial payers in the second half of 2020 legislative or special sessions. Since 2017, 9 states have passed prescription drug pricing transparency laws, requiring manufacturers to report drug price increases and launch prices. Legislative efforts could include transparency efforts for any potential COVID-19 treatment options as well as eliminating cost sharing or reducing OOP costs for these drugs following the public health emergency.

As insurance coverage gaps grow post-pandemic, the need for manufacturer-sponsored patient support programs will likely increase.  State lawmakers could seek legislation requiring manufacturer coupons and copay assistance for prescription drugs to count toward patient deductibles and OOP limits when no generic equivalent exists.

Coverage and Access

While the individual market in most states has remained stable in recent years, the COVID-19 pandemic could create new challenges and opportunities.  For individual market plans, this includes changes in enrollment, utilization, plan spending, and patient access.

The Trump administration has emphasized expanding access to alternatives to individual market coverage, including short-term limited-duration insurance (STLDI) and association health plans.  Many states have taken up legislation in recent years to extend these STLDI flexibilities.

States have also used tools such as Section 1332 waivers to offer populations more affordable coverage by expanding exchanges, offering tax credits to broader demographics, or developing reinsurance programs. To date, 13 states have been approved for 1332 waivers.

The sharp rise in unemployment due to COVID-19 has shifted many people from employer-sponsored coverage and into the individual market or Medicaid. Insurance coverage and access to quality, affordable treatment and vaccine options are anticipated priorities for state lawmakers. Changes to telehealth coverage and reimbursement in Medicare—which became effective in early 2020—and COVID-19 telehealth flexibilities offered in state Medicaid programs and the commercial market could influence policymakers to create lasting policy and regulatory changes.

Lawmakers may also prioritize lengthening exchange enrollment or providing other state-based assistance for those seeking individual market insurance, in response to the shift from employer-sponsored coverage caused by pandemic-related unemployment.

Medicaid

State Medicaid programs may experience financial strain due to increased enrollment, COVID-19 testing and treatment, and lower state tax revenues as a result of economic shutdowns.

Prior to COVID-19, state legislatures heavily debated addition of work requirements under Section 1115 waivers as a condition for Medicaid eligibility. While approved in 9 states, these waivers—requiring proof of employment, job search, or job training—have been halted by lawsuits in 6 states and have not yet been implemented in the other 3.  In January, the Centers for Medicare and Medicaid Services (CMS) announced a new 1115 waiver option, the Healthy Adult Opportunity (HAO), which allows states to implement flexibilities such as capped funding structures and closed drug formularies. To date, only Oklahoma has submitted a HAO waiver application to the CMS.

As legislative sessions resume, states are facing significant Medicaid financial pressure and likely budget deficits due to rising enrollment, costs of COVID-19 testing and treatment, and lower tax revenues due to economic shutdowns. Many of the flexibilities and enhanced funding offered by the federal government will end with the public health emergency, leaving states to determine how to fund Medicaid budgets and increased utilization. Policymakers could seek to control rising costs by looking to drug benefit management, implementation of managed care, or other benefit changes as a place to save money while navigating potential enrollment surges.

Conclusion

Due to the unanticipated enrollment changes and shifts in types of insured coverage, state policy makers will likely prioritize healthcare issues stemming from COVID-19 as they strive to rectify state budgets in the coming months.

Stay ahead of these emerging state policy trends and follow COVID-19 developments with Avalere’s State Policy 360, monitoring all 50 states and DC by tracking major trends in Medicaid waivers, drug benefit management, prescription drug pricing, telehealth, and individual market changes.

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