Kaiser’s Bid for $500 Cap on Drug Coverage Rejected

California regulators have rejected a request by Kaiser Permanente, the state’s largest HMO, to set limits as low as $500 on coverage for prescription drugs in some insurance policies.

Daniel Zingale, director of the California Department of Managed Health Care, said he was deeply troubled by Kaiser’s proposal because it could have denied patients access to lifesaving drugs.

Zingale said his agency is conscious of the growing cost of prescription drugs but he added that cost-cutting efforts must be designed so they don’t endanger people.

“A person living with HIV faces drug bills of $15,000 per year to stay alive,” Zingale wrote in a letter Wednesday to Kaiser Chairman and Chief Executive George Halvorson.

“The Kaiser proposal could force many people with HIV, under the impression that their health-care investment covers lifesaving drugs, to choose between food and medication,” Zingale wrote.

“No one with heart disease, cancer, diabetes or HIV should be denied lifesaving drugs.”

Kaiser spokesman Matthew Schiffgens said the health maintenance organization had withdrawn its request on Tuesday, a day before Zingale sent his letter rejecting it. Even so, Schiffgens said, the insurer views drug caps as reasonable, given the current realities of medical economics.

“We think that these are useful and responsive tools for balancing the rapidly escalating cost of pharmaceuticals and the imperative to keep insurance premiums affordable for California’s health-care consumers,” Schiffgens said. “It’s clearly been demonstrated that when health insurance premiums increase, consumers begin to decide that they can’t afford coverage.”

Under Kaiser’s proposal, the caps would have applied to some members of Kaiser’s individual and small-group policies.

California law allows insurers to sell individual policies that include no drug benefit at all. But once a plan includes any prescription coverage, certain minimum standards apply, such as mandatory coverage of diabetes drugs, contraceptives and pain management medications.

Zingale’s action is just the latest in his agency’s battle with California HMOs over coverage for prescription drugs. In January, a judge in Sacramento ruled that the agency could not force Blue Shield of California to provide a weight-loss drug to an obese member. In July 2001, another judge said the state could not require Kaiser Permanente to cover Viagra or other drugs to remedy sexual dysfunction.

Those court losses prompted the Legislature to approve a bill this year that gives Zingale’s agency explicit authority to regulate prescription drug benefits offered by HMOs. Gov. Gray Davis signed the bill, despite opposition from Kaiser and the insurance industry.

Nearly all insurers place dollar limits on drug spending for senior citizens in Medicare HMOs, which aren’t regulated by Zingale’s office. But experience has shown that patients with chronic conditions quickly use up their benefits and then face thousands of dollars in out-of-pocket expenses.

Zingale said his agency will soon begin a study to determine when caps are appropriate and how low they should be set. Zingale’s predecessors allowed drug caps as low as $1,000 for some Kaiser policies, but he plans to re-evaluate them with his new legislative authority.

Kaiser, which insures 6.3 million Californians, said it will continue trying to make drug coverage affordable and accessible. “Affordability is a very important issue,” Schiffgens said.