Copay Accumulator 101

Generic copay accumulator programs exploit copay assistance by accepting the copay assistance for the cost of the medication without counting the third-party contribution to the individual’s deductible or annual out-of-pocket limit. For example, if a patient’s cost sharing for a medication is $100 and the copay assistance covers $90 and the patient pays $10, only the $10 will count towards the patient’s deductible and annual out-of-pocket limit.  
Copay accumulator programs allow health insurers to take the benefit of the manufacturer assistance rather than passing it on to consumers. These programs are harmful to patients because they deprive them of the value of the copay assistance. As a result of this deprivation, patients will ultimately be required to pay more out of pocket for their healthcare costs, and it will take them longer to reach their annual deductible and out-of-pocket limits, than if the assistance initially counted toward the patient’s copay requirement.
Additionally, while on the out-set copay accumulator programs seem beneficial for employers that pay for health insurance, these programs can result in increased costs and anxiety for employees. Because copay assistance is limited, when employees run out of copay assistance, they are left with hefty bills at the counter for their medications. Abrupt financial charges can cause employees to experience increased anxiety and stress and result in medication non-adherence. Non-adherence to medication treatment is costly for employers and results in higher healthcare costs in the long-term. Thus, while copay accumulators may be enticing in the short-term for employers, in the long-term, they cost more than they save.
A more complex version of copay accumulators is a copay maximizer program. Under a copay maximizer program, the health plan determines the copay based on the maximum amount of manufacturer copay assistance. Once the health plan determines the maximum amount of copay assistance available for one year from the manufacturer, it divides that amount by 12 to determine the monthly patient copay. For example, if the maximum manufacturer copay assistance available for one year is $12,000 the patient copay is at least $1,000 per month to capitalize on the copay assistance.
$12,000 (maximum manufacturer assistance) ÷ 12 (months in plan year) = $1,000 (minimum patient copay).
Under this approach, the health plan receives the entire possible amount of copay assistance, but like the basic copay accumulator program, this copay assistance does not count towards the individual’s deductible or annual out-of-pocket limit.
While maximizers may seem beneficial for patients initially, as they often have lower copays, maximizer programs result in disingenuous copayment requirements not based on the list price or net price of the medication. In addition, the use of maximizer programs has also led to some health plans adopting a more aggressive definition of essential health benefits in order to maximize the patient's copay assistance. 
Health plans have been constantly looking for ways to exploit patients’ copay assistance to benefit plans rather than patients. Recently, they have found a way to target patients who need certain specialty medications by classifying select specialty medications as non-essential health benefits (non-EHB).
This non-EHB classification is important because under the Patient Protection and Affordable Care Act (ACA) individual and small group health plans are required to cover all 10 EHB listed in the ACA. Meanwhile, large group and employer plans are not required to provide coverage of EHBs; however, if they do, they must comply with the ACA’s EHB coverage requirements. One of the ACA’s 10 EHB’s is prescription drugs. Despite prescription drugs being an enumerated EHB, some health plans have decided that specialty drugs are not considered a prescription drug, thus the plans can carve out and exclude certain specialty drugs from the plan’s standard coverage requirements. Health plan schemes that carve certain specialty medications out of the prescription medication EHB are harmful to patients and inconsistent with the law.
What Are Non-Essential Health Benefit Schemes?
Non-EHB schemes have been described as “a non-essential health benefits copay assistance solution” or as a “copay offset program from specialty medication.” Under these schemes, programs place specialty medications on a specific non-EHB drug list. For plan beneficiaries that enroll in these programs, their drugs are available for a $0 copay. On the back end, once the patient is enrolled in the program, the program collects the maximum amount of copay assistance from the drug manufacturer and does not count that copay assistance toward the patient’s deductible or maximum out-of-pocket limit. This type of program is typically referred to as a copay maximizer.
However, if the enrollee does not sign up, the enrollee is responsible for a much higher coinsurance between 30% and 50%, depending on the plan's program. In addition, this coinsurance does not count towards the patient’s deductible or the annual maximum out-of-pocket limit as required by the ACA. Instead, the plan enrollees are responsible for that coinsurance for the entirety of the plan year, unless they enroll in these special non-EHB programs. This practice could result in patients paying more than the permissible annual out-of-pocket limits under the ACA, and the worst part is that plans are alleging that this is legal. 
These programs have argued that they are permitted to charge plan enrollees more than the ACA maximum out-of-pocket limit because the specialty drugs on their list are “covered” but not EHBs. Health insurers, PBMs, and their agents use two arguments to justify non-EHB schemes. First, they may claim that specialty medications are not one of the ten categories of EHBs. That is, somehow specialty medications are not covered by the prescription medication EHB. Second, they may argue that an insurer is only required to cover the same number of drugs within a class and category as the state’s benchmark health plan. Therefore, any additional medications that a plan covers within those classes and categories are not considered an EHB and not subject to the ACA’s out-of-pocket maximums.
Why Do Non-Essential Health Benefit Schemes Violate the Patient Protection and Affordable Care Act (ACA)?
Non-EHB schemes violate the ACA and its implementing regulations because specialty medications are prescription drugs and patient contributions for EHBs must count towards their annual out of pocket limits.
1. Specialty Medications are an ACA Essential Health Benefit -- A Prescription Drug.
  Prescription drugs are one of the ten EHB categories listed in the ACA. While the ACA does not define “prescription drugs,” it does refer to prescription drugs broadly as FDA-approved drugs Specialty medications are FDA-approved drugs. Further, while plans may adopt their own definition of EHBs, their definition must be consistent with the Department of Health and Human Services (HHS) guidelines. Thus far, HHS has only stated plans may exclude from coverage a name-brand prescription drug when the plan offers a generic alternative. Thus, plans that are broadly categorizing specialty medications as non-EHBs, irrespective of the drugs’ generic availability, are using an unauthorized definition of prescription drugs.
2. Non-EHB Schemes Violate the ACA's Cost-Sharing Requirements
  Under the ACA, all EHBs, including prescription drugs, are subject to the annual limits on cost-sharing, unless an exception exists. Cost-sharing includes deductibles, coinsurance, copayments, and similar charges. In addition, HHS has provided that if a patient pays for and receives a prescription medication not covered under the general plan, plans must consider this medication an EHB and count the patient’s payments for the medication toward the plan’s annual limit on cost-sharing. Thus, programs that prohibit specialty medications -- that a patient receives a prescription for and pays for -- from counting towards their annual limits are not in compliance with the ACA’s cost-sharing requirements.
Non-EHB Schemes Are Bad for Patients
Non-EHB schemes are harmful to patients. These program place patients in an unfair predicament in which they must choose between paying a higher out-of-pocket cost for their medication or entering into a copay maximizer program in which the value of their copay assistance is conveyed to the health plan without counting toward the patient’s deductible. Although copay maximizer programs may initially be appealing to patients as they will have no up-front cost for prescriptions, these programs hurt patients in the long run, as patients are still required to meet their annual deductible but without the cost of the prescription medication contributing to that annual amount.
Copay maximizers can also perpetuate health disparities among minority populations. In 2021, a National Hemophilia Foundation survey found that 65 percent of respondents would face difficulties in accessing their treatments if copay assistance programs were not counted toward their out-of-pocket expenses. This study also found that one-third of individuals who were unable to afford their treatments when the copay assistance ran out were people of color. Maximizer programs contribute to the perpetuation of healthcare disparities as patients might be able to obtain some of their medications but be unable to afford other medications or necessary supplemental care due to remaining high deductibles.
Resources
Aimed Alliance -- Non-EHB Fact Sheet: How a Loophole in the ACA Can Impact Access to Your Necessary Treatments
On August 16, 2004, the Internal Revenue Services (IRS) issued Notice 2004-50 (IRS Notice), a bulletin that contained a set of questions and answers on health savings accounts (HSAs) and high-deductible health plans (HDHPs).] In that document, question 9 or “Q-9” asked “may an individual who is covered by an HDHP and also has a discount card that enables the user to obtain discounts for health care services or products, contribute to an HSA?” The IRS provided the following answer:
A-9. Yes. Discount cards that entitle holders to obtain discounts for health care services or products at managed care market rates will not disqualify an individual from being an eligible individual for HSA purposes if the individual is required to pay the costs of the health care (taking into account the discount) until the deductible of the HDHP is satisfied.
The IRS notice has recently been interpreted to mean that individuals who are enrolled in an HSA alongside an HDHP may only use copay assistance if that assistance does not count toward the annual deductible (i.e., a copay accumulator program).
Why Is the IRS’s Interpretation Important?
In 2020, the Department of Health and Human Services relied on the IRS notice and revoked protections that prevented exchange plans and employer-sponsored plans from using copay accumulator programs if a patient was prescribed a brand medication and no generic equivalent was available. States are also beginning to adopt this interpretation as they begin to pass legislation limiting the use of copay accumulator programs.
However, the IRS interpretation is flawed and should not act as a barrier to copay accumulator reform for the following reasons:
- The IRS notice is not legally binding. The IRS notice is a guidance document that did not go through rulemaking requirements, such as notice and comment periods. Thus, the notice is persuasive at most, and federal agencies are not bound by the IRS interpretation.
- IRS’s interpretation is wrong. The IRS notice conflates discount cards with copay assistance. Copay assistance is distinguishable because copay assistance is a finite amount available and was not in existence when IRS created the 2004 notice.
- IRS’s notice is inconsistent with the HSA statute. The HSA statute provides an enumerated list of items that may disqualify an individual from contributing to an HSA account. The HSA statute provides that an individual is ineligible if the individual (1) doesn’t have a high-deductible health plan; (2) is covered by another plan; (3) over 65; and (4) a dependent on someone else’s federal tax form. The statute does not address the use of copay assistance or even a discount card as a bar to using an HSA account.
Resources
Aimed Alliance -- IRS's 2004 Notice Should Not Prevent Copay Accumulator Reform (2021)
Internal Revenue Bulletin: 2004-33 | Internal Revenue Service (irs.gov)
FAQ on NBPP 2020.
2021 NBPP
When a health plan partners with an alternative funding program, the health plan defines all specialty medications as a non-essential health benefits (non-EHB).8 By defining specialty medications as a non-EHB, health plans inform enrollees that they must either enroll with the alternative funding program or be responsible for 100 percent of the cost of the medication. Because this medication is defined as a non-EHB, any cost paid for the medication by or on behalf of the enrollee will not count towards their deductible or annual limit on cost-sharing. Given this coercive program design, plan enrollees are essentially required to enroll with the alternative funding program.
Once enrolled with the alternative funding program, the health plan automatically denies coverage for the enrollee’s prescription medication. The alternative funding program then steps in and obtains the enrollee’s personal information such as household size and annual income to determine the type of third-party financial assistance the plan enrollee may be eligible for. Unlike typical non-EHB programs, which primarily enroll plan enrollees in manufacturer copay assistance programs, alternative funding programs determine whether enrollees are eligible for manufacturer copay assistance programs, charitable assistance programs, and international importation programs.
If an individual is eligible for a manufacturer copay assistance program, the health plan will inflate the cost of the prescription drug to the maximum amount of manufacturer copay assistance available for the year. If the enrollee is eligible for a different program such as international importation, then enrollee will receive their medication through that source. However, if the enrollee is not eligible for any part of the alternative funding program, then the prescription will be sent back to the health plan for coverage and the medication will be covered like a regular pharmacy benefit.
Resources
Aimed Alliance: Alternative Funding Programs
Are you a patient who has experienced difficulty accessing your medication because your health plan has a copay accumulator program? Would you like to be part of advocacy efforts to help eliminate accumulator programs and ensure patients benefit from copay assistance?
Email us at policy@aimedalliance.org.
Frequently Asked Questions
1. Is there a way to know whether the plan has an accumulator program before signing up?
Yes! Consumers should read a plan’s coverage document and summary of benefits very carefully to determine whether the plan they are considering uses a copay accumulator program. Plan language regarding copay accumulators is often in fine print; therefore, consumers should look out for language that says third party assistance will not count towards their deductible or annual out-of-pocket limit. Consumers shopping for health plans on the Health Insurance Marketplace should review the AIDS Institute 2022 Report, which highlights the individual market health plans across all states and the District of Columbia that have adopted a copay accumulator program.
2. Am I able to see information on whether my current health plan uses a copay accumulator program?
Yes! Consumers should check their plan’s coverage document and summary of benefits to determine whether their health plan uses a copay accumulator program. Consumers should look for any plan language related to copay assistance and meeting the plan’s deductible and annual out-of-pocket limit.
3. Can insurance plans switch to accumulators in the middle of the plan year without giving you notice?
While a health plan can adopt a copay accumulator program mid-year, they must provide beneficiaries with notice of the change. Under the final 2020 Notice of Benefit and Payment Parameters, individual, small group and large group plans are required to give beneficiaries reasonable notice of any mid-year changes in plan benefits, such as the removal of a drug from the formulary or placing a drug on a higher tier.
4. What is the impact of copay accumulators on patients?
Copay accumulators have a negative effect on consumers financially. When a plan adopts a copay accumulator program, plan beneficiaries will be forced to spend more money out of pocket to meet their deductible and annual out-of-pocket limit. In fact, a 2021 study found that 60 percent of insurers strongly agree that copay accumulator programs shift additional costs to patients. Further, these programs may even influence where an individual chooses to work if their employer-sponsored health plans have copay accumulators that ultimately lead to employees facing higher out-of-pocket costs. For example, a 2018 study found that 56 percent of U.S. adults with employer-sponsored health plans consider their health plan's coverage a key factor in deciding whether they would stay at their current job.
5. How can I persuade my employer that a copay accumulator program is bad?
Employees with complex health conditions often depend on copay assistance to access their medically necessary treatments. However, copay assistance is not a bottomless well. Employees can only receive a finite amount of assistance each year. Once copay assistance runs out, many of these employees can no longer afford their medications and, in many instances, there are no generic alternatives they can turn to. This can place employees at risk for medication adherence issues, such as skipping refills, rationing medications, or abandoning treatment all together. Employees who do not stick with their treatment plans can face disease progression or relapse, potentially leading to increased healthcare utilization from additional doctor visits and hospitalizations. Adverse health consequences and increased financial strain add stress and anxiety to the lives of people who are already vulnerable. For employers, this means employees could experience higher absenteeism, increased stress, and reduced productivity.
Employers and human resources professionals should remember they are not required to adopt a copay accumulator program. Employers can negotiate with their health insurers and choose not to adopt a copay accumulator or maximizer program because of the harms these programs pose to employees who need this assistance to receive their medically necessary treatments.
For more information on why copay accumulator plans are bad for employers, read Aimed Alliance’s Fact Sheet: Copay Accumulator Programs: What Employers Need to Know or watch Aimed Alliance’s Employer focused webinars on (1) Copay Accumulators: Striking a Balance Between Promoting a Healthy Workforce & Managing Costs; and (2) Copay Accumulator Program for Employers: A Legal And Regulatory Update, Data Trends and Patient Spotlight.
6. Can Medicare beneficiaries use copay assistance?
Medicare beneficiaries cannot use copay assistance for their Part D medications. The Federal Anti-Kickback Statute prohibits pharmaceutical manufacturers from offering payment or other forms of remuneration to a person to induce the purchase of an item or service covered under Medicare or other federal healthcare programs.
See Department of Health and Human Services, Study on Copayment Coupons for Medicare Part D Drugs (2014).
7. How do copay accumulator programs affect patients with multiple sclerosis and neurological conditions?
A 2015 survey by the National Society for Multiple Sclerosis found that 40 percent of people with multiple sclerosis (MS) rely on copay assistance to maintain access to their medications. Like many patients with chronic illnesses, patients with MS often have high annual healthcare costs that can result in significant financial hardships for patients, caregivers, and families. Thus, without copay assistance available to help meet cost-sharing requirements and annual out-of-pocket limits, patients with chronic illnesses will be forced to spend more out of pocket to meet their medical needs.
To learn more about how copay accumulators impact patients with MS, read Jordan Green’s story on Patients Rising, here.
Do you have questions about copay accumulator programs and how these programs can impact patients?
Email us at policy@aimedalliance.org to have your question added to our FAQ!
District Court Decision
Aimed Alliance and CCF, Frequently Asked Questions: Court Decision on Copay Accumulators — English + Spanish
Aimed Alliance and CCF, Copay Accumulators Are Banned: What Patients Need To Know — English + Spanish
Aimed Alliance and CCF, Copay Accumulators Are Banned: What Employers Need to Know — English + Spanish
Aimed Alliance Question and Answers on September 2023 District Court Decision
Aimed Alliance et al Amicus Brief

Aimed Alliance Webinar
Copay Accumulators 101 – Everything You Need to Know for Effective Patient Advocacy
HR.com Webinar -- Health Benefits: The Hidden Costs of "Cost-Saving" Programs
HR.com Webinar -- Essential Health Benefits, Importation, and More -- Do You Know the Risks?
Employers
Aimed Alliance -- Fact Sheet: Copay Accumulators What Employers Need to Know (2020)
Aimed Alliance -- Webinar "Striking a Healthy Balance Between Promoting a Healthy Workforce and Managing Costs." (2020)
Copay Maximizers & Alternative Funding Programs
Aimed Alliance: Alternative Funding Program Fact Sheet & Infographic
Aimed Alliance -- Non-EHB Fact Sheet: How a Loophole in the ACA Can Impact Access to Your Necessary Treatments
Drug Channels -- Copay Maximizers Are Displacing Accumulators -- But CMS Ignores How Payers Leverage Patient Support (2020)
IRS/HSA
Aimed Alliance -- IRS's 2004 Notice Should Not Prevent Copay Accumulator Reform (2021)
Internal Revenue Bulletin: 2004-33 | Internal Revenue Service (irs.gov)
FAQ on NBPP 2020.
2021 NBPP
State Advocacy
Aimed Alliance -- Fact Sheet: Why States Should Enact Copay Accumulator Reform (2020)
Federal Advocacy
Aimed Alliance -- 2023 Letter to FDA on International Importation
Aimed Alliance -- 2022 Letter to FTC
Aimed Alliance & Center for Health Law and Policy Innovation (CHLPI) -- 2021 Letter to CCIIO
2023 District Court Decision Revoking 2021 NBPP
Frequently Asked Questions: Court Decision on Copay Accumulators — English + Spanish
Copay Accumulators Are Banned: What Patients Need To Know — English + Spanish
Copay Accumulators Are Banned: What Employers Need to Know — English + Spanish

Copay Accumulator News & Updates

Upcoming: Aimed Alliance Joins Panelists for “Coffee Chat” on AFPs

Aimed Alliance Joins ERISA Comment to House Committee on Education and the Workforce