In February, Humana agreed to pay a $500,000 fine for lack of cooperation in an investigation. The fine was included in a consent order. This investigation concerned charges that Humana had discriminated against people living with HIV.
This consent order did not address the merits of the discrimination charge. As part of the order, Humana agreed to “ensure that it does not by effect or design treat those living with HIV/AIDS less favorably than any other condition.”
In 2014, The AIDS Institute and The National Health Law Program filed a discrimination complaint with the Office for Civil Rights at the U.S. Department of Health and Human Services. The complaint charged that Humana and other insurers had placed HIV medications on the medication tier with the greatest expense to the consumer. The Federal Office for Civil Rights then notified the Florida Office of Insurance Regulation (FOIR) of this complaint. FOIR then began its own investigation leading to this Consent Order.
The charges in this case relate to a type of discrimination, “Marketplace Discrimination.” It occurs when health insurance practices discourage people with expensive-to-treat medical conditions from purchasing health insurance. As discouraged people tend to be invisible, its effects are impossible to measure. For example, health insurers categorize medications into tiers, based on expense to the customer.
Marketplace discrimination occurs on those occasions when an insurer clusters all or most of the medications to treat a disease on the most expensive tier. According to Michael Ruppal of The AIDS Institute, marketplace discrimination extends to other diseases such as Hepatitis B and C.
This understanding of marketplace discrimination is consistent with the business model of health insurance. Cliff Eserman of Incompas Financial described this business model as “spreading the risk over a bunch of people, just not yourself.” Ruppal argued that if Health Insurance Companies spread their risk among customers with multiple needs, they could minimize risk. Instead, certain companies have policies that discourage people with expensive-to-treat medical conditions from purchasing their plans.
In practice, however, other factors come into play. According to Eserman, Health insurers label the ratio of benefits-paid-out to income-received as the “Usury Ratio.” Eserman reported that health insurers strive for a Usury Ratio of 80 percent. The remaining 20 percent has to cover wages, salaries, overhead, and profits. This creates an incentive to minimize benefits-paid-out through excluding more “costly” patients.
Before the Affordable Care Act, private insurance could refuse to sell insurance to people with expensive-to-treat medical conditions. Now, marketplace discrimination drives them to less discriminatory insurers. This would concentrate risk among those non-discriminating insurers, driving up their costs. Health insurers engaging in marketplace discrimination discriminate against customers and engage in unfair business competition.
Ruppal argues that marketplace discrimination also precludes effective cost containment. Individuals lack the purchasing power to negotiate costs with pharmaceutical companies. Health insurers, however, could use their group purchasing power to negotiate costs with pharmaceutical companies.
In marketplace discrimination, insurers merely pass on the high cost of medications to patients. Challenging marketplace discrimination puts pressure on health insurance companies to negotiate costs with pharmaceutical companies. This could drive down the prices of medications.
“We want the Affordable Care Act (ACA) to work as intended, and we want it to work for people living with HIV/AIDS and others with chronic health conditions,” said Ruppal. “But shifting all the cost of medications to the patients is not only blatant discrimination, but it also leads to poorer health outcomes, since beneficiaries will not be able to afford and access their life-saving medications.”