Objectives: To examine health plan compliance with essential drug benefit regulations in California and Massachusetts and at the federal level.
Study design: Health plan formulary review and analysis.
Methods: We analyzed formularies from the 3 largest small group plans in California and Massachusetts, including each state's benchmark plan. With respect to both federal and state regulations, for each health plan, we examined whether the drug was covered, the designated patient cost sharing tier of the drug, and which conditions of reimbursement were applied to the drug.
Results: Most drugs included in state and federal mandates are covered by both benchmark and non-benchmark plans. However, health plans are not fully compliant with state and federal regulations. Significant differences among plans relate more to cost sharing and conditions of reimbursement, such as prior authorization, step edits, and quantity limits, than to drug coverage. CONCLUSIONS/POLICY IMPLICATIONS: Because health plans in California and Massachusetts are not fully compliant with state and federal mandates, they will have to adjust their formularies to meet minimum requirements. State policy makers need to balance competing aims of comprehensiveness of coverage and drug affordability. They must consider: (1) choice of benchmark plan -choice of a more generous benchmark plan implies less leverage for negotiating lower prices; and (2) breadth of state mandates which, if they exceed federal mandates, must be paid for by the states.