National Health Insurance Co. to pay over $1.9M for prescription drug practices

California Insurance Commissioner Ricardo Lara announced a major settlement with National Health Insurance Company (National Health).

The California Department of Insurance had alleged that, since 2015, the company continuously violated California law by failing to post a list online of covered prescription drugs (known as a formulary) and incorrectly placing certain drugs into higher cost tiers, denying consumers information needed to make critical care and coverage decisions.

The company has agreed to pay the Department a $1.995 million penalty for prescription drug and patient information practices that the Department contended were unfair and discriminatory.

“This settlement is a victory for consumers, and a notice to other insurance companies that we will continue to uphold California law, to protect consumers, and to ensure companies are conducting business in a fair and transparent manner,” said Commissioner Lara. “California law is clear. Insurance companies cannot design drug formularies that discriminate against consumers with serious medical conditions. Patients should have a correct, up-to-date list of what drugs are covered, and have the freedom to make medical decisions based on accurate information.”

The Department’s ongoing regulatory review found National Health committed a number of violations of California law in its small and large employer group coverage. When National Health did finally post its drug formulary online in 2019, it was not the current list of prescriptions drugs covered, but an outdated list of previously covered drugs.

The Department alleged this practice discouraged the enrollment of individuals with certain health conditions. The incorrect formulary gave the appearance of reduced benefits for consumers with particular conditions, potentially dissuading policyholders from submitting claims or persuading those who were looking for a policy to seek coverage elsewhere.

Another example of National Health apparently diminishing benefits for consumers with particular conditions was when, in its July 1, 2019 formulary, it placed almost all immunosuppressant drugs for transplant rejection as well as all covered drugs that the Department examined for multiple sclerosis, HIV, hepatitis B, and hepatitis C in the highest cost-sharing tier, regardless of generic or brand name status. By placing all of these drugs into the same tier, chronically ill individuals may have been discouraged from enrolling in coverage due to prohibitive costs, and this may have further resulted in lower adherence to a prescription drug treatment regimen.

Additionally, the Department found National Health’s formulary illegally required prior authorization for all HIV drugs. Prior authorization allows the insurer to determine whether a drug is medically necessary before it will be covered, rather than leaving the determination solely to the consumer’s doctor. The requirement to obtain prior authorization can result in delay and denial of coverage of a drug for a consumer whose doctor determined a prescribed drug was medically necessary.

Lastly, the Department found that National Health placed many preventive drugs, contraceptives, and other pharmacy items that must be covered without cost into tiers subject to patient cost-sharing.

In California, health insurance companies cannot offer coverage that unreasonably discriminates against chronically ill individuals, and must provide coverage that ensures affordability of outpatient prescription drugs. California law also requires that copayments, coinsurance, and other patient cost-sharing for outpatient prescription drugs be reasonable so that patients can access medically necessary outpatient prescription drugs.