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How the COVID Vaccine Cost Shift Could Impact Health Plan Pricing

What does the COVID vaccine cost shift mean for employers as well as their employees? Here’s everything you need to know as the federal government shifts the cost of COVID vaccines, tests, and treatments to insurers.

Doctor putting a bandaid on a patient's arm after an injection

Since the onset of the global pandemic, the United States federal government has been a major buyer of COVID-19 tests, treatments, and vaccines to ensure equitable access to these vital resources at no cost to consumers. But in late August, the government announced that it would be concluding this practice — in effect, shifting the cost of vaccines and treatments to insurers and patients themselves.

This might set off alarm bells in your head, but don’t panic yet. Here are two points to keep in mind.

1. This was always an inevitability.

If you’ve been paying attention to the COVID vaccine rollout, this shouldn’t be a huge surprise. The Trump and Biden administrations always intended to eventually redirect the cost of vaccines and treatments from the government back to healthcare consumers. After all, the U.S. operates under a free-market healthcare system.

2. Things won’t change overnight.

That said, you shouldn’t expect any sudden changes. A spokesperson for the U.S. Department of Health and Human Services (HHS) told the Wall Street Journal that the transition could take months. Officials have suggested the federal funds for COVID vaccine purchase and distribution could run through January 2023.

That doesn’t mean the transition will be without challenges, though. For instance, how does the government plan to ensure equitable access to COVID vaccines and treatments for the roughly 30 million Americans who are uninsured? And without purchasing vaccine doses in advance, how does the U.S. government plan to disseminate boosters and new variant-specific vaccines in a timely manner? These are all queries worth answering.

There’s also the matter of how this decision could further deepen health and wealth disparities in the U.S. The pharma industry stands to earn billions of dollars in profits from the sale of COVID treatments and shots. For example, Pfizer reported $8.1 billion in international sales during Q2 for Paxlovid, an antiviral drug used to treat COVID. And in 2021 alone, pharmaceutical companies reported upwards of $79 billion in combined international sales of COVID vaccines and treatments.

All the while, millions of Americans are buried under medical debt — and this change only adds to the problem. More than likely, insurers and pharmacy benefit managers will negotiate with drug manufacturers, which will cause the cost of COVID vaccines and treatments to rise. In turn, insurers will shift the increased cost of vaccines to consumers by raising health plan premiums.

In most cases, employees won’t be impacted. For instance, the Inflation Reduction Act eliminates cost-sharing for adult vaccines covered under Part D for any employees who are Medicare beneficiaries, even if they’re still in the deductible phase of the benefit. And while workers who have insurance aren’t likely to face copays for vaccines, they could see premiums increase down the road as a result of these added expenses — exacerbating the already serious issue of unaffordable medical care.

Paytient’s Take on COVID Vaccine Costs

For the 92% of people who have health insurance in the United States, things won’t look much different when the government stops funding COVID vaccine costs. That’s because routine vaccinations are required to be 100% covered by health plans. Just like flu shots, anyone with health insurance will be able to get a COVID shot without paying a dime.

Things are a lot less certain for the uninsured. Seeing as this population is the most vulnerable, this shift poses a legitimate public health problem. Those without insurance tend to have poor health, making them more likely to end up in the hospital or suffer complications associated with COVID. This is precisely the population that needs coverage most, and the government would be wise to make funding available for uninsured people to receive free COVID vaccines.

The thing that will change is that instead of the government footing the bill, health plans will need to cover the costs of these vaccines instead. Pfizer is currently charging the U.S. government about $25 per dose of COVID vaccine. This is essentially a rounding error in the U.S., where healthcare spending exceeds $12,000 per person. Health plans will absorb these costs and barely notice the difference. The amount that will be spent by health plans for these vaccines is even less considering the poor uptake of COVID booster vaccines.

We will, however, take this opportunity to remind you that you’re probably eligible for an updated bivalent COVID booster shot. As we head into autumn and the winter, it’s not a bad idea to get one — and a flu shot while you’re at it! These newer boosters are specially formulated against the Omicron variant currently accounting for most COVID infections, and they can keep you and your loved ones healthy.

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