Saying "AIDS, heart disease, and cancer drugs promote life, not lifestyle," the California Department of Managed Health Care (DMHC) has rejected a request by Kaiser Permanente, the state's largest HMO, to set caps as low as $500 on coverage for prescription drugs in some health insurance policies.

In a letter dated Oct. 9, 2002, to Kaiser Chief Executive George C. Halvorson, DMHC Director Daniel Zingale said he is "deeply troubled" by a Kaiser proposal to limit drug coverage under some of the HMO's health plans for 2003. Although Zingale said he shares Kaiser's "deep concern about the high cost of prescription drugs and the over-utilization of lifestyle drugs," he wants a solution that will not force patients, such as those with HIV, "to choose between food and medication."

According to Kaiser spokesperson Matthew Schiffgens, the release of Zingale's letter to the press is "much ado about nothing" because Kaiser had already decided to scrap the 2003 drug cap proposal on Oct. 8, 2002, the day before Zingale sent Halvorson the rejection letter, and had communicated this fact to counsel for the DMHC. Additionally, Schiffgens says Kaiser proposed a "wide variety of caps," ranging from a low of $500 to a high of $10,000.

Despite dropping the drug cap proposal for some individual and small group health plans, Schiffgens says Kaiser will continue to explore ways to keep health insurance premiums affordable for California consumers, but that it's a "fine balancing act" to weigh increasing drug costs with rising health insurance premiums.

"No one wants to see more uninsured Californians," says Schiffgens, adding that more small employers may drop health insurance benefits altogether in the face of ever-mounting health care costs.

Schiffgens also notes that it is "legal and acceptable" that some self-insured or individual plans are not required to offer a prescription drug benefit at all, while others have high deductibles and co-payments. "A drug cap is just another tool [to reduce costs]," he says.

The problem is that small, fully insured group health plans that do offer prescription drug benefits are mandated in California to cover diabetes medications, contraceptives, and drugs prescribed for mental health conditions. In the letter to Kaiser, DMHC stated: "We believe the fact that the Governor signed laws requiring coverage of these drugs means that they must not be singled out for limitations. Indeed, a person with diabetes or with a mental health condition could quickly exhaust a $500 cap."