State and Federal Programs to Cap Insulin Out-of-Pocket Costs

Insulin is a lifesaving medication for people with type 1 diabetes and some people with type 2 diabetes. More than 7 million people in the United States use insulin to manage their diabetes.

Unfortunately, insulin is much more expensive in the United States than in most other countries. In addition, the price has increased dramatically since 2000, far outpacing the rate of inflation.

This article will explain the steps that some states have taken to limit insulin out-of-pocket costs for people with state-regulated health insurance (and the limitations of state laws), efforts to do the same at the federal level, and the 2021 federal program that limits insulin costs for people with certain Medicare Part D plans.

Why Is There a Need to Regulate Insulin Out-of-Pocket Costs?

There are various prescription assistance programs, prescription discount programs, and diabetes organizations and charities that can help people with diabetes afford their insulin. But historically, there have been no rules in terms of how much a health insurance plan can require a member to pay to refill their insulin prescription.

Unfortunately, as the cost of insulin has skyrocketed, so have many health plans’ co-pays and coinsurance costs for insulin.

More expensive drugs tend to be in the higher tiers of a health plan’s formulary, which is the list of drugs preferred by the health plan. This often means that the person prescribed the medication pays a percentage of the cost (coinsurance) as opposed to a flat co-pay (a set amount per prescription).

People with high-deductible health plans (HDHPs) often have to pay the full cost (after the network-negotiated discount) for any medications until they’ve met their health plan’s deductible. Depending on the plan, this could be thousands of dollars.

The Internal Revenue Service (IRS) issued guidelines in 2019 that allow HDHPs to cover the cost of insulin before the deductible is met. But they do not have to do so unless a state requires it. So most HDHPs still require members to pay full price for drugs like insulin until the deductible is met.

What Have States Done to Lower Insulin Out-of-Pocket Costs?

As of 2022, laws have been enacted to cap insulin out-of-pocket costs (cost-sharing) in 20 states and the District of Columbia. These laws were enacted in 2020 or after (Colorado’s law was the first to take effect in January 2020).

In most cases, the state laws apply to state-regulated health insurance plans, but some states also extend their insulin cap protections to people who don’t have health insurance.

However, state laws and regulations never apply to self-insured group health plans, which are instead regulated at the federal level. Nearly two-thirds of workers who have employer-sponsored health insurance are enrolled in self-insured plans.

For those workers and their families, it doesn’t matter whether they’re in a state that has capped out-of-pocket costs for insulin since the state laws and regulations don’t apply to their coverage.

But for health plans that individuals and employers purchase from an insurance company, state rules apply. The following states have implemented out-of-pocket caps on insulin for state-regulated health plans:

• Alabama: Capped at $100/month
• Colorado: Capped at $100/month, plus a provision that provides $50/month insulin to some people who aren’t helped by the $100/month cap
• Connecticut: Capped at $25/month
• Delaware: Capped at $100/month and no cost-sharing for insulin pumps
• Illinois: Capped at $100/month
• Kentucky: Capped at $30/month
• Maine: Capped at $35/month
• Maryland: Capped at $30/month (effective as of 2023)
• Minnesota: Cap varies depending on the person’s circumstances
• New Hampshire: Capped at $30/month
• New Mexico: Capped at $25/month
• New York: Capped at $100/month
• Oregon: Capped at $75/month
• Rhode Island: Capped at $40/month
• Texas: Capped at $25/month
• Utah: Capped at $30/month
• Vermont: Capped at $100/month
• Virginia: Capped at $50/month
  
• Washington: Capped at $35/month, which changed from a previous $100/month cap
• Washington, D.C.: Capped at $30/month
• West Virginia: Capped at $100/month

Numerous other states have considered or are considering similar legislation. Some states that previously imposed or considered $100 monthly caps have since switched to (or considered) caps in the range of $25 to $35 per month. The idea of capping insulin costs at affordable levels is steadily gaining traction with state lawmakers.

States may also opt to take other innovative approaches to insulin affordability. For example, although California lawmakers have not yet reached an agreement for an affordable monthly insulin co-pay cap, Gov. Gavin Newsom announced in July 2022 that the state would start to manufacture its own insulin.

Will the Federal Government Cap Out-of-Pocket Costs for Insulin?

Although state-level rules to cap out-of-pocket insulin cost-sharing are helpful for some people, they don’t help people with self-insured group plans (which is the majority of people with employer-sponsored health coverage), nor do they help people with Medicare. That’s because self-insured plans and Medicare are regulated at the federal level rather than the state level.

In the spring of 2022, the U.S. House of Representatives passed H.R. 6833, the Affordable Insulin Now Act. But the legislation had not advanced in the Senate by July 2022.

The Affordable Insulin Now Act would cap out-of-pocket insulin costs at $35 per month. It would apply nationwide, protecting people in the 30 states that haven’t yet passed legislation on this issue. It would apply to individual and group plans, including self-insured group plans. It would also apply to all Medicare Part D plans, including Medicare Advantage plans with integrated Part D benefits.

Although the Affordable Insulin Now Act had not yet been enacted as of mid-2022, there was a similar pattern in addressing surprise balance billing. Surprise balance billing is when you are charged for receiving care from an out-of-network health provider, even though the hospital or healthcare provider’s office you visited is in-network.

Patient advocates pushed for protections on surprise balance billing for years. Numerous states created their own laws, albeit without the ability to regulate self-insured plans. After several failed attempts, the federal government enacted the No Surprises Act, which protects Americans from most cases of surprise balance billing as of 2022.

Medicare Part D Senior Savings Program

Although there is no federal cap on insulin out-of-pocket costs, the Medicare Part D Senior Savings Model—which became available in 2021—offers many Medicare beneficiaries insulin for $35 per month.

Under the Senior Savings Model, participating Part D plans (stand-alone or Medicare Advantage plans with integrated Part D) offer a wide range of insulin types with maximum co-pays of $35.

Part D plans are not required to participate in the Senior Savings Model, but it has proven popular with insurers and Medicare beneficiaries.

As of early 2022, there were about 43 million Medicare beneficiaries with Part D coverage. More than 17 million of those beneficiaries were enrolled in plans that were participating in the Senior Savings Model.

Summary

Since 2020, 20 states and the District of Columbia have implemented rules that cap insulin out-of-pocket costs for people with state-regulated health plans. The caps vary from $25 per month to $100 per month. But state regulations don’t apply to self-insured group plans, which cover the majority of people with employer-sponsored health coverage.

State laws also don’t apply to Medicare Part D, which is Medicare’s prescription drug program. But the Medicare Senior Savings Model, which took effect in 2021, caps insulin costs at $35 for Part D plans that choose to participate in the program.

A Word From Verywell

If you’re in a state that caps insulin costs, or that will in the near future, you may find that your insulin costs become much more affordable. But it’s important to understand whether your health plan is self-insured or fully insured (i.e., purchased from an insurance company).

That distinction has caught a lot of people off guard as state laws regarding insulin cost-sharing have taken effect. If your employer self-insures their health plan, state laws won’t apply to your coverage.

It’s possible that federal action on this issue could happen in the coming years, which would protect people with diabetes regardless of where they live or whether their health plan is self-insured.