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Agencies Issue Interim Final Regulations on Prescription Drug and Health Care Spending Data Submission by Group Health Plans and Health Insurance Issuers

by | Dec 22, 2021 |

Section 204 of Title II of Division BB (“Section 204”) the Consolidated Appropriations Act, 2021 (the “Act”) requires group health plans and health insurance issuers offering group health insurance coverage to annually submit to the Departments of Treasury, Labor, and Health and Human Services (the “Departments”) information about prescription drug and health care spending.  In addition, the Departments and the Office of Price Management (the “Agencies”) recently issued interim final regulations implementing Section 204. The preamble to the interim final regulations indicates that the Agencies intend to build a data collection system that will allow multiple reporting entities to submit different subsets of the required information.

One portion of the information that must be reported is general information about the plan or coverage, including the beginning and end dates of the plan year, the number of participants, beneficiaries, or enrollees, as applicable, and each state in which the plan or coverage is issued. Plans and issuers must also report the 50 most frequently dispensed brand prescription drugs, although initially the interim final regulations limit the reporting requirement to prescription drugs under a plan’s pharmacy benefit plan, and the total number of paid claims for each such drug.  Also, the 50 most costly prescription drugs by total annual spending, and the total annual amount spent by the plan for coverage for each drug, must be reported, as well as the 50 prescription drugs with the greatest increase in plan or coverage expenditures from the plan year preceding the plan year that is the subject of the report.

Under the Act, plans and issuers must also report total spending on health care services by the plan or coverage, broken down by (i) the type of costs (including hospital costs; health plan provider and clinical service costs, for primary care and specialty care separately; costs for prescription drugs; and other medical costs, including wellness services), (ii) spending on prescription drugs by the plan or coverage as well as by participants, beneficiaries, and enrollees, and (iii) premiums paid by employers on behalf of participants, beneficiaries, and enrollees.  Plans and issuers must also report any impact on premiums of rebates, fees, and other remuneration paid by drug manufacturers, including the amount paid with respect to each therapeutic class of drugs and for each of the 25 drugs that yielded the highest amount of rebates and other remuneration under the plan or coverage during the plan year.  Finally, plans and issuers must report any reduction in premiums and out of pocket costs associated with these rebates, fees, or other remuneration.

The interim final regulations apply to grandfathered health plans as well as non-grandfathered plans, but do not apply to (i) health reimbursement arrangements or other account-based group health plans, such as flexible spending accounts and health savings accounts; (ii) short term limited duration insurance; or (iii) other coverage that consists solely of excepted benefits.  The preamble to the regulations discusses in detail the rationale for the various definitions in the interim final regulations, including why the reference year under the regulations is in all instances the calendar year rather than the policy year or plan year. (The purpose was to provide uniformity in analyzing data. It was an approach recommended by stakeholders.) The preamble also notes that prescription drugs are grouped by name and active ingredient, and not further categorized by different dosages or strength, package size, or mode of delivery.  For a generic drug, it is not necessary to separate them by manufacturer. The preamble includes a detailed discussion of rebates, fees, and other remuneration paid by drug manufacturers.

The required information must be provided on an aggregate basis rather than a plan by plan basis, except for (i) identifying information for the plans and issuers and other reporting entities; (ii) the beginning and end dates of the last plan year ending on or before the last day of the reference year; (iii) the number of participants and beneficiaries covered on the last day of the reference year; and (iv) each state in which a plan or coverage is issued. Otherwise, reporting is done on a state and market segment basis, which would include a fully-insured large group segment; a fully-insured small group segment; self-funded small employer plans; and self-funded large employer plans.

The information for each self-funded plan must be included in the report for the state in which the plan sponsor has its principal place of business.  In general, for a fully-insured plan, the experience is reported for the state in which the contract is issued, although for health coverage provided through a group trust or MEWA, the experience must be included in the report for the state where the employer or association (if it qualifies as an employer under Section 3(5) of ERISA) has its principal place of business.  If a plan sponsor has contracts with both in-network and out-of-network providers, the out-of-network experience may be treated as if it related to the contract providing in-network services.

The Agencies understand that group health plans, although permitted to do so, will rarely report this information on their own, but rather will engage third parties, such as the health insurance issuer, third party administrators (“TPAs”), pharmacy benefit managers, or both TPAs and pharmacy benefit managers, to satisfy the required reporting obligations.  For fully insured group health plans, to the extent that coverage under a plan consists of group health insurance coverage, a plan may satisfy the data submission requirements if the plan, pursuant to a written agreement, requires the health insurance issuer to provide the required information in compliance with the interim final rules.  If the issuer fails to report the required information, it is then the issuer, rather than the plan, that is treated as violating the reporting requirements.

Additionally, for both fully insured and self-insured plans, the plan may satisfy its data submission requirements by entering into a written agreement with a third party such as a pharmacy benefit manager or a TPA requiring the third party to satisfy the interim final rules’ reporting requirements. However, in this instance, if the third party fails to satisfy the compliance obligation, the plan is the party that is treated as violating the regulatory requirements.

Under the Act, the initial reporting is required by December 27, 2021, and thereafter by June 1. In other words, the reporting for 2020 would be done by December 27, 2021, and the reporting requirement for 2021 would be due on June 1, 2022.  However, the Agencies have now indicated that no enforcement action will be taken with respect to any of these filing requirements if the reports are filed by December 27, 2022.

While there will be no enforcement action for reports filed on or before December 27, 2022, group health plans will need to use this extra time to revise their service agreements with TPAs and PBMs so that they will be in a position to comply by the extended deadline. They will need to address liability for reporting amongst the parties, ways a plan can review a report prior to submission to confirm its accuracy, and the process for any editing, all to occur prior to extended reporting deadline (and in later years by June 1 of each year). Should you have questions regarding what service agreements you need to revisit to address these requirements, please contact one of the authors for assistance.