On August 26, 2019, guidance was released on the Health and Human Services (HHS) regulation that appears to require group health plans to count the value of drug manufacturers’ coupons towards plan participants’ out-of-pocket limits. The HHS regulation was set to take effect for the 2020 plan year. Due to confusion surrounding the application of the regulation, the rule will not be enforced until HHS releases additional guidance for the 2021 plan year. As such, group health plans can continue excluding the value of drug discounts from participants’ out-of-pocket maximums for the 2020 plan year.
Out-Of-Pocket Maximum under the ACA
Under the Affordable Care Act (ACA), group health plans and high deductible health plans (HDHP) cannot require participants to pay for covered health care services over a certain amount, commonly referred to as the “out-of-pocket maximum.” The out-of-pocket maximum includes copayments, deductibles, and coinsurance (together referred to as “cost-sharing”) paid by participants. Once participants meet their out-of-pocket maximum, carriers must pay 100% of the cost for covered in-network benefits.
HHS Regulation on Drug Manufacturer’s Coupons
Some drug manufacturers provide coupons or discounts to consumers for prescription drugs. Before the HHS regulation, there was little guidance on whether group health plans should count these drug discounts towards participants’ cost-sharing. Most plans excluded the discounts from participants’ deductibles or out-of-pocket maximums. For instance, a group health plan would treat a participant who uses a $100 coupon towards a $400 prescription drug as contributing $300 to their out-of-pocket cost, rather than the $400 cost of the prescription drug.
In the 2020 Notice of Benefit and Payment Parameters (“NBPP”), HHS stated that drug manufacturers’ discounts or coupons were “not required to be counted” toward participants’ annual cost-sharing when a generic version was available. It was unclear in the regulation whether group health plans were required to count drug discounts toward participants’ out-of-pocket maximum when a generic version was not available.
HHS Rule Conflict with HSA-eligibility
If the HHS regulation does require group health plans to count the drug coupons towards out-of-pocket maximums, it could interfere with health savings account eligibility for individuals enrolled in high deductible health plans (HDHP). A prior IRS Notice 2004-50 (“IRS Notice”) explicitly instructed health plans to not count drug coupons to towards participants’ minimum deductibles under HDHP plans. Thus, a HDHP plan that is required to count drug coupons towards the out-of-pocket maximum under the HHS regulation, would no longer be HSA-qualified because it would not comply with the IRS Notice.
The Department of Labor, HHS and Treasury (“the Departments”) recently released guidance (entitled FAQs on ACA Implementation Part 40) on the HHS regulation. Due to the potential impact on HSA eligibility and conflict between the HHS regulation and the IRS Notice, the Departments have concluded that further rulemaking surrounding this issue must occur before enforcement of the HHS regulation can begin. Until additional rulemaking is issued by HHS, the Departments will not initiate enforcement action against group health plans or issuers who exclude the value of drug coupons or discounts from the out-of-pocket limit, including in circumstances where there is no medically appropriate generic equivalent drug available.
Impact on Employers
Until further guidance is issued, employers, plan sponsors and health insurance issuers may continue to exclude the value of prescription drug manufacturer coupons from participant cost-sharing under the ACA’s out-of-pocket limit rules, regardless of whether a medically appropriate generic equivalent is available. HHS will release additional guidance in their 2021 NBPP, which is expected to be finalized in April of 2020.
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