Update on 12/27/2022: On December 23, 2022, the Departments of Labor, Health and Human Services, and the Treasury (collectively, the Departments) released the Affordable Care Act and Consolidated Appropriations Act, 2021 Implementation FAQs, Part 56 (FAQ Part 56) stating it will provide a grace period on pharmacy drug cost reporting through January 31, 2023, and will not consider a plan or issuer to be out of compliance with prescription drug cost reporting requirements, provided that a good faith submission of 2020 and 2021 data is made on or before that date.

Update 10/21/2022: CMS released several FAQs that clarify requirements under the CAA for prescription drug reporting, including permitting aggregate filings to help simplify reporting for certain plans utilizing multiple vendors. Employers can review the FAQs to better understand reporting instructions, particularly helpful for plans using multiple reporting vendors.

Group health plans and carriers will soon be required to report certain demographic and spending information about a plan’s prescription drug expenditures, a requirement that is a part of the Consolidated Appropriations Act of 2021 (CAA) passed in 2020. Initially deferred from its original due date, reporting for 2020 and 2021 calendar years was set to be due this year on December 27, 2022 (though good faith reporting relief was further extended through January 31, 2023). For all subsequent years, reporting is due annually by June 1st.

Background

The CAA amended the Public Health Service Act (PHSA) to require group health plans and carriers to submit general and spending information about the plan, primarily related to prescription drug expenditures (“Pharmacy Reporting”). In turn, the Departments must use this data to publish public reports on prescription drug reimbursements, pricing trends, and the impact of prescription drug costs on premium costs.

The enforcement for the 2020 and 2021 reporting was delayed and the first reporting was set to be due December 27, 2022, as explained in FAQs issued August 20, 2021. Note; however, the further good faith reporting relief that has now been extended through January 31, 2023. For calendar year 2022 and all subsequent years, the reporting is due by June 1st.

Pharmacy Reporting Requirement

As explained further in the interim final rule, the pharmacy reporting requirement generally applies to group health plans (both fully insured and self-insured) and carriers. Examples of information that must be reported include:  

  • Premium amounts, including the average monthly premium paid by both employees and the employer;
  • Annual health care services spend categorized by types of cost (including hospital costs, health care provider and clinical service costs, costs for prescription drugs, and other medical costs);
  • Information on the 50 most frequently dispensed brand prescription drugs, and the total number of paid claims for each drug;
  • The 50 most costly prescription drugs by total annual spending, and the annual amount spent by the plan or coverage for each drug; and
  • The 50 prescription drugs with the greatest increase in plan expenditures and for each such drug, the change in amounts expended by the plan or coverage in each plan year.

The reported information can be submitted on an aggregate basis, with the only “plan-level” information being general plan information. Importantly, plans can satisfy their reporting obligations by having third-parties, such as carriers, third-party administrators (TPAs), or pharmacy benefit managers (PBMs) submit the required information on their behalf, explained further below.

Employer Action Items

To comply with this new requirement, employer plan sponsors will need the assistance of their carriers, TPAs, PBMs, or other similar vendors. In fact, the Departments stated in the interim final rule that they anticipate it will be rare for group health plans to report the information on their own, as employers generally do not have access to all of the information required. As such, employers should do the following, based on their funding type:

  • Fully insured: Confirm with their carriers that they will be complying with this requirement, as it appears that most carriers are completing the reporting on behalf of fully insured plans. In addition, employers should consider entering into a written agreement requiring their carrier to complete this reporting. Employers with fully insured plans who contract with their carrier to complete the reporting will not be held liable for any failure to report.
  • Self-insured: Identify and contract with a TPA/PBM to fulfill this requirement on the plan’s behalf and confirm the TPA/PBM has the necessary plan information to comply with the requirement. Self-insured employers are ultimately liable for any failure to report, regardless of whether they enter into a written agreement with their TPA/PBM to complete reporting. However, employers may still consider entering into a written agreement that requires their TPA/PBM to complete the reporting to protect itself contractually against a potential vendor failure.

Good Faith Relief

The Departments will not take enforcement action with respect to any plan or issuer that uses a good faith, reasonable interpretation of the regulations and the Prescription Drug Data Collection (RxDC) Reporting Instructions for the 2020 and 2021 data submissions that are due by December 27, 2022.

Specifically, the Departments are allowing a submission grace period through January 31, 2023. If a good faith submission of 2020 and 2021 data is made on or before that date, a plan or issuer will not be considered out of compliance with these requirements.

Also, for the 2020 and 2021 data, certain clarifications regarding reporting requirements (including the permissibility of multiple submissions by one entity and submissions by more than one entity, optional reporting on vaccines, and data aggregation rules) were included in FAQ Part 56.

Additional Resources

Disclaimer: This content is intended for informational purposes only and should not be construed as legal, medical or tax advice. It provides general information and is not intended to encompass all compliance and legal obligations that may be applicable. This information and any questions as to your specific circumstances should be reviewed with your respective legal counsel and/or tax advisor as we do not provide legal or tax advice. Please note that this information may be subject to change based on legislative changes. © 2022 Sequoia Benefits & Insurance Services, LLC. All Rights Reserved

Diane Cross — Diane is a Client Compliance Consultant for Sequoia, where she works with our clients to optimize and streamline benefits compliance. In her free time, Diane enjoys spending time with her family, live music, and cycling.