Group health plans and carriers are 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. The reporting deadline for the 2020 and 2021 calendar years was extended (as described in the Affordable Care Act and Consolidated Appropriations Act, 2021 Implementation FAQs, Part 56) through January 31, 2023. For calendar year 2022 and all subsequent years, reporting is due annually by June 1st following the close of the calendar year (e.g., reporting for calendar year 2022 is due June 1, 2023).
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 of Labor, Health and Human Services, and the Treasury (collectively, 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.
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 to insurance carriers. However, account-based plans, such as health reimbursement arrangements, and certain excepted benefits (e.g., short-term limited duration insurance, hospital or other fixed indemnity insurance, and disease-specific insurance) are exempt from this requirement.
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. CMS has 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 and FAQ Part 56 to better understand reporting instructions, which is particularly helpful for plans using multiple reporting vendors.
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.
Good Faith Relief
The Departments will not take enforcement action with respect to any plan or issuer that used a good faith, reasonable interpretation of the regulations and the Prescription Drug Data Collection (RxDC) Reporting Instructions for the 2020 and 2021 calendar year data submissions.
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.
Employers should be aware that TPAs and carriers have been requesting employers provide certain data points to help comply with this reporting requirement and are specifying timeframes in which employers must respond. As such, employers should be mindful to respond to TPA/carrier data requests to ensure that reporting is completed timely.
- Interim Final Rule
- Prescription Drug Data Collection (RxDC) FAQs
- FAQs issued August 20, 2021
- Sequoia Forewords
This blog was originally published on August 30, 2022. This was last updated on March 3, 2023.
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