The Arkansas Insurance Department (AID) recently introduced AID Rule 128: Fair and Reasonable Pharmacy Reimbursements, which requires both self-insured and fully insured plans to submit data about pharmacy compensation. The data will be used to assess whether reimbursement rates set by pharmacy benefit managers (PBMs) align with minimum national standards. In addition, the Arkansas Insurance Commissioner issued AID Bulletin #18-2024, which provides guidance on how health plans should submit the required data and information.
Data Submission Requirements
Under Rule 128, health benefit plans must submit data detailing reimbursement rates, claims paid, and pharmacy network retention. A health benefit plan is any individual or group plan issued by a health care payor to Arkansas residents. It excludes accident-only policies, specified disease plans, disability income plans, and long-term care plans without pharmacy benefits. Health care payors include carriers, HMOs, and entities that manage self-funded health plans, including government plans.
This data will help the AID determine if the rates are fair. Specifically, plans will need to provide information about dispensing fees, appeals and adjustments, and data regarding average reimbursement differences between PBM-affiliated pharmacies and non-affiliated pharmacies. Additionally, if the health plan is self-insured and has 5,000 or more Arkansas residents, it must submit cost projections for different dispensing fees and the impact on premiums.
Rule Implementation and Key Filing Deadlines:
Rule 128 was signed by the Arkansas Commissioner on December 20, 2024, with an initial filing deadline less than two months after. This short time frame has caused much confusion as carriers, PBMs, and third-party administrators (TPAs) struggle to meet the filing requirements.
For health benefit plans, the filing deadlines are as follows:
- Plan Year 2024: Submit data by February 17, 2025.
- Plan Year 2025: Submit data by July 1, 2025.
- Plan Years (2026 and beyond): Submit data by March 1 each year, with health plans submitting data for the previous full year of plan data.
Health benefit plans may request an extension if the necessary data is not available.
Penalties
It is important to note that when a group health plan fails to comply with the Rule, the potential penalties appear to be directed at the PBM rather than the health plan itself. Rule 128 specifies that violations will result in fines or penalties under Arkansas Code Ann. §23-92-508, which grants the Commissioner the authority to impose a penalty of up to $5,000 per violation on the PBM. If the PBM has committed a pattern of violations, the Commission may also revoke or suspend the PBM’s license.
Employer Action
In general, state insurance laws do not apply to self-insured group health plans due to Employee Retirement Income Security Act (ERISA) preemption. Rule 128 and the Bulletin are important because they explicitly state that self-insured group health plans must comply.
In recent years, several legal cases have challenged the application of ERISA preemption to state PBM laws and self-insured plans. Notably, Arkansas was involved in the 2020 United States Supreme Court case, Rutledge v. Pharmaceutical Care Management Association, where the Court ruled that ERISA did not block Arkansas from regulating the prices PBMs pay to pharmacies. With Rule 128, Arkansas appears to be reaffirming its authority to regulate pharmacy reimbursements, not benefit plan design, in line with the Rutledge decision.
With the above in mind, employers with Arkansas participants (in 2024 and beyond) will want to take the following action, depending on their funding type:
- Employers should be on the lookout for communications from their carriers, TPAs, and PBMs to understand how they will partner to complete the new Arkansas reporting.
- Fully insured employers should confirm their carriers are filing the data for their plans. The carriers are permitted to submit the data by product type, such as individual market, small group market, or group market. Generally, most carriers appear to be complying or working toward compliance with this new law.
- Self-insured (including level-funded) employers should work in partnership with their PBMs or TPAs to file the data on behalf of a health benefit plan for which it administers its drug benefits.
Resources
Connect with a Sequoia consultant to learn how Sequoia’s compliance services are integrated in our benefits services and tailored solutions. And if you’re already a Sequoia client, stay on top of your employer obligations with your Compliance Checklist that highlights important compliance dates, action items, and resources.
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