Biden Administration Announces Details on the New Health Plan Prescription Drug and Medical Care Cost Reporting Requirements

One of the many requirements that the “No Surprises Act” portion of the Consolidation Appropriations Act of 2020 places on group health plan sponsors is a new obligation to report detailed prescription drug and medical care spending information to the federal government on an annual basis. The Biden Administration just released an Interim Final Rule addressing how to comply. Employer plan sponsors of all sizes will need to make sure that 2020 and 2021 calendar year cost data is reported on behalf of their plan by December 27, 2022. After that, reporting will be due every year on June 1 for the prior calendar year. So, 2022 data reports will be due by June 1, 2023. Ultimately, federal officials will use this information to prepare national reports on prescription drug and medical care spending.

Originally, it seemed that employers would need to compile all their own medical and prescription drug cost data for their own reports. However, the interim final rule specifies that much of the data to be reported will be on an aggregate market and state level, rather than a group-specific level. This means most employers will be able to delegate at least some of their reporting responsibilities to insurance carriers, third-party administrators (TPAs), and pharmacy benefit managers (PBMs) through their administrative services agreement. If an employer offers fully-insured coverage contracts with their carrier to handle reporting, then the plan sponsor will have no additional responsibility related to these requirements. However, the rules are different for self-insured plan sponsor, including those with level-funded plans in place. In these cases, the plan sponsor can contract with their TPA and their PBM to handle the reporting; but the plan sponsor retains responsibility for ensuring the reporting is complete.

The reports themselves will be filed through an online portal that is still under development. Specific instructions on how this system will work are forthcoming. However, one important component is already clear—the new reporting system will allow multiple entries for a single plan. So, medical and pharmacy claims administrators will be able to report on behalf of the plans they serve separately, and that employers will not have coordinated vendor information at the plan level. However, plan sponsors will need to ensure that all vendors reporting on their behalf use the same “plan level” information in their submissions. This plan level data includes:

  • Plan identifying information.
  • Plan year information.
  • The number of participants and beneficiaries covered on the last day of the calendar year being reported on.
  • Each state where the plan is offered.

Unless a plan sponsor chooses to compile their data themselves and only report on their plan’s spending, then their claims payers will complete the reporting at an aggregate level. This means each medical claims administrator will need to create a report for each market segment in which they operate and for each state in which coverage is offered. There are seven applicable market segments: (1) the individual market, (2) the student market, (3) the fully-insured small group market, (4) the fully-insured large group market, (5) self-funded plans offered by small employers, (6) self-funded plans offered by large employers, and (7) plans offered to federal employees. For fully-insured plans, the state is where the policy was issued. For self-funded plans, the TPA uses the data where the plan sponsor has its principal place of business. The rules differ slightly for pharmacy benefit managers. They are required to issue their reports by market segment and state too, but they also need to segment data by each carrier or TPA they serve. That way, federal regulators can match pharmacy spend information with medical spend information for the same populations.

To meet the reporting requirements, medical claims administrators will need to report the total annual spending on health care services paid by both the plan and then also directly by plan participants. The information that needs to be disclosed includes:

  • Hospital costs;
  • Health care provider and clinical costs for primary care;
  • Health care provider and clinical costs for specialty care;
  • Costs for prescription drugs paid for through the medical coverage (such as prescription drugs administered during an inpatient care visit); and
  • Other medical costs, including wellness services.

Pharmacy benefit managers will need to include the following in their reports:

  • The 50 most frequently dispensed brand prescription drugs;
  • The 50 costliest prescription drugs by total annual spending;
  • The 50 prescription drugs with the most significant increase in plan or coverage expenditures from the previous year; and
  • Prescription drug rebates, fees, and other remuneration paid by drug manufacturers to the plan or issuer in each therapeutic class of drugs, as well as for each of the 25 drugs that yielded the highest amount of rebates.

For all these disclosures, the rule provides a detailed breakdown of exactly how TPAs and PBMs are required to report the information, including subcategories of spending and other pertinent details.

Finally, information needs to be reported on the impact of spending on overall group premiums, which is where employers of all sizes will likely need to be involved to ensure that their reporting is accurate and complete. The required information includes:

  • Premium amounts, including:
    • Average monthly premium amounts paid by employers and other plan sponsors;
    • Average monthly premium amounts paid by participants and beneficiaries;
    • Total annual premium amount; and
    • Total number of “life years” covered (calculated by determining total months individuals were covered during the year and dividing that number by 12); and
  • The impact of prescription drug rebates, fees, and other remuneration on premium and cost-sharing amounts.
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