Self-Funded Plans Can Exclude Discount Coupons from Counting Toward Deductibles
On May 14, 2020, the Department of Health and Human Services (HHS) published in the Federal Register its Notice of Benefit and Payment Parameters for 2021 final rule and posted an accompanying fact sheet.
Under the 2021 benefit parameters final rule, a self-funded group health plan will be permitted, but not required, to exclude the value of a drug manufacturer's payment assistance from spending that is applied toward annual limits on cost-sharing amounts (such as plan deductibles and out-of-pocket maximums). Plans can do so by putting in place a co-pay accumulator program. Simply put, these programs don't count toward patient cost-sharing limits the value of co-pay assistance cards or coupons that drug makers offer consumers to induce them to purchase brand name drugs.
The 2021 benefit parameters differ from the rule for 2020, which permitted plans to exclude the value of co-pay coupons from a participant's cost-sharing limits only when the prescription drug had a medically appropriate generic equivalent available. Enforcement of the 2020 final rule was placed on hold pending publication of the 2021 rule because of implementation concerns over whether co-pay assistance would make a participant ineligible to contribute to an HSA.
Under the final rule for 2021, "a self-funded group health plan has the flexibility to determine whether to include or exclude the amount of drug manufacturer co-pay coupons, regardless of whether a medically appropriate generic equivalent is available," according to an analysis by attorneys at Vorys, a national law firm. "An insured group health plan may also have to comply with any applicable state laws regarding co-pay coupons," the attorneys noted.
"Some states—including Arizona, Illinois, Virginia, and West Virginia—have banned co-pay accumulator programs," Katie Keith, a former research professor at Georgetown University's Center on Health Insurance Reforms, wrote on the Health Affairs blog. "In those states, insurers are required to count coupons and co-pay assistance towards a plan's deductible or out-of-pocket limit."
See the SHRM Online article HHS 2021 Health Plan 'Parameters' Raise Out-of-Pocket Maximums.
-- SHRM Online
Editor's note: The original story posted on Sept. 5, 2019, appears below. Parts of the following may be out of date.
Employer plans will still be able to exclude the value of drug manufacturer coupons from annual out-of-pocket maximums, even when no generic equivalent is available, under new guidance from the Department of Labor, Department of Health and Human Services (HHS), and Department of Treasury. These exclusions, or copay accumulators, are built into many employer plans.
The guidance was issued on Aug. 26, 2019, in the form of frequently asked questions (FAQs) about the implementation of the Affordable Care Act. The agencies indicate that a rule that had been set to take effect on Jan. 1, 2020, could potentially have put high-deductible health plans in conflict with earlier guidance from the Internal Revenue Service (IRS) on health savings accounts (HSAs). The agencies plan to address drug coupons in another guidance that will be issued for 2021.
The initial rule appeared in the HHS Notice of Benefit and Payment Parameters for 2020, which was published on April 25, 2019. That rule permitted health plans to exclude drug manufacturer coupons from annual out-of-pocket maximums when a generic equivalent is available. The rule itself did not state the inverse—that plans must apply the coupon values to out-of-pocket maximums when there is no generic equivalent—though the preamble indicated that this was the HHS's position.
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Employers and pharmacy benefit managers had been discussing what the rule actually meant and how to comply with it for several months. The federal government has been seeking means to lower health costs for years, including most recently a plan to facilitate importation of lower-cost foreign prescription drugs. In its initial rule, HHS tried to strike a balance between encouraging patients to choose lower-cost generic drugs and honoring the design of health plan cost-sharing limitations.
The initial drug coupon rule could be read to conflict with 2004 IRS guidance related to HSAs. In that guidance, the IRS indicated that drug discount cards would not affect an employee's HSA eligibility as long as the plan did not apply the value of the discount toward the individual's annual deductible. By contrast, the rule for 2020 would have required plans to apply the value of a manufacturer coupon to an annual out-of-pocket maximum in cases where no generic equivalent was available.
In light of the ambiguity, the FAQ announces that the departments will revisit drug manufacturer assistance in guidance form in 2021 and that the application of drug coupons towards cost sharing limitations will not be federally enforced in 2020.
Timothy J. Stanton and Hillary M. Sizer are attorneys with Ogletree Deakins, concentrating on ERISA and benefit matters. © 2019 Ogletree Deakins, all rights reserved, reposed with permission.
Related SHRM Articles:
New Tactic Emerges to Control Rx Spending, HR Magazine, Fall 2019
HHS 2020 Out-of-Pocket Maximums Raise Employer Penalties, SHRM Online, June 2019
Navigating the Changing Prescription Drug Market, SHRM Online, November 2018