A new prescription drug reporting mandate, adopted as part of the 2021 Consolidated Appropriations Act (CAA) (Pub. L. No. 116-260), requires group health plans and health insurers to report detailed data about prescription drug pricing (including rebates) and healthcare spending. The first reports are due by Dec. 27, 2022, and annually thereafter. The departments of Labor, Treasury, and Health and Human Services will use the information to prepare a biannual, publicly available report. The departments have issued interim final rules (IFR) detailing the data to report and recently updated submission instructions describing the mechanics of the reporting process. The updated instructions provide important information about reporting wellness services, prescription drug expenses that are covered by the pharmacy benefit manager and more.
Download the 21-page print-friendly article for details on the prescription drug reporting rules and the compliance challenges facing group health plans. This GRIST has been updated to reflect the updated submission instructions.
Below is a short recap of the reporting requirement.
The high cost of prescription drugs is a common source of frustration for many stakeholders in the US healthcare system, including employers sponsoring health plans and plan participants. Employers have supported efforts to make prescription drug pricing — with its web of rebates, discounts and pricing mechanisms — more transparent. Transparency could help address wide price variations, reduce healthcare waste and help individuals make informed choices about their healthcare spending. Mercer has a long-standing commitment to improving healthcare quality, affordability and accessibility for US workers and their families. Price transparency (including the CAA’s reporting requirements) is a critical part of that effort.
The No Surprises Act portion of the CAA tackles transparency in prescription drug pricing by requiring group health plans and health insurers to report a wide swath of information about their prescription drug spending. These reports must include information about the impact of complex drug pricing mechanisms — rebates, fees and other remuneration paid by drug manufacturers — on premiums. The submission instructions require plans and insurers to report to the Centers for Medicare & Medicaid Services (CMS) a wide variety of information on overall plan spending beyond prescription drugs, presumably for comparison with prescription drug spending.
Reporting challenges for group health plan sponsors. Unfortunately, group health plan sponsors rarely have access to much of this information. Although the departments acknowledge that the required information resides with plan vendors, the guidance does not meaningfully shift reporting responsibility to vendors — at least for self-funded plans. Employers must coordinate their vendors’ information reporting and are liable for all reporting failures, even for vendor-reported data to which employers have no access.
The new reporting requirement is particularly challenging for self-funded group health plan sponsors with multiple vendors and complicated plan designs. Sponsors of self-funded plans — especially those using carve-out and point-solution vendors to administer aspects of their health plans — must identify impacted vendors, coordinate their reporting, potentially combine data from multiple vendors, and either submit the report themselves or verify that the reporting is complete. The current system does not automatically generate a verification for plan sponsors when a report is submitted or accepted without errors.
Limited good-faith compliance relief. The only relief to date, announced in the updated submission instructions, appears to primarily assist vendors rather than health plan sponsors. The departments, concerned that insurers and third-party administrators (TPAs) will have difficulty obtaining information about the average monthly premiums paid by employers and employees, will not take enforcement actions related to this particular element of the reporting for the 2020 and 2021 reference years. Plan sponsors, who may also have difficulty obtaining cooperation or information from their vendors, would benefit greatly from similar relief. Additional relief in advance of the first reporting deadline would be welcome, given the sweeping nature of the requested data, the departments’ acknowledgment that employer plan sponsors do not possess the requested data, as well as the many reporting challenges described in this GRIST.
First reports due Dec. 27, 2022. Plans must report data for each calendar year (referred to as the reference year), beginning with 2020. The CAA originally imposed a Dec. 27, 2021, deadline to report 2020 data, but the departments issued FAQs deferring enforcement for one year. Accordingly, plans must first report data by Dec. 27, 2022, for each of the 2020 and 2021 reference years. Beginning with the 2022 reference year, data must be reported by the following June 1.
Transparency payoff at plan level uncertain. Given the significant effort required, employers may expect long-awaited, unprecedented transparency into prescription drug prices. But the department’s deidentified biannual report to Congress will presumably focus on national trends, offering employers little visibility into their own plan’s prescription drug prices. The departments are encouraging vendors to report CAA prescription drug pricing data in the aggregate. In contrast, the 2020 transparency-in-coverage (TiC) regulations require plan-specific, publicly available prescription drug pricing information in machine-readable files (MRFs). Although the departments put this portion of the TiC regulations on hold after the CAA was enacted, that type of plan-level transparency data could give plan sponsors greater insight into their own plan’s spending and the spending of other plans. The significant differences between the CAA and TiC requirements are discussed more fully in the print-friendly PDF.