Prescription Drug Reporting – The Next Transparency Requirement (Benefit Minute)

Posted in: Benefit Minute, Employee Benefits

The Consolidated Appropriations Act of 2021 (CAA) added a requirement for group health plans and health insurance issuers to provide certain information about prescription drug and health care costs. The deadline for first year reporting (2020) was originally December 27, 2021. However, it was subsequently extended to December 27, 2022 for calendar years 2020 and 2021. Thereafter, the reporting will be due June 1 for the 2022 calendar year and each subsequent calendar year.

The reporting requirements are particularly challenging for self-funded health plans and their sponsors who rarely have access to much of the information that has to be reported but remain responsible for reporting that is complete,  accurate, and not duplicative. For plans with multiple service providers, the plan sponsor must coordinate information reporting with these entities, and is liable for any reporting failures. Fully insured plans may shift reporting responsibility and liability to the health insurer if the insurer and the plan sponsor enter into a written agreement requiring the insurer to report the information.

The Health Insurance Oversight System (HIOS) being used by the Centers for Medicare and Medicaid Services does not automatically generate a verification when a report is submitted or accepted without errors, so plan sponsors will have to rely on the representation of service providers or insurers that the reporting has been completed.

Reporting is not required for excepted benefits and account based plans such as dental, vision, health reimbursement arrangements, and health care flexible spending accounts.

Overview of Requirements

The reporting includes the following components:

  • Plan-specific information
  • Premiums and life years
  • Health care spending by category (6 specific categories)
  • Top 50 most frequent brand name drugs
  • Top 50 most costly drugs
  • Top 50 drugs by spending increase
  • Prescription drug totals (spending and rebates)
  • Prescription drug rebates by therapeutic class
  • Prescription drug rebates for the top 25 drugs

The reporting must also include a narrative response that describes any estimation or allocation methods used for costs; describes type of rebates, fees and other remuneration that was included in or excluded from prescription drug and rebate totals; and describes the impact of rebates, fees and other remuneration on premium and out-of-pocket costs.

Plan Level or Aggregate Reporting?

The rules encourage any entity reporting for multiple plans (e.g. insurers, third party administrators, pharmacy benefit managers) to submit an aggregated report for their book of business by state and market segment to minimize the number of submissions, and CMS anticipates that most of the data will be reported in aggregated form. The applicable market segments for group health plans are:

  • self-funded plans offered by large employers
  • self-funded plans offered by small employers
  • fully insured large group market
  • fully insured small group market

For fully insured plans, the health insurer will presumably report all aggregate data since the insurer is independently responsible for complying with the reporting requirements. The only plan-level data that must be reported is the plan-specific information (including identifying information) and premiums, so the sponsor of a fully insured plan will need to provide this information to the health insurance carrier and obtain the required written agreement with the carrier.

How aggregation will work for self-funded plans is less clear. Presumably, the sponsor of a self-funded plan could register on HIOS, obtain the required data from service providers, and complete their own reporting.  This would ensure that the obligation has been met and will give the plan sponsor access to plan-level data that may be useful. However, it is more likely that service providers will be unwilling to provide meaningful plan-level data, so they will report aggregated data in the same manner as fully insured plans. A combination of plan-specific and aggregate data files is not permitted – the reporting instructions state that pharmacy data may not be submitted at a less granular level than other health care spending by category.

Additionally, based on current guidance, two service providers cannot submit the same data file for the same group health plan, so coordinating service providers is necessary. However, the instructions clarify that prescription drugs covered under the medical plan should be reported on the health care spending file and prescription drugs under the prescription drug benefit should be reported under the 6 prescription drug files, so there will be no overlap between the medical TPA and the PBM.  The plan sponsor is liable for any reporting failures.

Changing Insurers or Third Party Administrators

The prescription drug reporting is retrospective and may occur after a group health plan has changed insurers or other service providers. The guidance allows the prior service provider to either 1) report data for the time period it serviced the plan or 2) provide data to the current service provider to complete the reporting. Health insurers will likely take the first option. For self-funded plans, this poses another challenge because prior service providers may be unwilling to cooperate with the reporting. This obligation should be addressed in the service agreement.

Use of Data

This is another step in the quest for greater transparency in group health plan heath care and prescription drug costs. However, reporting of aggregated data in a system that will not be accessible to most plan sponsors or to plan participants diminishes the transparency value at the plan level. The data that the federal government obtains from the health care and prescription drug reporting will be used to prepare a publicly available report about aggregate prescription drug reimbursements and pricing and the impact of prescription drug prices in premium increases, with the first reporting expected to be released in June 2023.

Related Posts

  1. Considerations for Employees Approaching Medicare Entitlement (Benefit Minute)
  2. PSA In Good Health Volume 10 Tips