Federal Transparency Efforts: Prescription Drug and Health Cost Reporting Is Next

What is it?

As part of the Consolidated Appropriations Act, 2021 (CAA), all insurance companies and self-funded health plans (except HRAs and ICHRAs) must provide de-identified prescription drug and health cost reporting to the federal government.  We’ve previously summarized what data is to be reported and shared that the primary goal of the reporting is for the federal government to identify prescription drug trends and compile the data into a biannual report (without identifying plans or individuals).

This mandatory submission is being referred to as Section 204 RxDC reporting, or RxDC:

  • The requirements are detailed in Section 204 of the CAA
  • Rx stands for prescription drugs since the primary goal is to identify prescription drug trends
  • DC stands for data collection

At the end of June 2022, the Centers for Medicare and Medicaid Services (CMS) announced new guidance and templates for this reporting.

When is it effective?

  • Calendar year 2020 and 2021 reporting is due by December 27, 2022.
  • Calendar year 2022 reporting will be due by June 1, 2023.
  • Thereafter, each calendar year’s reporting will be due by the following June 1.

How will this reporting impact group health plans?

While RxDC creates an extra administrative burden, the goal of the new reporting is for agencies to gather information that can be used by the federal government and businesses to eventually lower drug costs.

What we know now:

If fully insured, most of the data required will be held by the insurance company and the law says “issuers” of fully insured policies are responsible to compile and submit the data.

  • The employer should have a written agreement confirming the insurance company is taking full responsibility for RxDC.
    • If they have not already confirmed this, then it’s ideal the employer reach out to “request confirmation the insurance company is bearing full responsibility to compile and submit all Section 204 RxDC reporting.”
  • However, the insurance company will need a little information from the employer, such as the plan number and the average employee-employer premium contribution splits per member per month (we’ll refer to these as PMPM contributions). Employers are already starting to hear from insurance companies asking for these details.
    • PMPM contributions are optional for the calendar year 2020 and 2021 data being reported by December 27, 2022, but your insurance company may request it anyway. So employers may need to follow the insurance company’s instructions for compiling calendar year 2020 and 2021 PMPM contribution data.
    • PMPM contributions are required as of June 1, 2023, and every year thereafter.
    • The calculation involves dividing total premium paid that calendar year by total member months that calendar year.
      • Total member months means number of individuals enrolled in the plan each month (employees, spouses, and dependents) during the calendar year.
      • The insurance company should have the total premium rates and member months, so it’s highly likely the only data they’ll need from the employer are total employee contributions for each calendar year.
      • From there, the insurance company can then subtract the employee contribution data you provide to come up with the employer contribution figures, and then they can divide by total member months since they already have enrollment figures.
      • If you were with different insurance companies for 2020 and 2021, you may hear from each of them separately asking for your calendar year contribution figures.
    • Average employee PMPM =
      • Total calendar year premium paid by the employees
      • Divided by total member months
    • Average employer PMPM =
      • Total calendar year premium paid by employer
      • Divided by total member months

If self-funded, most of the data required will be held by the PBM and some by the TPA, but because “plans and issuers” are responsible for the reporting, “the Departments do not require TPAs or PBMs to submit the information.”

  • The plan sponsor may enter into a written agreement with the TPA and PBM to compile and submit the data on their behalf.
    • We expect virtually all TPAs and PBMs to be willing to enter into such written agreements to take responsibility to compile and submit this reporting on behalf of employers with self-funded health plans. CMS is encouraging TPAs and PBMs to submit aggregate data for all of their clients across their book in that state rather than on a plan by plan basis.
    • If they have not already confirmed this, then it’s ideal the employer reach out to “request confirmation the TPA and PBM are bearing full responsibility to work together to compile and submit all Section 204 RxDC data reporting.”
  • The new guidance includes reporting instructions, a ZIP file with the nine file templates to be submitted, and a ZIP file providing a drug name and therapeutic class crosswalk.
  • Reporting requires one plan file in the CSV template P2, eight data files in the respective CSV templates D1 through D8, and a narrative response in Word or PDF (no template provided).
    • The data must include stop loss insurance premiums paid, which the TPA has and should agree to submit.
    • Wellness claims run through the health plan must be included, which the insurance company or TPA will already have as claims data, so they should include it in the data they compile and submit.
      • Employers do not have to submit details on wellness activity that’s not run through the health plan as a claim.
    • The “narrative response” must describe the impact prescription drug rebates have on premiums and cost sharing and other relevant insights discussed starting on page 42 of the instructions.
      • If drug rebates are passed through to the employer, then the TPA or PBM may not be able to facilitate this portion of the narrative response and ask the employer to provide an explanation of how rebates impact premiums and cost-sharing.
    • Be aware there is no way on the federal HIOS website to verify what has been submitted on the plan’s behalf. Coordination between the employer, TPA, and PBM will be vital to identify which entity is compiling and submitting each data file.
    • See our comments for fully insured plans above on the rules for reporting PMPM contributions. The same rules apply, but rather than using fully insured premiums, the employer uses premium equivalent rates instead, which can either be:
      • COBRA rates without the 2% administrative fee, or
      • “the premium equivalent amounts representing the total cost of providing and maintaining coverage, including claims costs, administrative costs, Administrative Services Only (ASO) and other TPA fees, and stop-loss premiums”
    • All data files are to be submitted via CMS’s HIOS website.

What can employers do now?

Now that we have a better idea of the data files themselves, it’s time for employers to get written agreements from their insurance company if fully insured or their TPA and PBM partners if self-funded.  It’s important to assign responsibility and liability for who will compile the information into the files and submit on the plan’s behalf.  If the TPA and/or PBM require the employer to file some or all of their own data, the employer should verify their HIOS credentials and, if necessary, get started setting themselves up.

Employers should be prepared to provide their plan number and PMPM contributions for the calendar year (those contributions are supposed to be optional for reporting due this December, but the insurance company or TPA might require it anyway).

If drug rebates are passed through to the employer, the employer should also consider how to structure a narrative describing the impact to premiums and cost-sharing for members.  The employer should also read through the instructions starting on page 42 to see if there are other elements the employer will need to explain in a narrative response.

IMA will continue to monitor regulator guidance and offer meaningful, practical, timely information.

This material should not be considered as a substitute for legal, tax and/or actuarial advice. Contact the appropriate professional counsel for such matters. These materials are not exhaustive and are subject to possible changes in applicable laws, rules, and regulations and their interpretations.

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