The Centers for Medicare and Medicaid Services has floated proposed regulations that would affect drug benefits for group plans and association plans and attempt to reduce drug expenses for health plan enrollees and drug plans.
While the rules seem to be focused on individual plans sold on government-run exchanges, three of the changes would also affect small and mid-sized group plans.
Mid-year formulary changes
Under current regulations, health insurers are barred from making changes to their drug formularies mid-year. They can only introduce changes upon renewal.
The CMS says it wants to boost incentives for drug plans to use generic drugs, so it is proposing a new rule that would allow insurers to:
- Add a generic drug that becomes available mid-year.
- Remove the equivalent brand-name drug from the formulary, or
- Remove the equivalent brand-name drug to a different tier in the formulary.
Under the rules, insurers would have to notify their affected enrollees at least 60 days before the change would take effect. They must also offer a process for an enrollee to appeal the decision.
This rule would affect insurers in the individual, small group, and large group markets.
Excluding certain brand-name drugs
Under existing regulations, all prescription medications covered under an insurance contract are considered an essential health benefit, including the requirements that aim to ensure that the drug coverage is comprehensive. Under the Affordable Care Act, health plans are required to cover 10 essential benefits, and that includes the medications that are required to treat them.
The CMS wants to change this by letting insurers exclude a brand-name pharmaceutical from “essential health benefits”, or EHBs, if there is a generic equivalent that is available and medically suitable.
As with the current rule, the proposal would only apply to plans in the individual and small group markets. That’s because large group and self-insured plans are not required to cover all 10 categories of EHBs.
The proposal would also permit insurers to count only the cost of the generic equivalent (and not the cost of the brand-name drug) toward the enrollee’s out-of-pocket limit. Also, insurers would be permitted to apply an annual and/or lifetime dollar maximum to the brand-name drug, since the prohibition against annual and lifetime dollar limits only applies to EHBs.
Currently, some insurers will count manufacturer coupons for brand-name drugs in addition to what the enrollee pays in calculating their out-of-pocket outlays for deductible purposes. They may do so depending on laws in the various states in which they operate.
For example, take the scenario of a drug that costs $600, and the manufacturer provides a $400 coupon that can be used to reduce the cost of the drug and the enrollee pays $200 out of pocket. Currently, insurers will count the full $600 towards the deductible and out-of-pocket maximum.
The CMS’s proposed rule would allow insurers to only include the actual out-of-pocket expense for the enrollee when calculating how much of an out-of-pocket maximum has been satisfied.
What comes next
The comment period for the proposed regulations ended on Feb. 19, 2019, and the final rules could be out before summer. We will keep you posted once the new regulations are out.
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