The far-reaching Consolidated Appropriations Act of 2021 contains a number of landmark regulatory changes affecting medical providers, insurers as well as pharmacy benefit managers that are aimed at making pricing more transparent for consumers and the general public.
Health plan sponsors have a fiduciary obligation to disperse plan assets in a prudent manner for the exclusive benefit of plan participants and beneficiaries, but it’s been difficult for regulators to ensure that they live up to those legal obligations. The CAA, signed into law in December 2020, aims to do that by requiring covered entities to report on a myriad of costs and expenses in their contracts.
The CAA covers a wide swath of organizations that play a role in the health care and related insurance arena. This includes:
- Health, vision and dental insurers.
- Medical management service providers
- Benefit administration selection services
- Pharmacy benefit managers
- Wellness plans
- Transparency tool vendors
The impending regulations will also affect employer groups and third party administrators that offer drug benefits to their employees by ushering in new reporting requirements. The new transparency rules will better help them identify any conflicts of interest and compensation amounts in their PBM contracts.
It should be noted that the CAA requirements affect both Affordable Care Act-compliant plans as well as grandfathered plans. And the rules affect not only health plans, PBMs and medical institutions, but also plan sponsors.
Also, PBMs will be required to provide certain information to plan sponsors, who will be able to use that data to satisfy their own reporting requirements.
To make sure you stay on top of the impending changes, here is a quick summary and analysis of them and how they could affect your organization:
Transparency in coverage
The final rules require covered entities to publish prices for all covered items, services as well as prescription drugs for every plan year going forward. The following must be published in machine-readable format for plans incepting on or after Dec. 27, 2021:
- In-network negotiated rates for all items and services.
- Allowed amounts for out-of-network items, services and prescription drugs.
- Negotiated rates and historical prices for in-network prescription drugs (net of rebates, discounts, fees and other price concessions).
- Contracted fees and services that ERISA-covered group health plans charge a “responsible plan fiduciary.”
- Compensation (commissions, fees and other income) for health insurance brokers and other benefit plan service providers.
Effective date: Jan. 1, 2022 (but enforcement has been deferred until July 1, 2022).
Non-gag clauses
The CAA prohibits health insurers and group health plans from agreements with providers that include gag clauses related to provider cost, price and quality information. The law bars covered entities from restricting access to that information as well as access to de-identified claims information for the purposes of analysis and improvement.
Effective date: The Centers for Medicare and Medicaid Services is expected to issue guidance for these rules for how covered entities can prove compliance in 2022.
Prescription drug reporting requirements
The CAA also requires the following reporting on pharmacy benefits and drug costs by PBMs and the entities they contract with:
- The beginning and end dates of the plan year, number of enrollees, and each state in which the plan is offered.
- The top 50 most frequently dispensed brand prescription drugs by the plan, and the total number of paid claims for each such drug.
- The top 50 most expensive prescription drugs paid for by the plan by total annual spending, and the annual amount spent by the plan for each such drug.
- The 50 prescription drugs with the greatest increase in plan expenditures since the prior plan year, and the change in amounts spent for each drug.
- The total spending on health care services by plan, broken down into categories, including hospital costs, primary care costs, specialty care costs and prescription drug costs.
- Average monthly premiums paid by employers and by participants.
- How premiums are affected by pharmaceutical rebates, fees and any other remuneration paid by drug manufacturers to the plan or its administrators or service providers with respect to prescription drugs prescribed to enrollees in the plan or coverage.
The rules require the above information for each therapeutic class of drugs and the 25 drugs that have the highest amount of manufacturer rebates and other remuneration paid under the plan. Plans and issuers must also report how premiums and out-of-pocket costs are affected by these rebates, fees or other remuneration.
Effective date: Regulations and guidance have not yet been issued, but CMS and other agencies have encouraged plans to start reporting for 2020 and 2021 plan years by Dec. 27, 2022.
Price comparison tool
The CAA requires that providers and health plans provide real-time cost-sharing information online for covered services and items (including pharmaceuticals).
Effective date: Implementation will be staggered due to the sheer scope of the data that will need to be made available publicly:
- Cost-sharing information for 500 shoppable items and services (that have yet to be identified) by Jan. 1, 2023.
- Cost-sharing information for all covered items and services by Jan. 1, 2024.
The takeaway
Providers, insurers, PBMs and self-insured employers should already be gearing up to comply with the new transparency rules as the window to get this posted on their sites is fast approaching. The focus at the moment should be on putting systems in place to report on costs and services.
If a service provider fails to disclose the required information, the Department of Labor could enforce civil monetary penalties under ERISA. Additionally, it could trigger a 15% excise tax, which can inflate to 100% if the fiduciary does not correct their failure to disclose in a timely manner.
This should also include compiling all of an organization’s contracts and conflict of interest statements.
For the other changes, as new regulations or guidance are issued, we’ll keep you abreast of changes and how they may affect you.