Extensive reporting requirements regarding prescription drug and health care spending are among the many new compliance obligations created by the Consolidated Appropriations Act, 2021 (“CAA”). On November 17, 2021, the agencies responsible for the prescription drug and health care spending reporting regime, including the Department of Labor, Department of Treasury, and the Department of Health and Human Services (the “Departments”), issued interim final rules outlining how they intend to implement this part of the new law. The reporting requirements, which apply to all employer-sponsored major medical plans—regardless of size—are geared towards collecting as much price-related data as possible. Ultimately, this is intended to help the administration prepare a statutorily required report on prescription drug and medical spending nationally.

Responsibility for Reporting

While the new rules require some “plan level” reporting, the Departments clearly anticipate that most of the reporting obligation will fall on claims administrators: specifically, insurance carriers, third-party administrators (TPAs), and pharmacy benefit managers (PBMs). However, in most cases, the federal government does not have direct jurisdiction over these entities.  As a result, the legal obligation to report falls on plan sponsors. To “solve” this problem, the rules anticipate that plan sponsors will contract with these third parties to handle the necessary reporting. The regulations provide that if the plan sponsor of a fully insured plan contracts with a carrier to handle reporting, the plan sponsor will have no additional responsibility related to these requirements. For self-insured plans, the plan sponsor can still contract with their TPA/PBM to handle the reporting; but the plan sponsor retains responsibility for ensuring the reporting is completed.

Filing Requirements

In August 2021, the Departments announced they would not enforce these reporting requirements until regulations were issued. The new guidance provides that reporting on the 2020 and 2021 calendar years is now “due” by December 27, 2022.  After that, reporting will be due by June 1 following the applicable reporting year. This means that reporting on the 2022 calendar year will be due on June 1, 2023. The reports themselves will be filed through an online portal that will be launched by the Departments. Specific instructions on how this system will work are forthcoming.

Plan-Level Reporting

The new reporting system will allow multiple entries for a single plan. This means that medical and pharmacy claims administrators will not have to coordinate their filings at the plan level. However, plan sponsors will need to ensure that all vendors reporting on their behalf use the same “plan level” information in their submissions. This plan level data includes:

• Identifying information for the plan;
• The beginning and end dates of the plan year that ended on or before the last day of the calendar year being reported on;
• The number of participants and beneficiaries covered on the last day of the calendar year being reported on; and
• Each state in which the plan is offered.

Aggregate Reporting

The substantive spending disclosures will be made at the aggregate level (unless a plan sponsor opts out of aggregate reporting and instead submits their own report). For this, each medical claims administrator will need to create a report for each market segment in which they operate and for each state in which coverage is offered. There are seven applicable market segments: (1) the individual market, (2) the student market, (3) the fully insured small group market, (4) the fully insured large group market, (5) self-funded plans offered by small employers, (6) self-funded plans offered by large employers, and (7) plans offered to federal employees. For fully insured coverage, data should be assigned to the State in which the insurance policy was issued. For self-funded groups, data should be assigned to the State where the plan sponsor has its principal place of business.

The rules differ slightly for pharmacy benefit managers. They are required to issue their reports by market segment, State, AND by medical claims administrator. This difference is intended to allow the Departments to match pharmacy spend information with medical spend information for the same populations. However, these methodologies may change in the future. While this interim final regulation takes effect right away, the Departments are still seeking public comment on it, and specific comments were requested on this issue.

Required Information

To meet the reporting requirements, medical claims administrators will need to report the total annual spending on health care services paid for by (1) the plan, and (2) participants and beneficiaries.  This information needs to be broken down as follows:

• Hospital costs;
• Health care provider and clinical costs for primary care;
• Health care provider and clinical costs for specialty care;
• Costs for prescription drugs paid for through the medical coverage (such as injections provided in a physician’s office); and 
• Other medical costs, including wellness services.

Pharmacy benefit managers will need to include the following in their reports:

• Lists of the top 50:
  • Most frequently dispensed prescription drugs by total number of paid claims for prescriptions filled;
  • Most costly prescription drugs determined by annual spending on each drug; and
  • Drugs with the greatest increase in annual spending on over the prior year.
• For each drug appearing on one of the “top 50” lists:
  
  • Total annual spending by the plan;
  • Total annual spending by plan participants and beneficiaries;
  • Number of participants or beneficiaries with a paid claim;
  • Total dosage units dispensed; and
  • Number of paid claims.

With respect to the top 50 drugs representing the greatest cost increase, the information below needs to be reported for both the applicable reporting year and the prior year.

• The method used allocate prescription drug rebates, fees, and other renumeration if applicable;
• Prescription drug rebates, fees, and other renumeration, including:
  
  • Total prescription drug rebates, fees and other renumeration, and the difference in the amount paid by the plan to the pharmacy administrator compared to pharmacies;
  • Total prescription drug rebates, fees, and other renumeration (excluding bona fide service fees):
    
    • Passed through to the plan;
    • Passed through to the participants and beneficiaries;
    • Retained by the pharmacy benefit manager;
    • For each therapeutic class and each of the top 25 prescription drugs with the greatest amount of total drug rebates or other price concessions for the year:
      
      • Total annual spending by the plan;
      • Total annual spending by plan participants and beneficiaries;
      • Number of participants or beneficiaries with a paid claim;
      • Total dosage units dispensed; and
      • Number of paid claims.

Finally, information needs to be reported on the impact of spending on overall premiums.  Claims administrators are likely in a poor position to quantify this information. As such, we anticipate this will be among the most difficult information to collect—particularly in the aggregate.  This information includes:

• Premium amounts, including:
  
  • Average monthly premium amounts paid by employers and other plan sponsors; 
  • Average monthly premium amounts paid by participants and beneficiaries; 
  • Total annual premium amount; and
  • Total number of “life years” covered (calculated by determining total months individuals were covered during the year and dividing that number by 12).
• The impact of prescription drug rebates, fees, and other renumeration on premium and cost sharing amounts.

Final Thoughts

The new reporting requirements outlined above represent a substantial additional workload for claims administrators and plan sponsors. While initial reports aren’t due until late December 2022, the systems and processes necessary to facilitate this reporting will be extensive. This new reporting is in addition to the responsibilities plan sponsor have to implement the new prohibitions on surprise billing, changes to ID cards, preparing for the health plan transparency requirements that start in July 2022, and much more. There is a lot of work to be done in the year ahead, and now is the time to plan how that work will get done.