In April 2019 the U.S. Department of Health and Human Services ("HHS") issued regulations addressing whether the amount of financial support provided by drug manufacturers, such as co-pay assistance coupons, must be counted toward the annual cost-sharing limits under the Patient Protection and Affordable Care Act (the "ACA"). HHS was concerned that drug manufacturers' cost-sharing support increased the cost of prescription drugs and encouraged patients to use higher-cost brand name drugs instead of less expensive generic drugs. Accordingly, under the new regulation, amounts individuals pay toward cost-sharing using support provided by a drug manufacturer (e.g., a co-pay coupon) to reduce or eliminate their out-of-pocket costs for certain brand-name prescription drugs are generally not required to be counted toward the annual cost-sharing limits under the ACA. To qualify for this treatment, a brand-name prescription drug must have a generic equivalent that is available and medically appropriate. Under this regulation, a group health plan could be amended to exclude certain co-pay assistance from counting toward a participant's annual cost-sharing limit, which would result in a participant spending her own funds (instead of only the co-pay coupon) to reach the annual cost-sharing limit.
In August 2019 the Departments of Labor, HHS, and Treasury (the "Departments") released new FAQ guidance regarding the circumstances under which manufacturers' drug co-pay assistance may be excluded from the ACA's annual cost-sharing limit. The FAQ explained that for plan years beginning on or after January 1, 2020, plans are permitted (but not required) to exclude the value of drug manufacturers' coupons from counting toward the ACA's cost-sharing limit when a medically appropriate generic equivalent drug is available. The Departments recognized that "this provision can be read to imply that, in any other circumstances, group health plans ... are required to count such coupon amounts toward the annual limitation on cost sharing." The Departments also recognized that this requirement could also conflict with certain rules that apply to high-deductible health plans.
In the FAQ, the Departments announced they would undertake new rulemaking and that until new rules are issued and effective, "the Departments will not initiate an enforcement action if...a group health plan excludes the value of drug manufacturers' coupons from the annual limitation on cost sharing, including in circumstances in which there is no medically appropriate generic equivalent available." This FAQ generally allows a group health plan to be amended to exclude the value of drug manufacturers' coupons from the ACA's annual cost-sharing limit even if the drug for which the coupon is provided does not have a medically appropriate generic equivalent available.
Employers that have adopted the co-pay accumulator program should ensure they comply with the HHS regulations and FAQ guidance, as well as applicable state laws that regulate the use of prescription drug coupons and similar financial support. Those employers should also ensure the plan document and summary plan description include specific provisions relating to the co-pay accumulator program, clearly explain how the program works, and identify the drugs and manufacturer assistance to which it applies. Employers should continue to monitor regulatory developments, as the Departments are likely to issue new co-pay accumulator program regulations in 2020. If you need any assistance with co-pay accumulator programs, please contact a member of the Kutak Rock Employee Benefits Practice Group.
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