Compliance News | November 30, 2021
The Consolidated Appropriations Act of 2021 enacted both the No Surprises Act and a provision requiring group health plans and insurers to submit to the federal government information on prescription drug costs and spending from the previous year. The Departments of Health and Human Services (HHS), Labor (DOL) and Treasury (collectively, the Departments) and the Office of Personnel Management (OPM) released interim final rules with a request for comments on this reporting requirement.
These regulations are applicable on December 27, 2021. The effective date for the first set of reporting is still December 27, 2021, but the Departments are deferring enforcement until December 27, 2022 to provide additional time for regulated entities to comply. For subsequent years, the deadline is June 1. This means that data for the 2020 and 2021 calendar years must be reported by December 27, 2022, and data for the 2022 calendar year must be reported by June 1, 2023.
The Departments welcome comments on the interim final rules. The comment deadline is January 24, 2022. Comments should be sent to the Centers for Medicare & Medicaid Services.
Group health plans are required to report the following information to the secretaries of the DOL and HHS for calendar years beginning with 2020:
The Departments will provide an internet portal where reporting entities can submit the required data. They intend to build a data-collection system that will allow multiple reporting entities to submit data that can be aggregated for various plans. For example, a third-party administrator may submit aggregated data for all of the group health plans that it administers. However, the aggregated data will be subject to certain parameters for reporting to assure that the Departments can link the data as appropriate. Reporting on an aggregate basis will make the Departments’ role in analyzing data easier, but may limit the usefulness of the data collection for individual plan sponsors.
In addition, the Departments stated they will provide detailed technical guidance in the instructions to the data collection instrument regarding reporting, including examples of the costs that should be reported in each category.
For more information, refer to this fact sheet.
Using the information reported by plans, the Departments will analyze trends in overall spending and publish analyses intended to enable plans to negotiate fairer rates and lower prescription drug costs.
The Departments will issue the first report in June 2023. Thereafter, they will issue a report every two years.
Plans and insurers are required to submit information for the previous plan year. The Departments are requiring plans and insurers to submit information based on the “reference year,” which is defined as the calendar year immediately preceding the calendar year in which the data submissions are due (regardless of the plan year).
Plan sponsors that fail to report the required data may be subject to penalties under both ERISA and the Internal Revenue Code. Governmental plans may be subject to penalties under the PHSA. The rules provide guidance concerning reporting responsibilities for fully insured plans and self-insured plans. Plan sponsors of fully insured plans may satisfy the reporting rules if the plan sponsor requires the health insurance issuer offering the coverage to report the information pursuant to a written agreement. In case of a violation, the insurance issuer would be responsible, not the group health plan. However, for self-insured plans, the plan sponsor may delegate responsibility for reporting to other entities but retains responsibility for any reporting violations by that other entity.
The rules clarify that these reporting requirements apply to grandfathered group health plans as well as non-grandfathered. These interim final rules do not apply to health reimbursement arrangements and other account-based group health plans, dental plans or other excepted benefits.
Plan sponsors should begin to prepare for this new reporting requirement. This will involve working with the plan’s service providers to determine reporting roles and amend contracts to clarify obligations between the entities.
For additional information about the Consolidated Appropriations Act requirements, see Segal’s compliance plan.
This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.
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