In a Reversal, Plans Need Not Count Drug Manufacturer Coupons Toward the ACA's Cost-Sharing Annual Limits | Practical Law

In a Reversal, Plans Need Not Count Drug Manufacturer Coupons Toward the ACA's Cost-Sharing Annual Limits | Practical Law

The Departments of Labor (DOL), Health and Human Services (HHS), and Treasury have issued FAQ guidance addressing whether drug manufacturer coupons for prescription brand drugs count toward the Affordable Care Act's (ACA's) annual limits on cost-sharing, including when there is no medically appropriate generic drug available.

In a Reversal, Plans Need Not Count Drug Manufacturer Coupons Toward the ACA's Cost-Sharing Annual Limits

by Practical Law Employee Benefits & Executive Compensation
Published on 28 Aug 2019 • USA (National/Federal)
The Departments of Labor (DOL), Health and Human Services (HHS), and Treasury have issued FAQ guidance addressing whether drug manufacturer coupons for prescription brand drugs count toward the Affordable Care Act's (ACA's) annual limits on cost-sharing, including when there is no medically appropriate generic drug available.
On August 26, 2019, the DOL, HHS, and Treasury (Departments) issued FAQ guidance addressing whether drug manufacturer coupons for prescription brand drugs count toward the Affordable Care Act's (ACA's) annual limit on cost-sharing, including when there is no medically appropriate generic drug. (Regarding the ACA's annual limits on cost-sharing, see Practice Note, Cost-Sharing Restrictions Under the ACA.)

Cost-Sharing Annual Limits Under the ACA

As background, the ACA imposes annual limits on cost-sharing under which non-grandfathered group health plans may not exceed certain ACA limits on an individual's out-of-pocket costs. HHS updates the cost-sharing limits in its annual notice of benefit and payment parameters. For 2019, the cost-sharing limits are:
  • $7,900 for self-only coverage.
  • $15,800 for non-self-only coverage.
For 2020, the cost-sharing limits will be:
  • $8,150 for self-only coverage.
  • $16,300 for non-self-only coverage.
(HHS Notice of Benefit and Payment Parameters for 2020; 84 Fed. Reg. 17454, 17541 (Apr. 25, 2019).)
In its benefit and payment parameters notice for 2020, HHS finalized a proposal involving how drug manufacturer coupons are counted toward the ACA's annual limit on cost-sharing. The final rule permits plans and insurers to exclude the value of drug manufacturer coupons from counting toward the ACA's annual limit on cost-sharing when a generic equivalent is available and medically appropriate.

Confusion Regarding Final Rule's Implications

After the final rule was published, the Departments received questions regarding the rule's scope, including whether drug manufacturer coupons count toward the ACA's cost-sharing limits in circumstances other than when a medically appropriate generic drug is available. Some commenters asserted that the final rule's provision could be interpreted to imply that, in situations other than those addressed in the final rule, plans and insurers must count drug manufacturer coupon amounts toward the annual limit on cost-sharing.

Potential Conflict with Rule for HDHPs and HSAs

The Departments acknowledged that interpreting the final rule to require drug manufacturer coupons to count toward the ACA's cost-sharing limits could conflict with prior IRS guidance on high deductible health plans (HDHPs) and health savings accounts (HSAs) (see IRS Notice 2004-50, Q&A 9 and Practice Note, Defined Contribution Health Plans: Overview: Definition of a High Deductible Health Plan (HDHP)). Specifically, under the prior guidance:
  • An HDHP must disregard drug discounts (and certain other discounts) in determining whether the HDHP's minimum deductible has been met.
  • Only amounts that are actually paid by an individual are taken into account for this purpose.
As a result, the final rule's provision on counting drug manufacturers' coupons could make it difficult for plans and insurers to comply with both the final rule and the prior HDHP rules.

Temporary Non-Enforcement Policy

In the FAQ guidance, the Departments indicated that they will address this ambiguity in developing HHS's Notice of Benefit and Payment Parameters for 2021. Until then, the Departments will not take enforcement action against plans and insurers that exclude the value of drug manufacturer coupons from the ACA's annual limits on cost-sharing. This includes situations in which there is no medically appropriate generic equivalent available. States may implement a similar nonenforcement policy, and HHS will not treat such a state as failing to enforce the annual limit on cost-sharing regarding health insurers.