Did you fully digest the final regulations the Department of Health and Human Services released this spring regarding prescription drug coupons and employee cost-sharing in health plans?
Because the regulations used the term insurer, I initially read them as applying to the fully-insured side. However, the regulations also apply to most employer-sponsored self-funded medical plans. Because more than 60% of American workers receiving health benefits at work are covered by an employer-sponsored self-funded plan, why is the term health insurer still so commonly used by regulators and elected representatives?
My colleague Karen McLeese, vice president of benefit regulatory affairs at CBIZ Benefits and Insurance Services, says, “cost accumulator programs can only be used in a situation where a generic drug is available; with the caveat that if a generic drug is not medically advisable, then a cost accumulator cannot be used.”
What this means is if you’ve taken measures to ensure that prescription drug coupons cannot indirectly reduce plan accumulators — a deductible or out-of-pocket maximum — you’ll need to adjust the program before your 2020 plan year begins so that if a generic drug is not available, the value of the coupon can reduce plan accumulators.
The conversation for employers sponsoring self-funded plans has changed from “should we prevent coupons from shifting costs from employee to employer” to “can we?”
The primary focus of most coupon offset programs in on specialty medication where generics are usually unavailable. The new regulations will essentially prevent these programs from achieving their primary goal.
For example, let’s say an employer-sponsored self-funded health plan has a $2,000 deductible and 100% coinsurance. An employee on the plan is prescribed a specialty medication with no generic equivalent that costs $4,000 per month. The individual receives a coupon valued at $2,000. Before cost accumulator programs were introduced, in the first month the self-funded plan paid $2,000 and credited the employee as paying $2,000, satisfying the worker’s deductible.
The coupon reduced the employee’s out-of-pocket expense to $0. Then in the second month, the self-funded plan paid the full $4,000 because the employee had already satisfied the deductible. The coupon simply transferred $2,000 in cost from the employee to the employer. In many circumstances this additional $2,000 employer cost would lower total compensation for all employees.
Under the cost accumulator programs, if the plan identified coupon use, it would not credit those coupons against the deductible or the out-of-pocket maximum. In our example, in the first month the employee still pays $0 but also receives $0 credit toward their $2,000 deductible. In the second month both the employee and employer pay $2,000. So the employer saves $2,000 and can use those collective funds toward increased total compensation for all employees.
Under these new regulations, we’re back to square one in situations where there is no equivalent generic medication. Employers sponsoring self-funded plans should make the following considerations.
· Do you presently use a cost accumulator program?
· If yes, is it compliant under these new regulations?
· If no, will your pharmacy benefit manager amend the program before your 2020 plan year begins to bring it into compliance?
· Is your PBM able to identify what percentage of the savings from the program is attributable to specialty medications that do not have a generic equivalent? If yes, is the projected savings moving into 2020 worthwhile enough to consider continuing the program?
· The regulations use the phrase available and medically appropriate generic equivalent. By available are we talking about generics that have the exact same chemical make-up as the brand? And, who is responsible for determining if the generic is medically appropriate?
· Do these programs introduce any additional legal risks to the employer?
Additional guidance from HHS would be welcome. In the meantime, I recommend you consult your attorney, benefit consultants and other advisers as you navigate this complicated topic.
