November 02, 2023

Background

The ACA and its implementing regulations provide that all non-grandfathered group health plans must ensure any annual cost sharing imposed under the plan does not exceed the inflation-adjusted annual limit – also referred to as the maximum out-of-pocket (or MOOP) limit – provided under the ACA. This cost sharing includes deductibles, coinsurance, copayments, and any other expenditure considered a qualifying medical expense. The HDHP rules also require deductibles to be met by the covered individual before plan coinsurance or other coverage begins in order for individuals to contribute to a health savings account (HSA).

Some drug manufacturers provide patients with direct financial support or discounts to help pay for certain prescription drugs – e.g., coupons directing a pharmacy to bill a portion of a patient’s copay or coinsurance obligations to the manufacturer instead of the patient.

In their amendments to the 2020 Notice of Benefit and Payment Parameters (2020 NBPP), HHS stated that amounts offered by drug manufacturers to reduce or eliminate out-of-pocket costs for certain brand name prescription drugs that have available and medically appropriate generic equivalents are not required to be counted toward cost sharing and the MOOP limit. As a result, however, many regulated entities interpreted this to mean that if a generic equivalent was not available, the drug manufacturer assistance was required to accumulate to the MOOP. The Departments issued FAQs About ACA Implementation Part 40 in August 2019 to acknowledge stakeholders’ confusion and addressed the issue again the preamble to the following year’s NBPP.

In the 2021 NBPP, HHS confirmed that any form or amount of direct financial assistance offered by drug manufacturers to reduce or eliminate out-of-pocket costs (e.g., coupons) may – but is not required to – accumulate toward the cost sharing and ACA annual MOOP limit.

Court Ruling

In HIV and Hepatitis Policy Institute et al. v. United States Department of Health and Human Services et al. (HIV and Hepatitis Policy Institute v. HHS), the plaintiffs – three individuals and three patient advocacy groups – sued HHS challenging the 2021 NBPP provisions conflicted with the ACA’s cost sharing definitions and prior regulations. The plaintiffs argued the 2021 NBPP conflicted with the ACA’s statutory definition of cost sharing, conflicted with HHS’ preexisting regulatory definition of cost sharing, and was arbitrary and capricious because it gave the same statutory and regulatory language different meanings.

The U.S. District Court for the District of Columbia vacated the 2021 NBPP rule, agreeing with the plaintiffs that the ACA’s definition of “cost sharing” does not clearly address the treatment of manufacturer assistance. The court focused on the statutory definition of “cost sharing” as, “(i) deductibles, coinsurance, copayments, or similar charges” and “(ii) any other expenditure required of an insured individual which is a qualified medical expense (within the meaning of section 223(d)(2) of Title 26) with respect to essential health benefits covered under the plan.” The court held that the provision is arbitrary and capricious since it could have two different meanings with respect to manufacturer assistance, which can be chosen at the discretion of the group health plan: either to allow the accumulation of the copay assistance or to not allow the accumulation. The court directed HHS to issue an interpretation of the statutory definition of cost sharing (and to not provide a choice).

Employer Plan Sponsor Implications and Next Steps

Employer plan sponsors should review the ruling with legal counsel, carriers/vendors including HSA vendors, and third-party administrators (TPAs) to discuss implications for their group health plans. The court’s ruling in HIV and Hepatitis Policy Institute v. HHS impacts employer plan sponsors who offer health savings account (HSA)-qualified high-deductible health plans (HDHPs). The 2021 NBPP discussed potential conflicts with the HDHP rules, specifically in terms of the requirement that only amounts paid by the individual may apply towards the HDHP deductible. Questions about these conflicting considerations may be revived based on the court’s ruling.

Plan sponsors should monitor for HHS guidance issued in response to the court’s ruling, including whether the Department reaffirms their position from FAQs Part 40, which provided a non-enforcement safe harbor while the federal government considered and addressed the issue.

Employer plan sponsors with insured coverage options may already be contending with some state laws that require fully-insured plans to apply direct drug manufacturer support toward the plan’s cost sharing limits. Self-insured group health plans covered by ERISA preemption protections are not subject to state insurance requirements, but as the federal guidance emerges, plans will want to review all of their coverage offerings to ensure compliance with both federal and state requirements (if applicable).

At the time of writing, it is unclear whether the federal government will appeal the court’s ruling, but Business Group on Health will keep members informed of legal and regulatory developments.

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Articles & Guides Affordable Care Act (ACA)