Prescription Drug and Health Care Spending
| Published date | 23 November 2021 |
| Citation | 86 FR 66662 |
| Record Number | 2021-25183 |
| Section | Rules and Regulations |
| Court | Employee Benefits Security Administration |
Federal Register, Volume 86 Issue 223 (Tuesday, November 23, 2021)
[Federal Register Volume 86, Number 223 (Tuesday, November 23, 2021)]
[Rules and Regulations]
[Pages 66662-66704]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-25183]
[[Page 66661]]
Vol. 86
Tuesday,
No. 223
November 23, 2021
Part IIIOffice of Personnel Management-----------------------------------------------------------------------5 CFR Part 890Department of the Treasury-----------------------------------------------------------------------Internal Revenue Service-----------------------------------------------------------------------
26 CFR Part 54Department of Labor-----------------------------------------------------------------------Employee Benefits Security Administration-----------------------------------------------------------------------
29 CFR Part 2590Department of Health and Human Services-----------------------------------------------------------------------
45 CFR Part 149Prescription Drug and Health Care Spending; Interim Final Rule
Federal Register / Vol. 86, No. 223 / Tuesday, November 23, 2021 /
Rules and Regulations
[[Page 66662]]
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OFFICE OF PERSONNEL MANAGEMENT
5 CFR Part 890
RIN 3206-AO27
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 54
[TD 9958]
RIN 1545-BQ10
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Part 2590
RIN 1210-AC07
DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Part 149
[CMS-9905-IFC]
RIN 0938-AU66
Prescription Drug and Health Care Spending
AGENCY: Office of Personnel Management; Internal Revenue Service,
Department of the Treasury; Employee Benefits Security Administration,
Department of Labor; Centers for Medicare & Medicaid Services,
Department of Health and Human Services.
ACTION: Interim final rules with request for comments.
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SUMMARY: This document sets forth interim final rules implementing
provisions of the Internal Revenue Code (the Code), the Employee
Retirement Income Security Act (ERISA), and the Public Health Service
Act (PHS Act), as enacted by the Consolidated Appropriations Act, 2021
(CAA). These provisions are applicable to group health plans and health
insurance issuers offering group or individual health insurance
coverage. These interim final rules add provisions to existing rules
under the Code, ERISA, and the PHS Act. These interim final rules
implement provisions of the Code, ERISA, and PHS Act that increase
transparency by requiring group health plans and health insurance
issuers in the group and individual markets to submit certain
information about prescription drugs and health care spending to the
Department of Health and Human Services (HHS), the Department of Labor
(DOL), and the Department of the Treasury (collectively, the
Departments). The Departments are issuing these interim final rules
with largely parallel provisions that apply to group health plans and
health insurance issuers offering group or individual health insurance
coverage. The Office of Personnel Management (OPM) is also issuing
interim final rules that require Federal Employees Health Benefits
(FEHB) carriers to report information about prescription drugs and
health care spending in the same manner as a group health plan or
health insurance issuer offering group or individual health insurance
coverage.
DATES:
Effective date: These regulations are effective on December 23,
2021.
Applicability date: The regulations are generally applicable
beginning December 27, 2021. The OPM-only regulations that apply to
health benefits plans and carriers under the FEHB Program are
applicable beginning December 27, 2021. However, as discussed in
section II.C.1.b. of this preamble, the Departments will provide
temporary and limited deferral of enforcement during the first year of
applicability and this temporary and limited deferral of enforcement
will apply, in the same manner, to FEHB plans and carriers.
Comment date: To be assured consideration, comments must be
received at one of the addresses provided below, by January 24, 2022.
Please see section V.E. of this preamble for information regarding
submission of comments on the information collection requirements.
ADDRESSES: Written comments may be submitted to the addresses specified
below.
In commenting, refer to file code CMS-9905-IFC.
Comments, including mass comment submissions, must be submitted in
one of the following three ways (please choose only one of the ways
listed):
1. Electronically. You may submit electronic comments on this
regulation at https://www.regulations.gov by entering the file code in
the search window and then clicking on ``Comment.''
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-9905-IFC, P.O. Box 8016,
Baltimore, MD 21244-8016.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-9905-IFC, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Padma Babubhai Shah, Office of
Personnel Management, at 202-606-4056.
Christopher Dellana, Internal Revenue Service, Department of the
Treasury, at 202-317-5500.
Matthew Litton or Shannon Hysjulien, Employee Benefits Security
Administration, Department of Labor, at 202-693-8335.
Christina Whitefield, Centers for Medicare & Medicaid Services,
Department of Health and Human Services, at 301-492-4172.
Customer Service Information: Information from OPM on health
benefits plans offered under the FEHB Program can be found on the OPM
website (www.opm.gov/healthcare-insurance/healthcare/). Individuals
interested in obtaining information from DOL concerning employment-
based health coverage laws may call the Employee Benefits Security
Administration (EBSA) Toll-Free Hotline at 1-866-444-EBSA (3272) or
visit DOL's website (www.dol.gov/ebsa). In addition, information from
HHS on private health insurance coverage and coverage provided by non-
federal governmental group health plans can be found on the Centers for
Medicare & Medicaid Services (CMS) website (www.cms.gov/cciio), and
information on health care reform can be found at www.HealthCare.gov.
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. The Departments generally
post all comments received before the close of the comment period on
the following website as soon as possible after they have been
received: http://www.regulations.gov. Follow the search instructions on
that website to view public comments. The Departments will not post on
Regulations.gov public comments that make threats to
[[Page 66663]]
individuals or institutions or suggest that the individual will take
actions to harm the individual. The Departments continue to encourage
individuals not to submit duplicative comments. The Departments will
post acceptable comments from multiple unique commenters even if the
content is identical or nearly identical to other comments.
I. Background
A. Prescription Drug and Health Care Spending Transparency Under the
Consolidated Appropriations Act, 2021
On December 27, 2020, the Consolidated Appropriations Act, 2021
(Pub. L. 116-260) (CAA) was enacted. Section 204 of Title II of
Division BB of the CAA added parallel provisions at section 9825 of the
Internal Revenue Code (the Code), section 725 of the Employee
Retirement Income Security Act (ERISA), and section 2799A-10 of the
Public Health Service Act (PHS Act), which require group health plans
and health insurance issuers offering group or individual health
insurance coverage to annually submit to the Departments certain
information about prescription drug and health care spending. The
statute provides that data shall be reported not later than 1 year
after the date the CAA was enacted, and not later than June 1 of each
year thereafter.
The data submission required under section 9825(a) of the Code,
section 725(a) of ERISA, and section 2799A-10(a) of the PHS Act
(section 204 data submissions) includes general information on the plan
or coverage, such as the beginning and end dates of the plan year, the
number of participants, beneficiaries, or enrollees, as applicable, and
each state in which the plan or coverage is offered. Plans and issuers
must also report the 50 most frequently dispensed brand prescription
drugs, and the total number of paid claims for each such drug; the 50
most costly prescription drugs by total annual spending, and the annual
amount spent by the plan or coverage for each such drug; and the 50
prescription drugs with the greatest increase in plan or coverage
expenditures from the plan year preceding the plan year that is the
subject of the report, and, for each such drug, the change in amounts
expended by the plan or coverage in each such plan year (top 50 lists).
Additionally, plans and issuers must report total spending on health
care services by the plan or coverage broken down by the type of costs
(including hospital costs; health care provider and clinical service
costs, for primary care and specialty care separately; costs for
prescription drugs; and other medical costs, including wellness
services); spending on prescription drugs by the plan or coverage as
well as by participants, beneficiaries, and enrollees, as applicable;
and the average monthly premiums paid by participants, beneficiaries,
and enrollees and paid by employers on behalf of participants,
beneficiaries, and enrollees, as applicable. Plans and issuers must
report any impact on premiums by rebates, fees, and any other
remuneration paid by drug manufacturers to the plan or coverage or its
administrators or service providers, including the amount paid with
respect to each therapeutic class of drugs and for each of the 25 drugs
that yielded the highest amounts of rebates and other remuneration
under the plan or coverage from drug manufacturers during the plan year
(top 25 list). Finally, plans and issuers must report any reduction in
premiums and out-of-pocket costs associated with these rebates, fees,
or other remuneration. The Departments intend to provide greater
technical detail regarding each data element in the section 204 data
submission in the instructions for the information collection
instrument. The Departments also intend to provide an internet portal
where reporting entities can submit the required data.
Section 9825(b) of the Code, section 725(b) of ERISA, and section
2799A-10(b) of the PHS Act additionally require the Departments to
publish on the internet a report on prescription drug reimbursements
for plans and coverage, prescription drug pricing trends, and the role
of prescription drug costs in contributing to premium increases or
decreases under these plans or coverage, with information that is
aggregated so that no drug or plan specific information is made public
(section 204 public report). This section 204 public report must be
published no later than 18 months after the date on which plans and
issuers are required to first submit the information and biannually
thereafter. The section 204 public report may not include any
confidential or trade secret information submitted to the Departments,
pursuant to section 9825(c) of the Code, section 725(c) of ERISA, and
section 2799A-10(c) of the PHS Act. These interim final rules implement
section 9825 of the Code, section 725 of ERISA, and section 2799A-10 of
the PHS Act. The Departments seek comment on all aspects of these
interim final rules.
Under the FEHB Act, 5 U.S.C. 8901 et seq., OPM is charged with
administering the FEHB Program and maintains oversight and enforcement
authority with respect to FEHB plans, which are federal governmental
plans. Pursuant to 5 U.S.C. 8910, OPM is joining the Departments to
require the submission of prescription drug and health care spending
data from FEHB plans in the same manner as plans and issuers must
provide such data under section 9825 of the Code, section 725 of ERISA,
and section 2799A-10 of the PHS Act.
On July 9, 2021, President Biden issued Executive Order 14036,
``Promoting Competition in the American Economy.'' \1\ Executive Order
14036 directed the federal government to ``enforce the antitrust laws
to combat the excessive concentration of industry, the abuses of market
power, and the harmful effects of monopoly and monopsony.'' The data
collection required by these interim final rules will provide valuable
information about competition and market concentration in the
pharmaceutical and health care industries. Policymakers can use the
prescription drug and health care spending data to make informed
decisions in support of the goals of Executive Order 14036, including
identifying any excessive pricing of prescription drugs driven by
industry concentration and monopolistic behaviors, promoting the use of
lower-cost generic drugs, and addressing the impact of pharmaceutical
manufacturer rebates, fees, and other remuneration on prescription drug
prices and on plan, issuer, and consumer costs.
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\1\ https://www.federalregister.gov/documents/2021/07/14/2021-15069/promoting-competition-in-the-american-economy.
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The Departments are issuing regulations implementing provisions of
Title I (No Surprises Act) and Title II (Transparency) of Division BB
of the CAA in several phases.
On July 13, 2021, the Departments and OPM issued interim final
rules entitled, ``Requirements Related to Surprise Billing; Part I''
\2\ which generally apply to group health plans and health insurance
issuers offering group or individual health insurance coverage
(including grandfathered health plans) with respect to plan years (in
the individual market, policy years) beginning on or after January 1,
2022; FEHB health benefits plans with respect to contract years
beginning on or after January 1, 2022; and health care providers and
facilities, and providers of air ambulance services beginning on
January 1, 2022 (July 2021 interim final rules). The July 2021 interim
final rules implement sections 9816(a)-(b) and 9817(a) of the Code;
sections 716(a)-(b)
[[Page 66664]]
and 717(a) of ERISA; sections 2799A-1(a)-(b), 2799A-2(a), 2799B-1,
2799B-2, 2799B-3, and 2799B-5 of the PHS Act; and 5 U.S.C. 8902(p), to
protect consumers from surprise medical bills for emergency services,
air ambulance services furnished by nonparticipating providers of air
ambulance services, and non-emergency services furnished by
nonparticipating providers at participating facilities in certain
circumstances.
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\2\ 86 FR 36872 (July 13, 2021). Public comments on this rule
were due by September 7, 2021.
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Among other requirements, the July 2021 interim final rules require
emergency services to be covered without any prior authorization,
without regard to whether the health care provider or facility
furnishing the emergency services is a participating provider or a
participating emergency facility with respect to the services, and
without regard to any other term or condition of the plan or coverage
other than the exclusion or coordination of benefits or a permitted
affiliation or waiting period. With respect to emergency services
furnished by nonparticipating providers or facilities, air ambulance
services furnished by nonparticipating providers of air ambulance
services, and non-emergency services furnished by nonparticipating
providers at certain participating facilities, the July 2021 interim
final rules generally limit cost sharing for out-of-network services to
in-network levels, require such cost sharing to count toward any in-
network deductibles and out-of-pocket maximums, and prohibit balance
billing in certain circumstances. Balance billing refers to the
practice of out-of-network providers billing patients for the
difference between: (1) The provider's billed charges; and (2) the
amount collected from the plan or issuer plus the amount collected from
the patient in the form of cost sharing (such as a copayment,
coinsurance, or amounts paid toward a deductible).
On September 16, 2021, the Departments and OPM issued proposed
rules entitled, ``Requirements Related to Air Ambulance Services, Agent
and Broker Disclosures, and Provider Enforcement.'' \3\ These proposed
rules propose to implement section 9823 of the Code; section 723 of
ERISA; and sections 2723(b), 2746, 2799A-8, and 2799B-4 of the PHS Act;
as well as sections 106(a) and 106(e) of the No Surprises Act. These
proposed rules would implement certain provisions of the No Surprises
Act that would increase transparency by requiring group health plans
and health insurance issuers in the group and individual markets, and
FEHB carriers, to submit certain information about air ambulance
services to the Departments and OPM, as applicable, and by requiring
providers of air ambulance services to submit certain information to
the Secretaries of HHS and Transportation. These proposed rules also
include HHS-only provisions that would increase transparency by
requiring a health insurance issuer offering individual health
insurance coverage or short-term, limited-duration insurance to
disclose to policyholders and to report to HHS any direct or indirect
compensation provided by the issuer to an agent or broker associated
with enrolling individuals in such coverage. The HHS-only proposed
rules would additionally provide the process by which HHS would
investigate complaints and potential violations of PHS Act provisions
and, if warranted, take enforcement action, including the imposition of
civil money penalties, against providers and facilities, including
providers of air ambulance services. These proposed rules would amend
existing regulations to clarify the process to investigate complaints
and potential violations of the PHS Act and impose civil money
penalties against plans and issuers. These proposed rules would also
establish the process by which HHS would impose civil money penalties
if a provider of air ambulance services fails to submit some or all
required data to HHS.
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\3\ 86 FR 51730 (Sept. 16, 2021). Public comments on this rule
were due by October 18, 2021.
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On October 7, 2021, the Departments and OPM published interim final
rules entitled, ``Requirements Related to Surprise Billing; Part II,''
\4\ which generally apply to certified independent dispute resolution
(IDR) entities; selected dispute resolution (SDR) entities; group
health plans and health insurance issuers offering group or individual
health insurance coverage and FEHB carriers; and providers, facilities,
and providers of air ambulance services beginning on or after January
1, 2022, with the exception of certain provisions that apply beginning
on October 7, 2021 (October 2021 interim final rules). The October 2021
interim final rules implement sections 9816(c) and 9817(b) of the Code;
sections 716(c) and 717(b) of ERISA; and sections 2799A-1(c), 2799A-
2(b), 2799B-6(1), 2799B-6(2)(B), and 2799B-7 of the PHS Act.
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\4\ 86 FR 55980 (October 7, 2021). Public comments on this rule
are due by December 6, 2021.
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The October 2021 interim final rules implement provisions of the No
Surprises Act that establish a federal IDR process that group health
plans, health insurance issuers offering group or individual health
insurance coverage, and FEHB carriers; and nonparticipating providers,
facilities, and providers of air ambulance services may use following
the end of an unsuccessful open negotiation period to determine the
out-of-network rate for items or services that are emergency services,
nonemergency services furnished by nonparticipating providers at
participating facilities, and air ambulance services furnished by
nonparticipating providers of air ambulance services, under certain
circumstances. In addition, HHS-only provisions of the October 2021
interim final rules address good faith estimates of health care items
or services for uninsured or self-pay individuals and the associated
patient-provider dispute resolution process. The October 2021 interim
final rules also amend final regulations issued by the Departments in
2015 related to external review in order to implement section 110 of
the No Surprises Act.
Division BB of the CAA also includes: Provisions regarding
transparency in plan and insurance identification cards (section 107);
continuity of care (section 113); accuracy of provider network
directories (section 116); and prohibition on gag clauses (section 201)
that are applicable for plan years beginning on or after January 1,
2022. The Departments intend to undertake rulemaking to fully implement
these provisions, with the exception of section 201 of Title II of
Division BB of the CAA, prohibition on gag clauses, which is self-
implementing. On August 20, 2021, the Departments issued guidance
regarding implementation of each of these sections of Division BB of
the CAA.\5\ Until rulemaking fully implementing these provisions is
finalized and effective, plans and issuers are expected to implement
the requirements using a good faith, reasonable interpretation of the
statute.
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\5\ FAQs about Affordable Care Act and Consolidated
Appropriations Act, 2021, Implementation Part 49 (Aug. 20, 2021),
available at https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/FAQs-Part-49.pdf.
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B. Stakeholder Consultation and Input
The Departments and OPM published a Request for Information (RFI)
in the June 23, 2021 Federal Register (86 FR 32813). The RFI solicited
comments from the public regarding implementation considerations for
the data collection required by section 9825 of the Code, section 725
of ERISA, and section 2799A-10 of the PHS Act and the associated impact
on plans and issuers. The Departments sought input on specific data
elements to be
[[Page 66665]]
collected, including the level of detail that is feasible for entities
subject to the data collection requirements to report and the
associated burdens and potential compliance costs. In the RFI, the
Departments indicated that public comments would inform the
Departments' and OPM's implementation of the statutory requirements
through rulemaking and the establishment of processes to receive the
required information. The Departments also sought comment from the
public regarding information to include in the Departments' biannual
section 204 public report. OPM sought input from the public regarding
implementation considerations for the data collection as it pertains to
FEHB carriers.
The Departments also held several listening sessions with
employers, group health plans, issuers, and pharmacy benefit managers
(PBMs) to gather public input on each aspect of the data submission
requirements as well as the biannual section 204 public reports. OPM
also held a listening session with FEHB carriers. The Departments
consulted with stakeholders through regular contact with states,
issuers, plans, trade groups, employers, and other interested parties.
The Departments and OPM considered all public input received in the
development of these interim final rules. The Departments and OPM also
took into account the objectives of Executive Order 14036 to promote
competitiveness in the health care and pharmaceutical markets and lower
the price of and improve access to prescription drugs and biologics.
II. Overview of the Interim Final Rules--Departments of HHS, Labor, and
the Treasury
A. Applicability
These interim final rules add 26 CFR 54.9825-2T and amend 29 CFR
2590.716-2 and 45 CFR 149.20 to include a reference to the new
regulations added by these interim final rules.\6\ These interim final
rules include the prescription drug and health care spending data
submission requirements for plans and issuers required under section
9825 of the Code, section 725 of ERISA, and section 2799A-10 of the PHS
Act.
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\6\ The amendment to 29 CFR 2590.716-2 also includes a technical
edit to correct a cross-reference in 29 CFR 2590.716-2(a)(2).
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These interim final rules generally apply to group health plans and
health insurance issuers offering group or individual health insurance
coverage. The term ``group health plan'' includes both insured and
self-funded group health plans, and includes private employment-based
group health plans subject to ERISA, non-federal governmental plans
(such as plans sponsored by states and local governments) subject to
the PHS Act, and church plans subject to the Code. Individual health
insurance coverage includes coverage offered in the individual market,
through or outside of an Exchange, and includes student health
insurance coverage as defined at 45 CFR 147.145. As discussed further
in section III. of this preamble, OPM interim final rules require FEHB
carriers to comply with these interim final rules, with respect to
prescription drug and health care spending data submission
requirements, subject to OPM regulation and contract provisions.
Section 9825 of the Code, section 725 of ERISA, and section 2799A-
10 of the PHS Act (and all provisions of the No Surprises Act that are
applicable to group health plans and health insurance issuers offering
group or individual health insurance coverage) apply to grandfathered
health plans. Section 1251 of the Affordable Care Act provides that
grandfathered health plans are not subject to certain provisions of the
Code, ERISA, or the PHS Act, as added by the Affordable Care Act, for
as long as they maintain their status as grandfathered health plans.
For example, grandfathered health plans are subject neither to the
requirement to cover certain preventive services without cost sharing
under section 2713 of the PHS Act, nor to the annual limitation on cost
sharing set forth under section 2707(b) of the PHS Act. If a plan or
coverage loses its grandfathered status, it is required to comply with
both provisions, in addition to certain other requirements of the
Affordable Care Act. However, the CAA does not include an exception for
grandfathered health plans that is comparable to the exception
contained in section 1251 of the Affordable Care Act. Therefore, the
provisions of these interim final rules that apply to plans and issuers
also apply to grandfathered health plans (as defined in 26 CFR 54.9815-
1251, 29 CFR 2590.715-1251, and 45 CFR 147.140).
These interim final rules do not apply to health reimbursement
arrangements (HRAs), or other account-based group health plans, as
described in 26 CFR 54.9815-2711(d)(6)(i), 29 CFR 2590.715-
2711(d)(6)(i), and 45 CFR 147.126(d)(6)(i), that make reimbursements
subject to a maximum fixed dollar amount for a period, because the
benefit design of these plans makes the prescription drug and health
care spending data reporting concepts under section 9825 of the Code,
section 725 of ERISA, and section 2799A-10 of the PHS Act inapplicable.
The Departments expect that account-based group health plans typically
will be integrated with other coverage that will be required to report
such information (such as in the case of individual coverage HRAs
(ICHRAs), for which the issuer of the individual coverage will be
required to report the information) or will be otherwise exempt from
these requirements (such as excepted benefit HRAs). Therefore, under
these interim final rules, the reporting requirements do not apply to
HRAs (including ICHRAs) and other account-based group health plans.
This approach is consistent with many other requirements that apply to
group health plans and the existing applicability provisions in 26 CFR
54.9816-2T, 29 CFR 2590.716-2, and 45 CFR 149.20 with respect to other
requirements of Division BB of the CAA.
Excepted benefits are exempt from the requirements in chapter 100
of the Code, part 7 of ERISA, and Part A and Part D of title XXVII of
the PHS Act.\7\ Under section 2791(b)(5) of the PHS Act, short-term,
limited-duration insurance is excluded from the definition of
individual health insurance coverage and is, therefore, exempt from the
new requirements established in section 2799A-10 of the PHS Act.
Therefore, short-term, limited-duration insurance (as defined in 26 CFR
54.9801-2, 29 CFR 2590.701-2, and 45 CFR 144.103) and coverage that
consists solely of excepted benefits (as described in section 9832(c)
of the Code, section 733(c) of ERISA, and section 2791(c) of the PHS
Act) are not subject to the data submission requirements set forth in
these interim final rules.
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\7\ See section 9831 of the Code, section 732 of ERISA, and
section 2722 of the PHS Act. The CAA amended the PHS Act statutory
exemption for these products to include the new requirements
established under new Part D of the PHS Act. See section
102(a)(3)(B) of the No Surprises Act, which made conforming
amendments to add the phrase ``and Part D'' to section 2722(b),
(c)(1), (c)(2), and (c)(3) of the PHS Act.
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The Departments seek comment as to whether there are any other
plans with unique benefit designs that should be exempt from these
interim final rules.
B. Definitions (26 CFR 54.9825-3T, 29 CFR 2590.725-1, 45 CFR 149.710)
The Departments adopt terms and definitions applicable to the data
submission requirements set forth in these interim final rules in 26
CFR 54.9825-3T, 29 CFR 2590.725-1, and 45 CFR 149.710. In addition, the
[[Page 66666]]
definitions in 26 CFR 54.9816-3T, 29 CFR 2590.716-3, and 45 CFR 149.30
apply to these interim final rules. In general, these interim final
rules do not define terms that are commonly used in the health care and
health insurance industry.
Reference Year. Section 9825(a) of the Code, section 725(a) of
ERISA, and section 2799A-10(a) of the PHS Act require plans and issuers
to submit information ``with respect to the health plan or coverage in
the previous plan year.'' To help ensure uniformity of data across
plans and coverage and increase the usability of the data for purposes
of the section 204 public report, the Departments are requiring plans
and issuers to submit information based on the ``reference year,''
defined in these interim final rules as the calendar year immediately
preceding the calendar year in which the section 204 data submissions
are due.
Collecting data for the immediately preceding calendar year, rather
than the previous plan year, better accounts for the timing of when
newly introduced drugs--including new brand prescription drugs, newly
available generic versions of brand prescription drugs, and
biosimilars--become available and the fact that some group health plans
and health insurance coverage have plan years that do not correspond to
calendar years. If data are collected based on the plan year, newly
introduced drugs would be reflected in the data for some plans and
coverage but not others. If data are collected based on the calendar
year, newly introduced drugs will be reflected in the data for every
plan, regardless of the start and end date of the plan year.
Newly introduced drugs, such as biologics, are often very costly
and may impact the ranking of the 50 most costly prescription drugs.
Similarly, when a generic or biosimilar version of a drug becomes
available, the brand version will be prescribed less frequently, which
may impact the ranking of the top 50 most frequently dispensed brand
prescription drugs. Therefore, if the Departments were to collect
information regarding the top 50 drugs by plan or policy year as
specified in plan or coverage documents, without additional
specification about the measurement period, there would be
inconsistency among data submissions that would make them difficult to
compare to each other. Collection of all data on a calendar-year basis
will enable the Departments to effectively analyze the data and
understand the impact of a newly introduced drug consistently across
plans and coverage, market segments, and years. In addition, using the
calendar year as the reference year will enable the Departments to
produce consistent data analyses across group health plans and group
health insurance coverage (which may be offered on a non-calendar
basis) and individual health insurance coverage (which is generally
offered on a calendar-year basis) for purposes of the section 204
public report.
Second, using the calendar year as the reference year is consistent
with other HHS rules and data collections related to prescription drug
and health care spending. For example, similar to section 9825 of the
Code, section 725 of ERISA, and section 2799A-10 of the PHS Act,
section 2718(a) of the PHS Act requires issuers to report Medical Loss
Ratio (MLR) data ``with respect to each plan year.'' However, issuers
report calendar year information to HHS for the MLR data collection
instead.\8\ The National Association of Insurance Commissioners (NAIC),
which section 2718(c) of the PHS Act directs to make recommendations to
HHS regarding definitions for the MLR data collection, recommended that
the term ``plan year'' in section 2718(a) of the PHS Act be interpreted
to refer to the calendar year, rather than the year specified in
particular plan or policy documents.\9\ The NAIC recommended this
interpretation because any other definition would have precluded
meaningful comparison of the reported data, reduced the reliability of
the data, and increased reporting burdens. The Departments are of the
view that the same rationales apply with respect to the section 204
data submissions.
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\8\ See 45 CFR 158.103, which defines the MLR reporting year as
a calendar year during which group or individual health insurance
coverage is provided by an issuer.
\9\ https://www.naic.org/documents/committees_ex_mlr_reg_asadopted.pdf.
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In addition, the prescription drug data collection with respect to
qualified health plans (QHPs), required under section 1150A of the
Social Security Act related to collection of information ``for a
contract year,'' also involves the submission of data on a calendar-
year basis.\10\ Likewise, the Medicare program, in which some Medicare
Part D plans and Medicare Advantage Plans offering a prescription drug
plan have non-calendar year contract years, analyzes prescription drug
and prescription drug rebate data on a calendar-year basis and
generally collects data in a manner that permits calendar year-based
analysis.\11\ Similarly, the Medicaid program, where some managed care
plans have non-calendar year contract years, analyzes prescription drug
and prescription drug rebate data on a calendar-year basis.\12\ In
addition, state data collections related to prescription drug spending
and rebates, including certain state All-Payer Claims Databases,
generally collect data on a calendar-year basis.\13\ Collection of
calendar-year data will allow the Departments to evaluate the
consistency and validity of the data and compare trends across multiple
data sources as well as between publicly- and privately-sponsored
health coverage.
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\10\ Pharmacy Benefit Manager Transparency for Qualified Health
Plans information collection, available at https://www.cms.gov/regulations-and-guidancelegislationpaperworkreductionactof1995pra-listing/cms-10725.
\11\ See, e.g., 42 CFR part 423; see also https://www.cms.gov/newsroom/fact-sheets/medicare-part-d-direct-and-indirect-remuneration-dir.
\12\ See, e.g., https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Information-on-Prescription-Drugs/Medicaid.
\13\ See, e.g., Colorado Prescription Drug Rebate Data
Submission Manual (Sept. 8, 2020), https://www.civhc.org/wp-content/uploads/2020/10/Colorado-APCD-2020-Drug-Rebate-Data-Submission-Manual_09.08.2020.pdf; Maine Uniform Reporting System for
Prescription Drug Price Data Sets, 90-590 C.M.R. ch. 570, https://mhdo.maine.gov/_finalStatutesRules/Chapter570RxDrugPricing_2020Feb4.docx; Massachusetts Payer Reporting
of Prescription Drug Rebates Data Specification Manual (Apr. 2020),
https://www.chiamass.gov/assets/docs/p/prescription-drug-rebate/Prescription-Drug-Rebate-Data-Specification-Manual-2020.pdf;
Minnesota Commerce Department, Public Pharmacy Benefit Manager (PBM)
Transparency Report (Dec. 1, 2020), https://mn.gov/commerce-stat/pdfs/pbm-transparency-report.pdf; Texas Pharmaceutical Benefits
Reporting (Dec. 2020): Health benefit plan issuer and Pharmacy
benefit manager reporting forms, https://www.tdi.texas.gov/health/documents/hbpi.pdf and https://www.tdi.texas.gov/health/documents/pbm.pdf.
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Prior to issuing these interim final rules, the Departments
received comment letters from several stakeholders recommending that
the Departments collect data on a calendar-year basis, including for
non-calendar year plans or coverage. The Departments also solicited
comment on using calendar year as the basis for the section 204 data
submissions in the RFI, and the overwhelming majority of commenters
that responded to this RFI question supported the calendar-year
approach. Commenters stated that calendar-year data would be more
meaningful when comparing trends in the group markets (where plan years
may not align with the calendar year) to those in the individual market
(where policy years are generally on a calendar-year basis), because
all of the data would be based on the same period. Issuers additionally
advised that reporting calendar-year data for purposes of the section
204 data submissions would reduce compliance burdens because issuers
submit other
[[Page 66667]]
related data to state and federal regulators on a calendar-year basis.
The Departments share the views of these commenters.
Student Market. In these interim final rules, for purposes of
section 204 data submissions, the term ``student market'' has the
meaning given in 45 CFR 158.103. Under 45 CFR 149.30, the definitions
in 45 CFR 144.103 apply to the provisions of 45 CFR part 149 unless
otherwise specified. The definitions of many terms in 45 CFR 144.103
and 45 CFR 158.103 are identical. However, the term ``student market''
is not defined in 45 CFR 144.103, but is defined in 45 CFR 158.103 as
the market for student health insurance coverage. Consistency of the
definition of ``student market'' in these interim final rules with the
definition in 45 CFR 158.103 will enable the Departments to validate
data quality and produce consistent analyses across data submitted
under section 2718(a) of the PHS Act for purposes of MLR reporting and
section 9825 of the Code, section 725 of ERISA, and section 2799A-10 of
the PHS Act for purposes of the section 204 public report.\14\
Consistency with the definition of ``student market'' in 45 CFR 158.103
will also reduce compliance burdens for plans and issuers in the fully-
insured markets, because plans and issuers subject to the requirements
of 45 CFR part 158 have already created group size and market
determination processes and have modified systems to track data using
the definitions in 45 CFR 158.103 for purposes of MLR reporting. The
Departments recognize that self-funded group health plans generally are
not subject to as many requirements that are based on employer size as
fully-insured group health plans. Consequently, self-funded plans are
likely to face more challenges in determining employer size and
providing that information to third-party administrators (TPAs) that
submit data on behalf of self-funded plans. Therefore, reasonable
approximations for employer size determinations of self-funded group
health plans will be allowed. The instructions for the information
collection instrument will provide examples of approximation methods
that the Departments will consider to be reasonable.
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\14\ All other relevant definitions in 45 CFR 158.103 have the
same meaning or functional effect as the definitions in 45 CFR
144.103.
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FEHB Line of Business. In these interim final rules, the term
``FEHB line of business'' refers to all health benefits plans that are
offered to eligible enrollees pursuant to a contract between an FEHB
Program carrier and OPM. Such plans are Federal governmental plans
offered pursuant to 5 U.S.C. chapter 89.
Market Segment. In these interim final rules, the term ``market
segment'' means each of the following: The individual market (excluding
the student market), the student market, the fully-insured small group
market, the fully-insured large group market (excluding the FEHB line
of business), self-funded plans offered by small employers, self-funded
plans offered by large employers, and the FEHB line of business. Mixed-
funded plans, which generally self-fund some health benefits and fully
insure other health benefits, should attribute information reported to
a market segment based on the source of funding for the benefits
included in the report. For example, self-funded pharmacy benefits
might be attributed to the market for self-funded group health plans
offered by large employers while the reporting for the medical
component of the same plan is attributed to the fully-insured large
group market, if the medical benefits are funded through an insurance
contract. ``Minimum premium'' plans and similar hybrid arrangements
that mimic key aspects of fully-insured arrangements or that are
required to comply with state laws regarding mandated benefits must be
included in the fully-insured small group and large group market
segments. ``Minimum premium'' plans generally feature regular fixed-
premium payments and limit the plan sponsor's monthly or annual
liability for claims, similar to fully-insured coverage. Finally,
because student health insurance coverage is designed, marketed, and
priced for a unique and narrower population than other individual
health insurance coverage, collecting student market data separately
for purposes of section 204 data submissions will allow the Departments
to better analyze prescription drug usage and costs in this market. In
addition, issuers of coverage subject to 45 CFR part 158 already track
and report data for the student market policies separately from other
individual market policies.
Enrollee. In these interim final rules, in the context of
provisions of section 2799A-10(a) of the PHS Act, the term ``enrollee''
means an individual who is enrolled, within the meaning of 45 CFR
144.103, in group health insurance coverage, or an individual who is
covered by individual health insurance coverage, at any time during the
reference year, and includes dependents.
Life-years. In these interim final rules, the term ``life-years''
means the total number of months of coverage for participants and
beneficiaries, or for enrollees, as applicable, divided by 12.
Brand Prescription Drug. In these interim final rules, the term
``brand prescription drug'' means a drug for which an application is
approved under section 505(c) of the Federal Food, Drug, and Cosmetic
Act (21 U.S.C. 355(c)), or under section 351 of the PHS Act (42 U.S.C.
262), and that is generally marketed under a proprietary, trademark-
protected name. The term ``brand prescription drug'' includes a drug
with Emergency Use Authorization issued pursuant to section 564 of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 360bbb-3), and that is
generally marketed under a proprietary, trademark-protected name. The
term ``brand prescription drug'' includes drugs that the U.S. Food and
Drug Administration (FDA) determines to be interchangeable biosimilar
products under sections 351(i)(3) and 351(k)(4) of the PHS Act (42
U.S.C. 262).
Prescription Drug or Drug. In these interim final rules, the term
``prescription drug'' or ``drug'' means a set of pharmaceutical
products, including biologics, that have been assigned a National Drug
Code (NDC) by FDA and are grouped by name and ingredient in the manner
specified by the Departments.\15\ The Departments anticipate specifying
that pharmaceutical products must be grouped by name and active
ingredient, separately for brand products and generic products or
certain biosimilar products. Products with the same name and active
ingredient will thus be considered, for the purpose of these interim
final rules, to be the same prescription drug even if they have a
different dosage strength, package size, mode of delivery, or, for
generic products, different manufacturers.\16\
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\15\ https://www.fda.gov/drugs/drug-approvals-and-databases/national-drug-code-directory.
\16\ This definition of the term ``prescription drug'' and
``drug'' and characterization of the term ``same prescription drug''
are used only for purposes of these interim final rules and are not
intended to reflect or suggest any such definition or
characterization of these terms by FDA.
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The Departments chose to group pharmaceutical products by name and
ingredient because this approach will produce more meaningful top 50
and top 25 lists of prescription drugs. If products are not grouped
according to name and ingredient, the same drug could occupy several
spots on the top 50 or top 25 lists. For example, providers may
prescribe a drug that comes in the form of pills in different
strengths, such as 10 mg or 20 mg, or a drug may sometimes be dispensed
as a 30-day supply and sometimes as a 90-
[[Page 66668]]
day supply. In addition, several different companies may manufacture
the same generic drug. If each variation of the drug were considered
separately, the drug could occupy several spots on a top 50 list, which
would be redundant and would not clearly indicate the full scope and
variety of drugs in the top 50 list. Or, conversely, the variations
could disperse the frequency across so many different products that the
drug would not end up making the top 50 list despite its prevalence,
even if it would be included in the list if categorized by ingredient
or name.
This definition is consistent with stakeholder recommendations.
Although a number of commenters responding to the RFI suggested that
the Departments rely on the NDC with regard to the definition of
``prescription drug,'' the majority of commenters advised the
Departments to classify prescription drugs according to characteristics
such as the drug's name and active ingredient and not solely by the
NDC, which distinguishes products by dosage strength, form of delivery,
package size, and manufacturer. Commenters generally recommended that
the Departments adopt a definition of ``prescription drug'' consistent
with this approach to ensure that different formulations and dosages of
the same drug do not appear on the top 50 lists multiple times.
Commenters also suggested that the Departments either use a common
commercially available database to group prescription drugs by name,
active ingredient, and therapeutic class, or provide a new uniform
mapping for how prescription drugs must be grouped and classified.
Therapeutic Class. In these interim final rules, the term
``therapeutic class'' means a group of pharmaceutical products that
have similar mechanisms of action or treat the same types of
conditions, grouped in the manner specified by the Departments in
guidance.\17\ The Departments may specify in guidance the technical
specifications for how plans and issuers must classify drugs, and may
specify that plans and issuers must do so according to a commonly
available public or commercial therapeutic classification system that
maps prescription drugs to therapeutic classes, a therapeutic
classification system provided by the Departments through guidance, or
a combination thereof. The Departments will require all plans and
issuers to use the same classification system. This definition is
consistent with stakeholder recommendations. Commenters responding to
the questions in the RFI regarding the definition of ``therapeutic
class'' advised that regulated entities use a variety of commercially
available therapeutic classification systems. Many commenters urged the
Departments to provide a uniform mapping system for therapeutic
classes. Commenters generally requested that the Departments provide
clear instructions and provide adequate implementation time, including
by allowing plans and issuers to phase in adoption of a new uniform
classification system.
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\17\ This definition of the term ``therapeutic class'' is used
only for purposes of these interim final rules and is not intended
to reflect or suggest any such definition or characterization of
this term by FDA.
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Prescription Drug Rebates, Fees, and Other Remuneration. In these
interim final rules, the term ``prescription drug rebates, fees, and
other remuneration'' means all remuneration received by or on behalf of
a plan or issuer, its administrator or service provider, including
remuneration received by and on behalf of entities providing pharmacy
benefit management services to the plan or issuer, with respect to
prescription drugs prescribed to participants, beneficiaries, or
enrollees in the plan or coverage, as applicable, regardless of the
source of the remuneration (for example, pharmaceutical manufacturer,
wholesaler, retail pharmacy, or vendor). Prescription drug rebates,
fees, and other remuneration also include, for example, discounts,
chargebacks or rebates, cash discounts, free goods contingent on a
purchase agreement, up-front payments, coupons, goods in kind, free or
reduced-price services, grants, or other price concessions or similar
benefits. Prescription drug rebates, fees, and other remuneration
include bona fide service fees. Bona fide service fees mean fees paid
by a drug manufacturer to an entity providing pharmacy benefit
management services to the plan or issuer that represent fair market
value for a bona fide, itemized service actually performed on behalf of
the manufacturer that the manufacturer would otherwise perform (or
contract for) in the absence of the service arrangement, and that are
not passed on in whole or in part to a client or customer of the
entity, whether or not the entity takes title to the drug.
Some commenters responding to the RFI regarding the definition of
prescription drug rebates, fees, and other remuneration recommended
definitions that are identical or substantially similar to the
definition of prescription drug rebates and other price concessions in
the MLR regulations at 45 CFR 158.103 (which generally require issuers,
among other requirements, to report premiums, prescription drug and
medical expenses, and administrative expenses to HHS). Some commenters
recommended that the definition include significantly more detailed
illustrative examples. Many commenters encouraged the Departments to
collect detailed information on the various types of prescription drug
rebates, fees, and other remuneration, including at the level of detail
consistent with the specifications for the data collection requirements
under the Exchange Establishment rule \18\ and the PBM Transparency
rule \19\ (which generally require certain entities to submit to HHS
prescription drug data with respect to QHPs). In these interim final
rules, the Departments are adopting a definition of prescription drug
rebates, fees, and other remuneration that overlaps with the definition
in the MLR regulations at 45 CFR 158.103 to the extent consistent with
section 9825(a)(9) of the Code, section 725(a)(9) of ERISA, and section
2799A-10(a)(9) of the PHS Act. As the types of prescription drug
rebates, fees, and other remuneration continue to evolve, the
Departments intend to provide additional examples in the instructions
for the information collection instrument as may be necessary. The
Departments intend to specify the level of detail at which prescription
drug rebates, fees, and other remuneration must be reported in section
204 data submissions in the instructions for the information collection
instrument. The Departments intend to specify a level of detail that
will assist plans, issuers, and other reporting entities in correctly
determining the total amount of prescription drug rebates, fees, and
other remuneration, and that will be generally consistent with the
categories of rebates, fees, and other remuneration specified in the
data collection requirements under the Exchange Establishment rule and
the PBM Transparency rule.
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\18\ 77 FR 18308 (March 27, 2012).
\19\ 86 FR 24140 (May 5, 2021).
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A number of commenters urged the Departments to include bona fide
service fees in the definition of ``prescription drug rebates, fees,
and other remuneration,'' stating that the statute did not provide an
exception for any fees paid by manufacturers to PBMs and other service
providers, and that disclosure of these fees is necessary to ensure
transparency and to ensure that rebates and other fees are not
improperly mischaracterized as bona fide service fees. In contrast,
other commenters urged the Departments to exclude bona fide service
fees from the
[[Page 66669]]
definition of ``prescription drug rebates, fees, and other
remuneration,'' stating that these fees do not affect drug costs or
impact premiums, and should be excluded for consistency with the
requirements under the MLR rule, the Exchange Establishment rule and
the PBM Transparency rule, as well as the definitions used by the
Medicare and Medicaid programs. The Departments interpret section
9825(a)(9)-(10) of the Code, section 725(a)(9)-(10) of ERISA, and
section 2799A-10(a)(9)-(10) of the PHS Act to require plans and issuers
to report the total amount of rebates, fees, and any other
remuneration, and separately, the extent to which rebates, fees, and
any other remuneration impact premiums and out-of-pocket costs. The
Departments note that section 9825(a)(9) of the Code, section 725(a)(9)
of ERISA, and section 2799A-10(a)(9) of the PHS Act require plans and
issuers to report rebates, fees, and any other remuneration paid by
drug manufacturers to the plan or coverage or its administrators or
service providers, with respect to prescription drugs prescribed to
participants, beneficiaries, or enrollees, as applicable, in the plan
or coverage, and do not provide for the exclusion of bona fide service
fees or any other fees. However, the Departments recognize that bona
fide service fees may not always be intended to directly affect the
cost or utilization of specific prescription drugs, and generally are
not passed through to plans and issuers or to participants,
beneficiaries, and enrollees. Therefore, the Departments will require
reporting of only the total amount of bona fide service fees, but will
not require these fees to be reported separately for each therapeutic
class or for each drug on the top 25 list. This approach will help
reduce compliance burden by enabling plans, issuers, TPAs, and PBMs to
leverage some of the reporting capabilities they have already built to
meet the requirements of section 1150A of the Social Security Act,
which requires QHP issuers, Medicare Advantage Organizations offering
plans with Medicare Part D, and Part D plan sponsors and PBMs that
manage prescription drug coverage under contracts with these entities
to report certain prescription drug benefit and rebate information to
HHS and to exclude bona fide service fees in such reporting.
A number of commenters urged the Departments to exclude drug
manufacturer cost-sharing assistance to participants, beneficiaries,
and enrollees, such as coupons and copay cards, from the definition of
prescription drug rebates because these amounts are not credited to the
plan or coverage or its administrators or service providers. The
Departments agree with this view, and in these interim final rules, the
definition of prescription drug rebates and other price concessions
excludes drug manufacturer cost-sharing assistance provided to
participants, beneficiaries, or enrollees, as applicable. However, to
the extent these amounts impact total annual spending by health plans
or issuers, or by participants, beneficiaries, and enrollees, these
interim final rules include drug manufacturer cost-sharing assistance
in the definition of ``total annual spending,'' as discussed in more
detail later in this section of this preamble.
Dosage Unit. In these interim final rules, the term ``dosage unit''
means the smallest form in which a pharmaceutical product is
administered or dispensed. Common dosage units include a pill, tablet,
capsule, ampule, or measurement of grams or milliliters.\20\
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\20\ This definition of the term ``dosage unit '' is used only
for purposes of these interim final rules and is not intended to
reflect or suggest any such definition or characterization of this
term by FDA.
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Premium Amount. In these interim final rules, the term ``premium
amount'' with respect to individual health insurance coverage and
fully-insured group health plans has the meaning given to the term
``earned premium'' in 45 CFR 158.130, excluding the adjustments
specified in 45 CFR 158.130(b)(5), which currently encompass payments
and receipts related to the risk adjustment program that would not be
relevant for purposes of the section 204 data submissions. Several
commenters responding to the RFI requested that the Departments clarify
how premiums must be reported for self-funded plans or recommended the
use of premium equivalents to ensure consistent reporting between
fully-insured and self-funded plans. To accurately capture the concept
of premiums and the full costs of maintaining health coverage with
respect to self-funded group health plans and other arrangements that
do not rely exclusively or primarily on premiums, in these interim
final rules, the term ``premium amount'' with respect to these plans
includes premium equivalent amounts that represent the total cost of
providing and maintaining coverage, such as the cost of claims,
administrative costs, and stop-loss premiums.
Reporting Entity. In these interim final rules, the term
``reporting entity'' means an entity that submits some or all of the
information required under these interim final rules to the Departments
with respect to a plan or issuer. The term also includes entities,
other than plans and issuers, that submit the information on behalf of
plans and issuers, as allowed by these interim final rules. Many
commenters responding to the RFI regarding potential types of reporting
entities requested clarification as to which entities are responsible
for section 204 data submissions. Commenters generally indicated that
plans and issuers expect that issuers and TPAs will report the
information on behalf of most group health plans, including self-funded
group health plans. Therefore, the Departments are allowing multiple
types of reporting entities to submit the required information to
provide plans and issuers with flexibility and to reduce administrative
burdens. Some commenters requested that the Departments require TPAs
and PBMs to report the information to or on behalf of self-funded group
health plans. Although the Departments understand that these entities
will make the section 204 data submissions on behalf of most self-
funded group health plans in the vast majority of cases, the
Departments note that section 9825 of the Code, section 725 of ERISA,
and section 2799A-10 of the PHS Act make plans and issuers responsible
for providing the required information to the Departments. Therefore,
the Departments do not require TPAs and PBMs to submit the information.
In addition, many commenters urged the Departments to design a data
collection system that would allow multiple reporting entities to
submit different subsets of the required information with respect to
the same plan or issuer. Commenters advised that a single reporting
entity may not possess all of the information required to be reported
under section 9825(a) of the Code, section 725(a) of ERISA, and section
2799A-10(a) of the PHS Act. For example, plans and issuers indicated
that a significant amount of information on prescription drug rebates
is generally maintained primarily by PBMs, while other information is
only known to plan sponsors, issuers, and TPAs. Commenters also advised
that a segmented data collection system would reduce compliance burden
by reducing the need for the reporting entities to transfer the data
among themselves before submitting it to the Departments. The
Departments intend to build a data collection system that will allow
multiple reporting entities to submit
[[Page 66670]]
different subsets of the required information with respect to the same
plan or issuer.
Total Annual Spending. In these interim final rules, the term
``total annual spending'' means incurred claims, as that term is
defined in 45 CFR 158.140, excluding the adjustments specified in 45
CFR 158.140(b)(1)(i), 45 CFR 158.140(b)(2)(iv), and 45 CFR
158.140(b)(4), and including cost sharing but net of prescription drug
rebates, fees, and other remuneration. Consistent with the definition
in 45 CFR 158.140, plans and issuers must calculate the components of
incurred claims based on claims incurred during the reference year and
paid through March 31 of the year immediately following the reference
year. The adjustments specified in 45 CFR 158.140(b)(2)(iv) currently
encompass claims payments recovered through fraud reduction efforts and
thus do not constitute spending, while the adjustments specified in 45
CFR 158.140(b)(4) currently encompass payments and receipts related to
the risk adjustment program that would not be relevant for purposes of
the section 204 data submissions. The adjustments specified in 45 CFR
158.140(b)(1)(i) currently encompass prescription drug rebates and
other price concessions as that term is defined in 45 CFR 158.103.
However, the definition of prescription drug rebates, fees, and other
remuneration adopted in these interim final rules differs in several
ways from the definition of prescription drug rebates and other price
concessions in 45 CFR 158.103. Similar to the definition in 45 CFR
158.140, total annual spending with respect to prescription drugs means
the spending net of prescription drug rebates, fees, and other
remuneration, as that term is defined in these interim final rules, in
lieu of the adjustments specified in 45 CFR 158.140(b)(1)(i) for
prescription drug rebates and other price concessions, as that term is
defined in 45 CFR 158.103. The Departments are choosing this definition
of incurred claims to be generally consistent with the financial
reporting requirements in the MLR data collection under 45 CFR part
158, which will reduce compliance burdens for issuers and TPAs.
Further, defining ``total annual spending'' to mean spending net of
prescription drug rebates, fees, and other remuneration will enable the
Departments to undertake more meaningful and accurate comparisons of
the costs of different prescription drugs, by capturing the actual
costs for different plans and issuers, as well as for the participants,
beneficiaries, and enrollees, as applicable, of different plans and
issuers.
In addition, as noted earlier in this section of this preamble
regarding the definition of ``prescription drug rebates, fees, and
other remuneration,'' a number of commenters that responded to the RFI
urged the Departments to exclude drug manufacturer cost-sharing
assistance to participants, beneficiaries, and enrollees, such as
coupons and copay cards, from the definition of prescription drug
rebates. Nonetheless, many commenters also urged the Departments to
collect information regarding drug manufacturer cost-sharing
assistance, particularly to the extent this assistance is excluded from
the annual limitation on cost sharing, while a few commenters opposed
collection of such information. The Departments note that section
9825(a)(7)(B) of the Code, section 725(a)(7)(B) of ERISA, and section
2799A-10(a)(7)(B) of the PHS Act direct plans and issuers to report
information on prescription drug spending by the plan or coverage and
by participants, beneficiaries, and enrollees, as applicable. To the
extent drug manufacturer cost-sharing assistance reduces spending by
the health plan or coverage or by participants, beneficiaries, and
enrollees, and to the extent information regarding the amount of these
reductions is available to plans, issuers, their administrators, or
their service providers such as PBMs (for example, when the drug
manufacturer cost-sharing assistance is excluded from the annual
limitation on cost sharing) and thus can be reported to the
Departments, the Departments intend to collect data on these reductions
separately and incorporate such reductions into the analysis conducted
for the section 204 public report.
The Departments seek comment on these definitions, including
whether other terms should be defined.
C. Reporting Requirements
1. Reporting Requirements Related to Prescription Drug and Health Care
Spending (26 CFR 54.9825-4T, 29 CFR 2590.725-2, and 45 CFR 149.720)
a. General Requirement
Section 9825(a) of the Code, section 725(a) of ERISA, and section
2799A-10(a) of the PHS Act require plans and issuers to submit annually
to the Departments certain information on prescription drug and health
care spending, premiums, and enrollment under the plan or coverage.
This general requirement is being codified at 26 CFR 54.9825-4T(a), 29
CFR 2590.725-2(a), and 45 CFR 149.720(a).
b. Timing and Form of Report
Section 9825(a) of the Code, section 725(a) of ERISA, and section
2799A-10(a) of the PHS Act require plans and issuers to provide the
first section 204 data submissions to the Departments not later than 1
year after the date of enactment of the CAA, which would be December
27, 2021, with respect to the plan or coverage in the previous plan
year, and by June 1 of each year thereafter. In these interim final
rules, consistent with the discussion in section II.A of this preamble
regarding the definition of ``reference year,'' the Departments
interpret these statutory provisions to require plans and issuers to
submit calendar year 2020 information by December 27, 2021, calendar
year 2021 information by June 1, 2022, calendar year 2022 information
by June 1, 2023, and so forth. Therefore, these interim final rules
provide that the report for the 2020 reference year must be submitted
to the Secretaries of the Treasury, Labor, and HHS (Secretaries of the
Departments) by December 27, 2021, and that beginning with the 2021
reference year, the report for each reference year is due by June 1 of
the year following the reference year. These interim final rules also
require that the report must be submitted in the form and manner
prescribed jointly by the Secretaries of the Departments. These
requirements are being codified at 26 CFR 54.9825-4T(b), 29 CFR
2590.725-2(b), and 45 CFR 149.720(b).
Stakeholders expressed significant concerns about the feasibility
of complying with the data submission deadlines specified in the
statute. Specifically, stakeholders explained that they would need
between 6 months to a year to comply with the reporting requirements
after: (1) These interim final rules are issued; (2) technical guidance
is provided by the Departments (such as instructions for the
information collection instrument); and (3) the specifications for the
data collection system are published by the Departments. Stakeholders
explained that they would need this time to modify contractual
agreements to enable disclosure and transfer of the required data
between various reporting entities; to develop internal processes and
procedures; and to implement the identification, compilation,
preparation, and validation of the required data. Stakeholders further
noted that they are concurrently implementing measures to comply with
numerous other complex requirements and near-term deadlines imposed by
the other provisions in the
[[Page 66671]]
No Surprises Act and Title II of Division BB of the CAA, as well as the
Transparency in Coverage final rule.\21\
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\21\ 85 FR 72158 (Nov. 12, 2020).
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As noted in FAQs about Affordable Care Act and Consolidated
Appropriations Act, 2021 Implementation Part 49, published by the
Departments on August 20, 2021, the Departments recognize the
significant operational challenges that regulated entities may face in
meeting the initial deadlines for the section 204 data submissions.\22\
Accordingly, the Departments are exercising discretion to defer
enforcement in connection with the December 27, 2021 and the June 1,
2022 deadlines for the section 204 data submissions for the 2020 and
2021 reference years, respectively. More specifically, the Departments
will not initiate enforcement action against a plan or issuer that does
not report the required information by the first statutory deadline for
reporting on December 27, 2021 or the second statutory deadline for
reporting on June 1, 2022, and that instead submits the section 204
data submissions for the 2020 and 2021 reference years by December 27,
2022.\23\ However, the Departments strongly encourage plans and issuers
to start working to ensure that they are in a position to be able to
report the required information with respect to the 2020 and 2021
reference years by December 27, 2022. The Departments further encourage
plans and issuers that are able to submit the required information by
either the December 27, 2021 or June 1, 2022 statutory deadlines to do
so.
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\22\ FAQs about Affordable Care Act and Consolidated
Appropriations Act, 2021 Implementation Part 49 (Aug. 20, 2021),
Q12, available at https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/FAQs-Part-49.pdf.
\23\ Under section 2723 of the PHS Act, states have the
opportunity to be the primary enforcers of section 2799A-10 of the
PHS Act with respect to health insurance issuers. However, on
September 16, 2021, the Departments and OPM published a proposed
rule entitled, Requirements Related to Air Ambulance Services, Agent
and Broker Disclosures, and Provider Enforcement (86 FR 51730), in
which HHS proposed to have direct enforcement authority for newly
enacted provisions of the PHS Act that require health insurance
issuers to submit certain information to HHS or the Departments,
including section 2799A-10 of the PHS Act, unless the state notifies
HHS of its intent to enforce. HHS solicited comment on this
approach. Public comments on this proposed rule were due by October
18, 2021. HHS is considering public comments and intends to address
the issue of enforcement of section 2799A-10 of the PHS Act
enforcement in the Requirements Related to Air Ambulance Services,
Agent and Broker Disclosures, and Provider Enforcement final rule.
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A number of commenters responding to the RFI additionally
recommended that the Departments allow for a longer run-out period for
prescription drug claims and rebates than allowed by the annual June 1
statutory deadline. Some commenters therefore recommended that the
Departments establish regular reporting deadlines of between 4 and 18
months after the end of the reference year. The Departments recognize
that longer run-out periods could lead to the submission of more
accurate data, but note that section 9825(a) of the Code, section
725(a) of ERISA, and section 2799A-10(a) of the PHS Act prescribe the
annual reporting deadline of June 1. The Departments further note that
the deadline for the section 204 data submissions must balance the need
for accuracy with the need for timely access to the data and the
statutory deadlines for the biannual section 204 public report. The
Departments are confident that regulated entities will be able to
produce reasonably accurate estimates of the payable and receivable
prescription drug rebate, fee, and other remuneration amounts by the
June 1 statutory deadlines, similar to how issuers and other reporting
entities currently determine such amounts for other federal and state
financial reporting purposes. However, to ensure that the Departments
receive complete and accurate data and are able to evaluate the
reliability of the estimates and trends, the Departments will also
collect restated amounts for prescription drug rebates, fees, and other
remuneration for the preceding reference year.
c. Transfer of Business
To capture meaningful and accurate information required under
section 9825(a) of the Code, section 725(a) of ERISA, and section
2799A-10(a) of the PHS Act with respect to group or individual health
insurance coverage provided by an issuer, these interim final rules
require issuers that acquire a line or block of business from another
issuer during a reference year to submit the required information and
report for the acquired business, including for the part of the
reference year that was prior to the acquisition. This requirement
mirrors the existing requirements for issuers to report the premium,
claims, and other expenditures with respect to purchased business for
MLR data reporting purposes in 45 CFR 158.110(c). This requirement is
being codified at 26 CFR 54.9825-4T(c), 29 CFR 2590.725-2(c), and 45
CFR 149.720(c).
The sale or transfer of blocks of policies between issuers is a
common practice in the health insurance industry and could lead to
inconsistencies in the reporting required under section 9825(a) of the
Code, section 725(a) of ERISA, and section 2799A-10(a) of the PHS Act.
For example, if part of the data for a given reference year with
respect to a block of business were reported by the selling issuer, and
the other part was reported by the acquiring issuer, the split
reporting could result in distortions and inconsistencies in the list
of the top 50 most frequently dispensed brand prescription drugs, the
report on the impact of cost-sharing amounts, the report on average
monthly premium amounts, and other required data elements. The
Departments seek comment on whether these interim final rules should be
amended through future rulemaking to require reporting of any data
elements that would address the impact of mergers, splits, and similar
transactions on prescription drug costs to the extent such transactions
increase market concentration.
d. Reporting Entities and Special Rules To Prevent Unnecessary
Duplication
As discussed in section II.B of this preamble regarding the
definition of ``reporting entity,'' the Departments are allowing plans
and issuers to satisfy their reporting obligations under these interim
final rules by having third parties, such as issuers, TPAs, or PBMs,
submit some or all of the required information on their behalf,
provided a plan or issuer enters into a written agreement with the
third party that is providing the information on its behalf in
accordance with these interim final rules. The Departments expect that
it will be rare for group health plans to report the required
information on their own, but nothing in these interim final rules
prohibits them from doing so.
For fully-insured group health plans, these interim final rules at
26 CFR 54.9825-4T(d)(1), 29 CFR 2590.725-2(d)(1), and 45 CFR
149.720(d)(1) provide that, to the extent coverage under a group health
plan consists of group health insurance coverage, the plan may satisfy
the section 204 data submission requirements if the plan requires the
health insurance issuer offering the coverage to report the required
information in compliance with these interim final rules, pursuant to a
written agreement. Under this provision, if the issuer fails to report
the required information, then the issuer, not the plan, violates the
reporting requirements.
For both fully-insured and self-funded group health plans, as well
as health insurance issuers offering group or individual health
coverage, these interim final rules at 26 CFR 54.9825-4T(d)(2), 29 CFR
2590.725-2(d)(2), and
[[Page 66672]]
45 CFR 149.720(d)(2) provide that the plan or issuer may also satisfy
the section 204 data submission requirements with respect to the
required information that the plan or issuer, as applicable, requires
another party (such as another issuer, a PBM, a TPA, or other third
party) to report in compliance with these interim final rules, pursuant
to a written agreement. Under this provision, if the third-party
reporting entity fails to report the required information, the plan or
issuer violates the reporting requirements.
The Departments solicit comment on this approach.
2. Required Information (26 CFR 54.9825-6T, 29 CFR 2590.725-4, and 45
CFR 149.740)
a. General Information
The provisions of these interim final rules that address the
general information that plans and issuers must submit for each plan or
coverage at the plan or coverage level are being codified at 26 CFR
54.9825-6T(a), 29 CFR 2590.725-4(a), and 45 CFR 149.740(a).
Plans and issuers must ensure that the information they report, or
the information that is reported on their behalf, includes identifying
information at the plan or coverage level, such as name and Federal
Employer Identification Number (FEIN) and other relevant identification
numbers, for plans, issuers, plan sponsors, and any other reporting
entities. Plan- and coverage-level identifying information is necessary
for the Departments to verify receipt of data from all plans and
issuers subject to the section 204 data submission requirements. The
identifying information will also allow the Departments to ensure that
reporting entities do not submit duplicate information, and that
different reporting entities do not reflect the data of the same health
plan or coverage in different market segments when a plan or issuer
engages multiple reporting entities to report information on its
behalf. For example, if a self-funded group health plan engages a TPA
to report health care spending and a PBM to report prescription drug
spending, the Departments will need to verify that both reporting
entities reported the data and included the data for the plan in the
appropriate market segment. The identifying information will further
enable the Departments to cross-reference the data to other data
submitted by plans and issuers to the Departments, such as the MLR data
submitted by issuers to HHS and the Form 5500 Annual Returns/Reports of
Employee Benefit Plan data submitted by group health plans to DOL and
the Department of the Treasury.
In addition, plans and issuers must ensure that the information
they report, or that is reported on their behalf, includes the
following data elements, which are required by section 9825(a)(1)-(3)
of the Code, section 725(a)(1)-(3) of ERISA, and section 2799A-
10(a)(1)-(3) of the PHS Act, at the plan level, regardless of whether
they submit the other required information at the aggregate level, as
described in section II.C.3. of this preamble: (1) The beginning and
end dates of the plan year that ended on or before the last day of the
reference year; (2) the number of participants, beneficiaries, and
enrollees, as applicable, covered on the last day of the reference
year; and (3) each state in which the plan or coverage is offered. The
number of participants, beneficiaries, and enrollees, as applicable,
can be measured in multiple ways, such as the average number over the
course of a year, or a number at a point in time, such as at the
beginning or end of the year, all of which convey different and
valuable information. To ensure data consistency, these interim final
rules require plans and issuers to report at the plan level the number
of participants, beneficiaries, and enrollees, as applicable, covered
only on the last day of the reference year. This approach will provide
the Departments with the most recent information regarding enrollment
at the plan level. To reduce the reporting burdens, these interim rules
require plans and issuers to report the life-years attributable to the
participants, beneficiaries, and enrollees, as applicable, over the
course of the reference year only in total, at the state and market
segment aggregate level, as described in section II.C.3. of this
preamble. This approach will provide enrollment metrics that are most
relevant to the other data elements collected at the aggregate level
and will enable the Departments to analyze trends such as average
annual spending per person. Issuers subject to MLR reporting
requirements under 45 CFR part 158 will be able to leverage the life-
years they compile at the state and market segment level for MLR
reporting purposes.
In accordance with the requirements in section 9825(b) of the Code,
section 725(b) of ERISA, and section 2799A-10(b) of the PHS Act
regarding the treatment of plan-specific information in the section 204
public report, the Departments will not publicly disclose this
information in a manner by which any plan can be identified.
b. Health Care Spending
Section 9825(a)(7) of the Code, section 725(a)(7) of ERISA, and
section 2799A-10(a)(7) of the PHS Act require plans and issuers to
report the total annual spending on health care services, broken down
by the types of cost, including: (1) Hospital costs; (2) health care
provider and clinical service costs, for primary care and specialty
care separately; (3) costs for prescription drugs; and (4) other
medical costs, including wellness services. For prescription drug
spending, plans and issuers must report separately the costs incurred
by the plan or coverage and the costs incurred by participants,
beneficiaries, and enrollees, as applicable. The provisions related to
these requirements are being codified at 26 CFR 54.9825-6T(b)(4)
through (5), 29 CFR 2590.725-4(b)(4) through (5), and 45 CFR
149.740(b)(4) through (5).
Stakeholders requested that the Departments provide specific
instructions for which expenses must be reported in each category.
Several commenters responding to the RFI made technical suggestions
regarding how the Departments should specify these expense categories.
These interim final rules set forth general requirements, and the
Departments intend to provide detailed technical guidance in the
instructions to the information collection instrument regarding
reporting by health care service type that aligns with these general
requirements and provides examples of the costs that should be reported
in each category. To promote consistency and reduce the reporting
burden, the Departments may leverage specific data elements used in the
MLR Annual Reporting Form and the Unified Rate Review Template that
issuers file with HHS.\24\ The Departments solicit comments on the use
of MLR and rate review definitions of health care spending cost
elements.
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\24\ See, e.g., https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/2019-MLR-Form-Instructions.pdf
and https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/URR_v5.3-instructions.pdf.
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Many commenters responding to the RFI urged the Departments to
exclude prescription drugs covered under the hospital or medical
benefit from the section 204 data submissions due to the complexity of
obtaining these data, longer run-out periods associated with these
drugs, and differences in the relevant pricing mechanisms and
underlying cost drivers (such as different supply chains and
procurement mechanisms). Commenters
[[Page 66673]]
additionally noted that these drugs may be subject to different cost-
sharing requirements than drugs dispensed by retail or mail-order
pharmacies, and may present consumers with fewer opportunities to
choose among drugs. The Departments acknowledge these concerns, but
note that section 9825(a) of the Code, section 725(a) of ERISA, and
section 2799A-10(a) of the PHS Act do not create an exemption for
prescription drugs covered under a plan's or coverage's hospital or
medical benefit. The Departments further note that prescription drugs
covered under a hospital or medical benefit constitute a significant
proportion of the total prescription drug spending in the U.S., and
include some of the more costly drugs. Therefore, these interim final
rules require reporting of the total annual spending on prescription
drugs administered in a hospital, clinic, provider's office, or other
provider setting and covered under the hospital or medical benefit of a
plan or coverage (which may be a subset of, and already reported with,
the total spending on hospital or other medical costs), separately from
the total annual spending on drugs covered under the pharmacy benefit
of a plan or coverage. Separate reporting of spending on drugs covered
under the pharmacy benefit and on drugs covered under the hospital or
medical benefit will assist the Departments in evaluating prescription
drug trends with respect to the setting in which the drugs are
administered. However, in recognition of stakeholders' concerns
regarding the compliance burdens associated with reporting information
on drugs covered under the hospital or medical benefit, these interim
final rules do not, at this time, require plans and issuers to report
data elements other than total annual spending, as required under
section 9825(a) of the Code, section 725(a) of ERISA, and section
2799A-10(a) of the PHS Act, such as the top 50 and top 25 lists, for
drugs covered under the hospital or medical benefit. Instead, these
data elements should reflect only the drugs covered under the pharmacy
benefit. Once the Departments begin to receive the section 204 data
submissions and have the opportunity to evaluate the prescription drug
data, the Departments will further review and analyze the merits of
this approach and may modify the provisions regarding the information
to be collected on drugs covered under the hospital or medical benefit
in future rulemaking. Finally, the Departments recognize that for drugs
covered under the hospital or medical benefit, the cost of the
prescription drugs included in some bundled payment arrangements and
other alternative payment arrangements may not be readily available to
the plan or issuer. In these situations, the plan or issuer is required
to separately report the total annual spending attributable to the
prescription drugs included in the bundle or other alternative payment
arrangement in good faith and to the best of its ability. The
Departments seek comment on all aspects of collecting only some of the
information on drugs covered under the hospital or medical benefit. The
Departments also seek comment on whether reporting flexibilities for
drugs included in bundled and other alternative payment arrangements
may contribute to prescription drug spending increases or facilitate
anti-competitive practices.
These interim final rules require plans and issuers to separately
report total annual spending on health care services by the plan or
coverage, and total annual spending on health care services by
participants, beneficiaries, and enrollees, as applicable. Collecting
total annual spending on health care services at this level of detail
will ensure consistency with the other data elements required by
section 9825(a) of the Code, section 725(a) of ERISA, and section
2799A-10(a) of the PHS Act, such as total annual spending on
prescription drugs and average monthly premium amounts, which are
collected separately with respect to a plan or coverage and with
respect to participants, beneficiaries, and enrollees, as applicable.
Consistency across the data elements will enhance the usability of the
data and enable the Departments to conduct meaningful data analysis.
These interim final rules additionally require plans and issuers to
report, for each drug in the top 50 and top 25 lists, as well as for
each therapeutic class, prescription drug spending and utilization,
including: (1) Total annual spending by the plan or coverage; (2) total
annual spending by participants, beneficiaries, and enrollees enrolled
in the plan or coverage, as applicable; (3) the number of participants,
beneficiaries, and enrollees, as applicable, with a paid prescription
drug claim; (4) total dosage units dispensed; and (5) the number of
paid claims. The Departments intend to collect cost-sharing amounts to
obtain the total annual spending by participants, beneficiaries, and
enrollees, as applicable. Inclusion of identical data elements in each
of the top 50 and top 25 lists and the therapeutic class list will
streamline reporting and reduce compliance burdens. Collecting these
amounts for each of the top 50 and top 25 lists, as well as for each
therapeutic class, will enable the Departments to include in the
section 204 public report an analysis regarding the overlap (or lack
thereof) and the causes of any such overlap, among the lists of the
most frequently dispensed drugs, the most costly drugs, the drugs with
the greatest cost increases, and the drugs generating the greatest
amount of rebates. This analysis may include analysis of the
differences and similarities in these five spending and utilization
data elements across drugs in the top 50, top 25, and the therapeutic
class lists. This analysis may further include analysis of how
prescription drug spending increases are distributed among plans and
issuers as compared to the participants, beneficiaries, and enrollees.
The total annual spending on prescription drugs and total dosage units
dispensed will enable the Departments to conduct the required analysis
of prescription drug pricing trends for purposes of the section 204
public report, and to compare trends across multiple data sources as
well as between publicly and privately-sponsored health coverage. The
number of paid claims and the unique number of individuals with paid
prescription drug claims will allow the Departments to compute average
per person cost sharing, and evaluate the average impact, if any, of
prescription drug spending increases and rebates on participants,
beneficiaries, and enrollees, as well as analyze whether spending
increases are driven by increases in drug prices or utilization. The
Departments seek comment on the use of identical prescription drug data
elements for each of the top 50 and top 25 lists and the therapeutic
class list.
c. Premium Amounts
Section 9825(a)(8) of the Code, section 725(a)(8) of ERISA, and
section 2799A-10(a)(8) of the PHS Act require plans and issuers to
report the average monthly premium paid by employers on behalf of
participants, beneficiaries, and enrollees, as applicable, as well as
the average monthly premium paid by participants, beneficiaries, and
enrollees, as applicable. The provisions related to this requirement
are being codified at 26 CFR 54.9825-6T(b)(6), 29 CFR 2590.725-4(b)(6),
and 45 CFR 149.740(b)(6).
Stakeholders expressed concerns about this requirement. Employers
expressed concern that reporting this information would be burdensome
and suggested that the Departments utilize the information regarding
the tax-deductible portion of premiums shown
[[Page 66674]]
on the Forms W-2. Issuers and TPAs expressed concern that information
regarding the employer and participant, beneficiary, and enrollee
contributions to premiums is currently only known to employers, and
that it would be time-consuming and burdensome for issuers and TPAs to
obtain this information from employers. Issuers and TPAs also
anticipated that some employers may not want to disclose this
information to issuers and TPAs. Issuers and TPAs requested that the
Departments allow them to report estimated average monthly premium
amounts based on a sample of employers or based on publicly available
survey data.
The Departments acknowledge these concerns but note that plans and
issuers are required to report this information under section
9825(a)(8) of the Code, section 725(a)(8) of ERISA, and section 2799A-
10(a)(8) of the PHS Act. Furthermore, the Departments are of the view
that the information on the trends in the employer versus employee
contributions to premium amounts is integral to analyzing the extent to
which the impact of prescription drug costs on premiums affects
employers versus employees. Plans, employers, participants,
beneficiaries, and enrollees experience premium increases driven by
increases in prescription drug spending or, conversely, premium
decreases driven by prescription drug rebates, proportionately to their
share of total premium amounts, as well as the changes in this
proportion over time. Existing data on premium amounts paid by
employers versus by participants, beneficiaries, and enrollees are not
complete for each state and market segment defined in these interim
final rules. Furthermore, premium information shown on the Forms W-2
includes information related to plans that are not subject to these
interim final rules (such as account-based group health plans).
Therefore, these interim final rules require plans and issuers to
submit the actual average monthly premium amounts separately with
respect to payments by employers on behalf of participants,
beneficiaries, and enrollees, and payments by participants,
beneficiaries, and enrollees.
For purposes of these interim final rules, to accurately capture
premium amounts with respect to all types of group health plan
sponsors, the average monthly premium amount paid by employers on
behalf of participants, beneficiaries, and enrollees, as applicable,
includes premium amounts paid by plan sponsors that do not directly
employ individuals (for example, employee organizations or employer
groups and associations acting in the interest of their members and
considered an ``employer'' within the meaning of section 3(5) of ERISA)
but that nonetheless make payments of premiums or premium equivalents
on behalf of participants, beneficiaries, and enrollees, as applicable.
These interim final rules also require plans and issuers to report
total annual premium amounts and the total number of life-years.
Section 9825(a)(9)-(10) of the Code, section 725(a)(9)-(10) of ERISA,
and section 2799A-10(a)(9)--(10) of the PHS Act require plans and
issuers to report any impact on premiums and reductions in premiums and
out-of-pocket costs associated with rebates, fees, or other
remuneration paid by drug manufacturers to the plan or coverage or its
administrators or service providers. In addition, the section 204
public report required by section 9825(b) of the Code, section 725(b)
of ERISA, and section 2799A-10(b) of the PHS Act must include
information on the role of prescription drug costs in contributing to
premium increases or decreases. Collecting total annual premium amount
information will provide the Departments with important context to
understand the impact of rebates, fees, and other remuneration. For
example, if the impact of rebates, fees, and other remuneration
resulted in a premium decrease of $100,000 for the reference year, it
is important for the Departments to know whether the reduction is based
on total annual premium amounts of $1,000,000 or $10,000,000.
Similarly, collection of the total number of life-years will enable the
Departments to estimate the combined average premium, as well as to
estimate an average impact at the per person level for the
participants, beneficiaries, and enrollees, as applicable, whose
premiums or out-of-pocket costs may be affected by prescription drug
costs and prescription drug rebates, fees, and other remuneration.
The Departments seek comment on all aspects of the data submission
requirements regarding premium amounts.
d. Top 50 Drug Lists
Section 9825(a)(4)-(6) of the Code, section 725(a)(4)-(6) of ERISA,
and section 2799A-10(a)(4)--(6) of the PHS Act require plans and
issuers to report, respectively: (1) The 50 brand prescription drugs
most frequently dispensed by pharmacies for claims paid by the plan or
coverage, and the total number of paid claims for each such drug; (2)
the 50 most costly prescription drugs with respect to the plan or
coverage by total annual spending, and the annual amount spent by the
plan or coverage for each such drug; and (3) the 50 prescription drugs
with the greatest increase in plan or coverage expenditures over the
plan year preceding the plan year that is the subject of the report,
and, for each such drug, the change in amounts expended by the plan or
coverage in each such plan year. The provisions related to these
requirements are being codified at 26 CFR 54.9825-6T(b)(1) through (3),
29 CFR 2590.725-4(b)(1) through (3), and 45 CFR 149.740(b)(1) through
(3).
In accordance with these interim final rules, the top 50 drugs must
be determined separately for each aggregation level described in 26 CFR
54.9825-5T, 29 CFR 2590.725-3, and 45 CFR 149.730, as described in
section II.C.3 of this preamble. For example, if an issuer acts as the
reporting entity, has health insurance business or acts as a TPA in
multiple states and market segments, and aggregates the data at the
state and market segment level, then the issuer must prepare the three
top 50 lists for each market segment within each state. Each of these
lists must be based on the combined experience of all plans or policies
included in the relevant aggregation. The Departments expect that it
will be rare for self-funded plans to report these lists on their own
using their own claims experience to determine the top 50 drugs, but to
the extent a self-funded plan does so, any TPA that administers
benefits for the plan should not include that plan's experience in the
TPA's aggregated report.
As noted in section II.C.2.b. of this preamble, at this time, to
simplify reporting and analysis and to reduce the reporting burden,
these interim final rules require the information on the top 50 lists
to include only the drugs covered under the pharmacy benefit of a plan
or coverage, and exclude drugs administered in a hospital, clinic,
provider's office, or other provider setting and covered under the
hospital or medical benefit of a plan or coverage. Stakeholders
requested that drugs covered under the hospital or medical benefit be
excluded from the section 204 data submissions because these drugs may
have different supply chains and procurement mechanisms, be subject to
different pricing mechanisms and cost-sharing requirements than drugs
dispensed by retail or mail-order pharmacies, and may present consumers
with fewer opportunities to choose among drugs. As a result, the
dispensing frequency, total spending, and prescription drug rebates,
which are used to rank the top 50 and top 25 lists, are likely to be
different for drugs covered under the pharmacy benefit and
[[Page 66675]]
for drugs covered under the hospital or medical benefit. Consequently,
combining drugs covered under the pharmacy benefit with the hospital or
medical benefit could lead to distorted ranking of the top 50 lists.
Commenters responding to the RFI further pointed to the operational
challenges of combining the data on drugs covered under the pharmacy
benefit and the hospital or medical benefit to produce the top 50
lists, given that these data come from separate sources and may be
reported by different reporting entities. The Departments will continue
to review the validity of this approach and whether it adequately
fulfills the objectives of section 9825(a) of the Code, section 725(a)
of ERISA, and section 2799A-10(a) of the PHS Act, and the Departments
may modify the reporting requirements for the top 50 lists to include
drugs covered under the hospital or medical benefit, or to require
separate top 50 lists for drugs covered under the pharmacy benefit and
under the hospital or medical benefit, in future rulemaking. The
Departments solicit comment on this approach.
Top 50 Most Frequently Dispensed Brand Prescription Drugs. Plans,
issuers, and other reporting entities must determine the most
frequently dispensed brand prescription drugs based on the total number
of paid claims for prescriptions filled during the reference year for
each drug.
For each of the top 50 most frequently dispensed brand prescription
drugs, the section 204 data submission must include the data elements
listed in 26 CFR 54.9825-6T(b)(5), 29 CFR 2590.725-4(b)(5), and 45 CFR
149.740(b)(5) (required prescription drug data elements), which
include: (1) Total annual spending by the plan or coverage; (2) total
annual spending by participants, beneficiaries, and enrollees enrolled
in the plan or coverage, as applicable; (3) the number of participants,
beneficiaries, and enrollees, as applicable, with a paid prescription
drug claim; (4) total dosage units dispensed; and (5) the number of
paid claims. The rationale for collecting the required prescription
drug data elements for each of the top 50 most frequently dispensed
brand prescription drugs is described in section II.C.2.b. of this
preamble.
Top 50 Most Costly Drugs. Plans, issuers, and other reporting
entities must determine the 50 most costly drugs based on total annual
spending per drug. Total annual spending, as defined in these interim
final rules and as described in section II.B. of this preamble, must be
net of prescription drug rebates, fees, and other remuneration and must
include cost sharing as well as, to the extent available, drug
manufacturer cost-sharing assistance. For each of the top 50 most
costly drugs, the section 204 data submissions must include the
required prescription drug data elements. The statute requires
reporting of the top 50 most costly drugs by total annual spending with
respect to the plan or coverage, which the Departments interpret to
mean all spending under the plan or coverage, including both amounts
spent by the plan or coverage as well as cost sharing and other amounts
paid by participants, beneficiaries, and enrollees. The statute
additionally requires reporting of the amounts spent only by the plan
or coverage for each such drug. Because cost sharing generally
corresponds to the difference between total annual spending and the
amounts spent by the plan or coverage, the Departments chose to capture
the amounts spent by the plan or coverage through requiring reporting
of the total cost sharing paid under the plan or coverage. Reporting of
total cost sharing will provide the Departments with information
equivalent to that specified in the statute but will be more convenient
for data analysis. The rationale for collecting the required
prescription drug data elements for each of the top 50 drugs with the
highest total annual spending is described in section II.C.2.b. of this
preamble.
Top 50 Drugs with the Greatest Increase in Expenditures. Plans,
issuers, and other reporting entities must determine the top 50 drugs
with the greatest increase in expenditures based on the dollar amount
of the increase in total annual spending over the preceding year. The
statute requires reporting of the top 50 drugs with the greatest year-
over-year increase in plan expenditures, which the Departments
interpret to mean all spending under the plan or coverage, including
both amounts spent by the plan or coverage as well as cost sharing and
other amounts paid by participants, beneficiaries, and enrollees. This
interpretation is consistent with the interpretation of the reporting
methodology for the top 50 most costly drugs. A number of commenters
responding to the RFI recommended that the Departments define the
increase in expenditures based on the absolute amount of the increase
rather than the percentage increase because the former value would
enable the Departments to analyze which drugs are driving the increases
in total spending on prescription drugs and would provide the
Departments a better sense of the magnitude of the increases in this
spending. The Departments agree with this rationale.
For each of the top 50 drugs with the greatest increase in
expenditures, the section 204 data submissions must include: (1) The
required prescription drug data elements for the year immediately
preceding the reference year; and (2) the required prescription drug
data elements for the reference year. The rationale for collecting the
information on the year-over-year changes in the required prescription
drug data elements for each of the top 50 drugs with the greatest
increases in expenditures is described in section II.C.2.b. of this
preamble. Only drugs that were approved for marketing and/or issued an
Emergency Use Authorization by FDA for the entire year immediately
preceding the reference year and for the entire reference year should
be included in this top 50 list.\25\ This approach will ensure that the
cost increase is based on year-over-year changes and is not distorted
by the inclusion of new drugs released in the market later in a
calendar year.
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\25\ This includes an Emergency Use Authorization issued
pursuant to section 564 of the Federal Food, Drug, and Cosmetic Act
(21 U.S.C. 360bbb-3) for an unapproved use of an otherwise-approved
drug.
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The Departments seek comment on all aspects of the data submission
requirements regarding the top 50 drug lists.
e. Prescription Drug Rebates, Fees, and Other Remuneration
Section 9825(a)(9) of the Code, section 725(a)(9) of ERISA, and
section 2799A-10(a)(9) of the PHS Act require plans and issuers to
report prescription drug rebates, fees, and any other remuneration paid
by drug manufacturers to the plan or coverage or its administrators or
service providers, with respect to prescription drugs prescribed to
participants, beneficiaries, or enrollees, as applicable, in the plan
or coverage. The statute requires these amounts to be reported for each
therapeutic class of drugs, as well as for each of the 25 drugs that
yielded the highest amount of rebates and other remuneration under the
plan or coverage from drug manufacturers during the plan year.\26\ The
provisions related to these requirements are being codified at 26 CFR
54.9825-6T(b)(7) through (9), 29 CFR 2590.725-4(b)(7) through (9), and
45 CFR 149.740(b)(7) through (9).
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\26\ As discussed in section II.B. of this preamble, in this
instance, the Departments are interpreting ``plan year'' to mean
``reference year.''
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[[Page 66676]]
As discussed in section II.B. of this preamble regarding the
definition of ``prescription drug rebates, fees, and other
remuneration,'' the Departments intend to generally align the
categories of rebates, fees, and other remuneration in the section 204
data submissions with the categories specified in the data collection
requirements under the Exchange Establishment rule \27\ and the PBM
Transparency rule \28\ to reduce compliance burdens by allowing
reporting entities to leverage some of the reporting capabilities they
have already built to meet the requirements of these other HHS rules.
For consistency with the Exchange Establishment rule and the PBM
Transparency rule, these interim final rules further require reporting
of total prescription drug rebates, fees, and other remuneration with
respect to amounts passed through to the plan or issuer, amounts passed
through to participants, beneficiaries, or enrollees, as applicable,
and amounts retained by the PBM. Similarly, consistent with the
information collected under the Exchange Establishment rule and the PBM
Transparency rule, these interim final rules require reporting of the
difference between total amounts that the plan or issuer pays the PBM
and total amounts that the PBM pays pharmacies. One commenter
responding to the RFI opposed collection of the difference between
total amounts that the plan or issuer pays the PBM and total amounts
that the PBM pays pharmacies, as well as collection of other details
regarding prescription drug rebates, fees, and other remuneration
consistent with the Exchange Establishment rule and the PBM
Transparency rule; however, the commenter also recommended using the
same definition for prescription drug rebates, fees, and other
remuneration as used in the Exchange Establishment rule and the PBM
Transparency rule. In contrast, several other commenters expressed
concern with the impact on the market participants and on prescription
drug pricing of the difference between total amounts that the plan or
issuer pays the PBM and total amounts that the PBM pays pharmacies, and
recommended that the Departments collect this information. The
Departments are of the view that collection of this information is
integral to the Departments' ability to analyze prescription drug
reimbursements, pricing trends, and the impact of prescription drug
rebates, fees, and other remuneration on premiums and cost sharing for
purposes of developing the section 204 public report. This information
will inform the Departments' analyses because, similar to prescription
drug rebates, fees, and other remuneration, the difference between
total amounts that the plan or issuer pays the PBM and total amounts
that the PBM pays pharmacies is a factor that contributes to the
differences between the payments for prescription drugs made by plans,
issuers, enrollees, participants, and beneficiaries, and the portion of
those payments captured by pharmacies and drug manufacturers, and thus
impacts the cost of prescription drugs to plans, issuers, enrollees,
participants, and beneficiaries. However, similar to bona fide service
fees, these interim final rules provide for the submission of these
amounts only in total and not at the drug or therapeutic class level.
This approach will help reduce compliance burden by enabling plans,
issuers, TPAs, and PBMs to leverage some of the reporting capabilities
they have already built to meet the requirements of section 1150A of
the Social Security Act, and will ensure that the information will be
collected only to the extent that the Departments currently view that
as necessary for their analysis. Last, the rationale for collecting the
required prescription drug data elements for each therapeutic class and
for each of the top 25 drugs that yielded the highest amount of rebates
is described in section II.C.2.b. of this preamble.
---------------------------------------------------------------------------
\27\ 77 FR 18308 (Mar. 27, 2012).
\28\ 86 FR 24140 (May 5, 2021).
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Section 9825(a)(9)-(10) of the Code, section 725(a)(9)-(10) of
ERISA, and section 2799A-10(a)(9)--(10) of the PHS Act additionally
require plans and issuers to report the impact of the prescription drug
rebates, fees, and other remuneration from drug manufacturers on
premiums and out-of-pocket costs. For internal consistency, these
interim final rules capture the impact on out-of-pocket costs by
requiring reporting of the impact of prescription drug rebates, fees,
and other remuneration on cost sharing. A number of commenters
responding to the RFI indicated that plans and issuers may not know or
be able to quantify the impact of prescription drug rebates on premiums
or cost sharing. These commenters recommended that the Departments
allow plans and issuers to provide qualitative descriptions of how
prescription drug rebates, fees, and other remuneration generally
provide savings to participants, beneficiaries, and enrollees, instead
of attempting to collect drug-level impact amounts. The Departments
intend to design the information collection instrument in a manner that
would enable plans and issuers to provide both quantitative and
qualitative information regarding the impact of prescription drug
rebates on premiums and cost sharing.
The Departments seek comment on all aspects of the data submission
requirements regarding prescription drug rebates, fees, and other
remuneration.
3. Aggregate Reporting (26 CFR 54.9825-5T, 29 CFR 2590.725-3, and 45
CFR 149.730)
a. General Requirement
Section 9825(a) of the Code, section 725(a) of ERISA, and section
2799A-10(a) of the PHS Act require plans and issuers to submit the
information in section 204 data submissions to the Departments ``with
respect to the health plan or coverage.'' Some of the information
described in these statutory provisions pertains specifically to each
group health plan, such as the beginning and end dates of the plan
year, the number of participants, beneficiaries, and enrollees, as
applicable, and each state where the plan or coverage is offered.
However, the Departments are of the view that section 9825(a) of the
Code, section 725(a) of ERISA, and section 2799A-10(a) of the PHS Act
do not strictly prescribe that every data element outlined in these
provisions must be reported separately by each unique group health
plan. After careful consideration of whether aggregate or plan-level
information would be more appropriate to facilitate development of the
section 204 public report as well as feedback received from
stakeholders, the Departments have determined that plans and issuers
(or other entities reporting on their behalf) may submit the majority
of the information required under these interim final rules on an
aggregate basis. The only plan-level information collected will be the
following: (1) Identifying information for plans and issuers and other
reporting entities; (2) the beginning and end dates of the plan year
that ended on or before the last day of the reference year; (3) the
number of participants, beneficiaries, or enrollees, as applicable,
covered on the last day of the reference year; and (4) each state in
which a plan or coverage is offered.
There are several reasons for collecting the majority of the
information in the section 204 data submissions on an aggregate basis.
First, collecting aggregate data is necessary for the Departments
to be able to draw conclusions about market trends for purposes of
developing a meaningful and accurate section 204 public report. The
Departments would
[[Page 66677]]
not be able to accurately combine plan-specific top 50 lists to
determine aggregate prescription drug trends within market segments,
within states, and across the country. The Departments would not be
able to accurately combine plan-specific top 50 lists because the
statute only requires plans and issuers to report information for the
top 50 drugs and not for all drugs. As a result, the Departments would
not have access to the utilization and spending information for drugs
that may not make the top 50 lists of every group health plan, but
which may have higher combined utilization or spending across all group
health plans than the drugs appearing on the plan-specific top 50
lists. Consequently, collection of plan-specific data could impair the
Departments' ability to comply with the statutory requirement to
produce the section 204 public report on prescription drug
reimbursement and pricing trends. As a simplified example of the
problems with collecting plan-specific data, suppose that the statute
requires reporting of only the top 3 most frequently dispensed brand
prescription drugs, rather than the top 50 drugs. Also, suppose that
there is only one issuer offering two plans in a specific state and
market segment. For Plan One, the four brand prescription drugs with
the highest number of paid claims are Drug A with 100 claims, Drug B
with 80 claims, Drug C with 75 claims, and Drug Z with 70 claims. For
Plan Two, the four brand prescription drugs with the highest number of
paid claims are Drug D with 110 claims, Drug E with 105 claims, Drug F
with 90 claims, and Drug Z with 85 claims. If the Departments collected
the top 3 brand prescription drugs at the plan level, Drug Z would be
missing from the issuer's submission because it is not in the top 3
list for either plan. However, if the issuer aggregated the data at the
state and market segment level before submitting it, Drug Z would have
155 paid claims and the Departments would correctly identify it as the
most frequently dispensed drug in this state and market segment.
The inability to correctly identify trends in prescription drug
reimbursements, pricing, and impact on premiums from the plan-specific
data would inhibit the Departments' ability to comply with the
requirements in section 9825(b) of the Code, section 725(b) of ERISA,
and 2799A-10(b) of the PHS Act to develop and issue a public report on
these trends. Collecting aggregate data will significantly reduce the
possibility of such scenarios.
In addition, the data underlying the top 50 lists need to be of
sufficient size for the Departments to be able to draw conclusions
about market trends for purposes of developing a meaningful and
accurate section 204 public report. The majority of group health plans
have a relatively small number of participants, beneficiaries, or
enrollees. If the Departments were to collect the top 50 lists
separately for each group health plan, most of these lists would be
based on small sample sizes and consequently could provide a distorted
view of the market. This is because plan-specific lists would tend to
be driven by the utilization of specific participants, beneficiaries,
or enrollees of a given plan, which may not be representative of the
market and may obscure broader trends. For example, a top 50 list for a
plan with five participants and beneficiaries may contain only two
steroid drugs, both purchased by a single participant to treat a skin
condition. These drugs would appear as the first and second drugs on
this plan-specific list. The top 50 list for another small employer
plan may contain only three drugs--two drugs used to treat a rare
autoimmune disease of one participant, and another drug used to manage
post-surgery pain of another participant--which would likewise appear
as the first, second, and third drugs on that plan-specific list.
However, neither of these plan-specific lists is likely to be
representative of the broader market; and, as described in the
preceding paragraph, the Departments would not be able to combine the
data from plan-specific top 50 lists in the manner needed to arrive at
accurate totals for any given drug across states, market segments, or
the country.
Another reason to collect aggregate data is to protect personally
identifiable information and protected health information. Many
comments received in response to the RFI stated that collection of
plan-level data would raise significant privacy concerns because, as
illustrated in the example above, it would not be difficult to discern
which drugs and which claims were attributable to specific
participants, beneficiaries, or enrollees in plan-level data. These
comments argued that aggregate reporting would reduce the likelihood of
collecting and transmitting personally identifiable information and
protected health information, and thus the risk of inadvertent or
inappropriate disclosure. The Departments share this concern and agree
that aggregate reporting will better ensure that personally
identifiable information and protected health information are protected
from disclosure. Specifically, allowing aggregation of data will
provide a larger population sample of participants, beneficiaries, or
enrollees from which the data are drawn so that it is difficult to
determine if a prescription drug or therapeutic class can be associated
with a specific individual. In addition, HHS, which will collect the
information on behalf of the Departments and OPM, intends to collect
and maintain the information using information technology (IT) systems
that are designed to meet all of the security standards protocols
established under federal law or by HHS that are relevant to such
information.\29\ The Departments and OPM will further analyze the
collected information to evaluate whether additional steps may be taken
to ensure consumer privacy.
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\29\ HHS' enterprise-wide information security and privacy
program was launched in FY 2003, to help protect HHS against
potential IT threats and vulnerabilities. The program ensures
compliance with federal mandates and legislation, including the
Federal Information Security Management Act and the President's
Management Agenda. The HHS Cybersecurity Program plays an important
role in protecting HHS's ability to provide mission-critical
operations. In addition, the HHS Cybersecurity Program is the
cornerstone of the HHS IT Strategic Plan.
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An additional reason to collect aggregate data is that prescription
drug rebates, fees, and other remuneration generally are not negotiated
separately for each plan; rather, they tend to be driven by sales
volume and other considerations at the PBM level. Therefore, it is the
Departments' understanding that plan-specific prescription drug rebate
data generally is rarely available. Consequently, plan-specific lists
of prescription drug rebates for each therapeutic class and for the top
25 drugs with the highest amount of rebates largely would be based on
allocation calculations, and therefore plan-specific data would create
little value beyond that created by aggregated reporting. Plan-specific
lists might have some value for plans, but for purposes of the
Departments' analysis of the data for the section 204 public report,
there is no compelling policy reason to require plans and issuers to
engage in a complex and burdensome allocation exercise, particularly
because lists based on allocation calculations would not provide useful
information about any specific plan.
Last, the overwhelming majority of commenters on the RFI encouraged
the Departments to adopt an aggregate approach to data collection. They
noted that an aggregate approach would be significantly less burdensome
and urged the Departments to collect data at the highest possible
aggregation level. They also raised similar concerns as those described
earlier in this section of this
[[Page 66678]]
preamble regarding small sample sizes, usability of plan-specific data,
and disclosure of personally identifiable information and protected
health information. In addition, stakeholders noted that some cost
elements are not tracked separately for each group health plan. Some
commenters did, however, identify potential benefits of plan-specific
reporting of data. One commenter noted the increased transparency that
would result from plans receiving plan-specific information about
prescription drugs from PBMs. The commenter also stated that plan-
specific reporting would be more valuable for identifying trends than
overly aggregated data. Other commenters noted that certain reporting
requirements under section 9825(a) of the Code, section 725(a) of
ERISA, and section 2799A-10(a) of the PHS Act are plan-specific and
asserted that aggregated reporting would present operational challenges
if, for example, a TPA were the reporting entity for all of the
required information and it serviced different types of plans but did
not have access to all of the required information for each plan. One
commenter had concerns about plans being held responsible for the TPA's
or PBM's failure to accurately report aggregated data.
The Departments are of the view that collection of aggregate data
will substantially reduce the burdens for both the reporting entities
and the federal government. The Departments estimate that reporting
every data element separately for each group health plan would require
plans and issuers to prepare and submit a combined total of several
million reports. In contrast, reporting aggregate data would result in
a combined total of approximately 2,000 reports, requiring plans and
issuers to spend significantly less effort and fewer resources on
calculations, validation, submission, and storage of the data while
still providing a sufficiently large data pool from which to identify
trends and variations in prescription drug use and costs. To the extent
a TPA is the reporting entity for all of the required information for
numerous plans but does not have access to all of the required
information for each plan, it can either obtain it from the plan or
require the plan to submit that information. As noted in this preamble,
plans may need to revise their services agreements with TPAs to address
liability for and the accuracy of the information that the TPA or PBM
reports and the ways in which the plan can review such reporting to
confirm its accuracy.
The smaller number of aggregate data reports submitted to the
Departments would also reduce the Departments' burden for collecting,
storing, securing, and analyzing the data.
For these reasons, these interim final rules require data to be
aggregated in the section 204 data submissions for the reference year
at the state and market segment levels. This general requirement is
being codified at 26 CFR 54.9825-5T(a), 29 CFR 2590.725-3(a), and 45
CFR 149.730(a). Within each state and market segment, the data of
fully-insured plans may be aggregated according to the issuer of the
coverage provided to these plans or the FEHB carrier, as applicable,
that acts as a reporting entity for these plans. The data of self-
funded plans may be aggregated according to the TPA that acts as a
reporting entity for these plans. The Departments are of the view that
overall, aggregation at the reporting entity, state, and market segment
level will capture statistics based on sufficiently large pools of
underlying data while also providing a sufficient level of detail for
the analysis and reporting required under section 9825(b) of the Code,
section 725(b) of ERISA, and section 2799A-10(b) of the PHS Act, and is
therefore the optimal aggregation level to enable the Departments to
draw meaningful conclusions from the data. Aggregation at the state
level will allow for the analysis of geographic variations in
prescription drug trends. Aggregation at the market segment level will
also allow for the analysis of variations in prescription drug trends
among certain distinct populations subject to distinct plan and
coverage design considerations, such as employees of small and large
employers. Aggregation at the reporting entity level will allow for
consistency in the data with respect to cost drivers such as negotiated
rates for the provider networks used by a particular issuer or TPA, or
the formulary design and prescription drug rebate agreements utilized
by a particular PBM. For health insurance coverage, aggregation at the
reporting entity, state, and market segment levels is also largely
consistent with the aggregation rules for the MLR data collection in 45
CFR 158.120, which will minimize the health care spending reporting
burden for issuers.
The Departments are of the view that, at this time, the clear
benefits of the aggregate data approach outweigh the potential
drawbacks. However, the Departments solicit comment on the general use
and the specific aspects of this data aggregation approach versus a
plan-specific data collection approach. In addition, after the
Departments begin to receive section 204 data submissions and have the
opportunity to evaluate the efficacy and adequacy of the aggregate data
approach, the Departments will further review and analyze the merits of
this approach and may modify the approach in future rulemaking if
necessary or appropriate.
b. Aggregation by Reporting Entity
The requirements related to aggregation by reporting entity are
being codified at 26 CFR 54.9825-5T(b), 29 CFR 2590.725-3(b), and 45
CFR 149.730(b). Specifically, 26 CFR 54.9825-5T(b)(1), 29 CFR 2590.725-
3(b)(1), and 45 CFR 149.730(b)(1) provide that if a reporting entity
submits data on behalf of more than one group health plan in a state
and market segment, the reporting entity may aggregate the data
required in 26 CFR 54.9825-6T(b), 29 CFR 2590.725-4(b), and 45 CFR
149.740(b) for the group health plans for each market segment in the
state.
As discussed in sections II.C.3.a. and II.B. of this preamble, the
Departments intend to make available a data collection system that will
allow multiple reporting entities to submit different subsets of the
required information for a single plan or issuer. These interim rules
at 26 CFR 54.9825-5T(b)(2)(i), 29 CFR 2590.725-3(b)(2)(i), and 45 CFR
149.730(b)(2)(i) provide that if multiple reporting entities submit the
required data related to one or more plans or issuers in a state and
market segment, the data submitted by each of these reporting entities
may not be aggregated at a less granular level than the aggregation
level used by the reporting entity that submits the data on total
annual spending on health care services in 26 CFR 54.9825-6T(b)(4), 29
CFR 2590.725-4(b)(4), and 45 CFR 149.740(b)(4) on behalf of these plans
or issuers. Under this approach, the data may not, for example, be
aggregated at a less granular level than the aggregation level used by
the issuer providing the coverage to fully-insured plans, the TPA
acting as a reporting entity for self-funded plans, or the plan sponsor
acting as a reporting entity for the self-funded plans it sponsors.
For example, if a TPA is the reporting entity for the total annual
spending on health care data for 20 self-funded plans in a state and
market segment and aggregates the data of those plans, and a PBM is the
reporting entity for the top 25 list for the same 20 self-funded plans,
then the PBM must aggregate the data of only these 20 self-funded plans
in the state and market segment to produce the top 25 list for these 20
self-funded
[[Page 66679]]
plans. If the PBM also serves as the top 25 list reporting entity for
30 other self-funded plans that utilize a different TPA for the section
204 data submission, then the PBM must additionally aggregate the data
of only these 30 other self-funded plans in the state and market
segment and produce a separate top 25 list for these 30 self-funded
plans. However, the PBM cannot aggregate the data for all 50 self-
funded plans to produce and submit a single top 25 list for the state
and market segment. Conversely, a single data submission by a TPA may
be associated with more than one corresponding data submission by
several PBMs if the self-funded group health plans for which the TPA
acts as a reporting entity do not all utilize the same PBM. Based on
the Departments' estimate, discussed in section V of this preamble,
that 473 issuers and 205 TPAs, but only 66 PBMs, will be involved in
making section 204 data submissions, the Departments estimate that it
is highly likely that a single PBM would submit data that complement
data submissions of many issuers and TPAs. As a result, if a PBM
aggregated data across multiple issuers and TPAs, this could
significantly reduce the consistency between the prescription drug and
rebate data submitted by the PBM and the health care spending, premium,
and enrollment data submitted by issuers and TPAs. However, based on
the estimated number of issuers, TPAs, and PBMs, the Departments
anticipate that it is significantly less likely that multiple PBMs
would submit data that complement the data submission of a single
issuer or TPA. Therefore, the Departments are of the view that the
disadvantage of the modest inconsistencies that may result from the
approach adopted in these interim final rules is outweighed by the
benefit of reduced compliance burdens. The Departments solicit comment
on this aggregation approach.
These interim final rules additionally provide that the Departments
may specify in guidance alternative or additional aggregation methods
for data submitted by multiple reporting entities. In choosing
alternative or additional aggregation methods, the Departments will
seek to reduce compliance burdens for the reporting entities while
ensuring that the aggregated data facilitate the development of the
biannual public report required under section 9825(b) of the Code,
section 725(b) of ERISA, and section 2799A-10(b) of the PHS Act. For
example, the Departments may choose to allow data submitted by
affiliated issuers to be aggregated at the holding group level within a
state and market segment. Aggregation at the holding group level may
further reduce compliance burden, but may obscure differences between
different business models, such as preferred provider organizations and
health maintenance organizations. The Departments may also choose to
allow data submitted by PBMs to be aggregated at a higher level than at
the level of each issuer and TPA. Aggregation of prescription drug and
rebate data at the PBM level may likewise reduce compliance burdens and
may enable more robust trend analysis. However, as discussed previously
in this section of this preamble, this approach could significantly
reduce the consistency between the prescription drug and rebate data
and the health care spending, premium, and enrollment data, potentially
impairing some of the analyses the Departments intend to undertake for
purposes of the section 204 public report. The Departments will issue
any such guidance sufficiently in advance of the data submission
deadline to enable plans, issuers, and other reporting entities to
adjust their processes. The Departments seek comment on which
alternative aggregation methods should be considered and their
respective merits and drawbacks.
As noted in section II.C.3.a. of this preamble, data submitted by
reporting entities that are issuers, TPAs, or other plan service
providers must be aggregated at the state and market segment level. For
example, if an issuer is the reporting entity, the issuer must report
the data separately for each state where it offered coverage, and
within each state must aggregate the data separately for the individual
market (excluding student policies), the student market, the fully-
insured small group market, the fully-insured large group market
(excluding FEHB plans), and the FEHB line of business, as applicable.
If the issuer also provides TPA services to self-funded group health
plans in the same state, the issuer must additionally aggregate the
data separately for all of the self-funded plans offered by small
employers and all of the self-funded plans offered by large employers
for which the issuer acts as a TPA and as the reporting entity in the
state.
In addition, these interim final rules at 26 CFR 54.9825-5T(b)(3),
29 CFR 2590.725-3(b)(3), and 45 CFR 149.730(b)(3) provide that when a
group health plan, regardless of funding type, involves health coverage
obtained from two affiliated issuers, one, often a health maintenance
organization, providing in-network coverage only and the second,
usually a preferred provider or similar organization, providing out-of-
network coverage only, then for purposes of aggregating data at the
reporting entity level, the plan's out-of-network experience may be
treated as if it were all related to the contract provided by the in-
network issuer. This approach ensures that in this situation the
experience of employees of a single employer can be aggregated under a
single reporting issuer in the same section 204 data submission, which
is a reasonable approach because the coverage is priced and marketed to
group health plans as one single product. In addition, this provision
enables issuers to leverage existing reporting processes that they use
for purposes of MLR reporting under 45 CFR part 158.
The Departments solicit comment on all aspects of the data
aggregation by reporting entity approach.
c. Aggregation by State
The provisions related to aggregation by state are being codified
at 26 CFR 54.9825-5T(c), 29 CFR 2590.725-3(c), and 45 CFR 149.730(c).
These interim final rules at 26 CFR 54.9825-5T(c)(1), 29 CFR
2590.725-3(c)(1), and 45 CFR 149.730(c)(1) and 26 CFR 54.9825-5T(c)(2),
29 CFR 2590.725-3(c)(2), and 45 CFR 149.730(c)(2) specify,
respectively, that for purposes of aggregating data at the state level,
the experience of fully-insured coverage must be attributed to the
state where the contract was issued, while the experience of self-
funded group health plans must be attributed to the state where the
plan sponsor has its principal place of business, with certain
exceptions. These requirements will ensure consistent reporting across
plans, issuers, and other reporting entities, and are similar to the
requirements in 45 CFR 158.120 for the MLR data collection. Attribution
of experience to a state in this manner, rather than, for example, to
the state where the individual obtaining health care services or
prescription drugs works or resides, will significantly reduce the
reporting burden because the data elements required in these interim
final rules generally are not tracked based on the situs of the
individual. The Departments are of the view that attribution of
experience to a state in this manner is unlikely to significantly
affect the data trends at the state level given that the Departments
expect most if not all reporting entities to aggregate the required
data, which will mitigate the possibility of an outsized impact of any
given plan's experience on the top 50 lists and trends in a state.
[[Page 66680]]
Individuals sometimes obtain, and employers sometimes provide,
health coverage through associations, trusts, or multiple employer
welfare arrangements (MEWAs). Coverage issued through an association,
but not in connection with a group health plan, is not group health
insurance coverage for purposes of the PHS Act and is instead
individual market coverage. These interim final rules at 26 CFR
54.9825-5T(c)(3), 29 CFR 2590.725-3(c)(3), and 45 CFR 149.730(c)(3)
provide that the experience of individual market business sold through
an association must be attributed to the issue state of the certificate
of coverage. For employment-based association coverage subject to
ERISA, group health plans may exist at the individual employer level (a
non-plan MEWA) or at the association level, if the association
qualifies as an employer under ERISA section 3(5) (a plan MEWA).\30\
These interim final rules at 26 CFR 54.9825-5T(c)(4), 29 CFR 2590.725-
3(c)(4), and 45 CFR 149.730(c)(4) provide that the experience of health
coverage provided through a group trust or a MEWA must be attributed to
the state where the individual employer (if the plan is at the
individual employer level) or the association (if the association
qualifies as an employer under ERISA section 3(5)), respectively, has
its principal place of business or the state where the association is
incorporated, if the association has no principal place of business.
---------------------------------------------------------------------------
\30\ Under ERISA section 3(5), an employer is ``any person
acting directly as an employer, or indirectly in the interest of an
employer, in relation to an employee benefit plan; and includes a
group or association of employers acting for an employer in such
capacity.'' For more information, see Multiple Employer Welfare
Arrangements under the Employee Retirement Income Security Act
(ERISA): A Guide to Federal and State Regulation, available at
https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/mewa-under-erisa-a-guide-to-federal-and-state-regulation.pdf.
---------------------------------------------------------------------------
These provisions apply in the same manner to group health plans
covering employees in multiple states. For example, the experience of a
fully-insured group health plan covering employees in multiple states
must be attributed to the state in which the contract for health
insurance coverage is issued or delivered as stated in the contract
(except for coverage provided through an association). If the plan
contracted for coverage with a different issuer in each state, then the
relevant experience must be attributed to each of these states.
Similarly, the experience of a self-funded group health plan providing
benefits to employees in multiple states must be attributed to the
state in which the plan sponsor has its principal place of business
(or, in the case of an association with no principal place of business,
the state where the association is incorporated), as applicable.
The Departments solicit comments on all aspects of the data
aggregation by state approach.
III. Overview of the Interim Final Rules--Office of Personnel
Management
A. Authority for Data Collection
OPM solicited comments on the capability of FEHB carriers to
complete this reporting and if there should be any considerations taken
into account specific to reporting by FEHB carriers. A few comments
raised concerns about OPM's authority to require this reporting or
questioned whether it was appropriate to apply section 204 to FEHB
carriers.
Under 5 U.S.C. 8910(a), OPM must make a continuing study of the
operation and administration of the FEHB Program, including surveys and
reports on FEHB plans and on the experience of these plans. Under 5
U.S.C. 8910(b), each contract between OPM and an FEHB carrier must
contain provisions requiring carriers to furnish such reasonable
reports as OPM deems necessary to carry out its functions under the
FEHB Act. Accordingly, OPM's contract with each FEHB carrier requires
the carrier to furnish reports that OPM finds necessary to properly
administer the FEHB Program.\31\ In addition, 5 U.S.C. 8910(c) requires
government agencies to furnish OPM with such information and reports as
may be necessary to enable OPM to administer the FEHB Program. On the
basis of this statutory authority, OPM will require FEHB carriers to
report information about pharmacy benefits and health care spending,
consistent with section 204 of Title II of Division BB of the CAA and
the Departments' interim final rules. In response to comments
requesting clarification of carriers' reporting responsibilities, OPM
has worked with the Departments to facilitate carriers' reporting by
establishing that where an entity does not possess all of the
information required to be reported, another reporting entity may be
responsible for the data submission on the carriers' behalf. Reporting
by FEHB carriers is expected to help accomplish the CAA's intended
purposes of achieving national health data transparency and lowering
costs both for the FEHB Program and for the health benefits industry.
---------------------------------------------------------------------------
\31\ In addition to this statutory authority and parallel
contract language, FEHB carrier contracts incorporate FEHB
regulations found at 5 CFR parts 890 through 894. As part of this
rulemaking, OPM amends FEHB regulations to direct carriers to comply
with requirements of 45 CFR 149.710 through 149.740.
---------------------------------------------------------------------------
B. Reporting and Display of Data
Several RFI commenters also raised concerns about duplicative
reporting or requested that OPM reconcile its current reporting
requirements with any reporting required under section 204 of Title II
of Division BB of the CAA. While OPM does require its FEHB carriers to
submit certain data directly to OPM, the specific type of reporting
diverges from section 204 of Title II of Division BB of the CAA in
terms of the nature of the reporting as well as its purpose.
The OPM interim final rules amend existing 5 CFR 890.114(a) to
include references to the Department of the Treasury, DOL, and HHS
interim final rules to clarify that, pursuant to 5 U.S.C. 8910, FEHB
carriers are required to report prescription drug and health care
spending as set forth in those regulations with respect to FEHB
carriers in the same manner as those provisions apply to a group health
plan or health insurance issuer offering group or individual health
insurance coverage, subject to 5 U.S.C. 8902(m)(1) and the provisions
of the carrier's contract. As provided at 5 CFR 890.114(f), the OPM
Director will coordinate with the Departments in matters regarding FEHB
carriers' reporting on prescription drug and health care spending, and
with respect to oversight of reporting by FEHB carriers. Carriers must
report FEHB plan prescription drug and health care spending data to the
Departments as a part of the section 204 collection of information
consistent with 45 CFR 149.720. Carriers will need to include the
information identified in 45 CFR 149.740 and aggregate the data
consistent with 45 CFR 149.730.
Several corrections have been made to 5 CFR 890.114. First,
paragraph (a) has been revised to remove inadvertently added cross-
references to 26 CFR 54.9816-7T and 29 CFR 2590.716-7, which relate to
the Department of the Treasury's and DOL's complaints processes.
Second, paragraph (d)(1) has been revised to change the phrase ``intent
to initiate'' to ``initiation of'' the Federal IDR process. Third,
paragraph (d)(2) has been revised so that cross-references to 26 CFR
54.9816-8T(c)(4)(vi)(A)(1), 29 CFR 2590.716-8(c)(4)(vi)(A)(1), and 45
CFR 149.510(c)(4)(vi)(A)(1) now cite paragraph (vii) instead (vi), and
the term ``misrepresentation'' now reads ``material
misrepresentation.''
[[Page 66681]]
IV. Waiver of Proposed Rulemaking
Section 9833 of the Code, section 734 of ERISA, and section 2792 of
the PHS Act authorize the Secretaries of the Departments to promulgate
any interim final rules that they determine are appropriate to carry
out the provisions of chapter 100 of the Code, part 7 of subtitle B of
title I of ERISA, and title XXVII of the PHS Act. Consistent with the
provisions at section 9833 of the Code, section 734 of ERISA, and
section 2792 of the PHS Act, the Secretaries of the Departments and the
OPM Director have determined that it is appropriate to issue these
interim final rules to enable regulated entities sufficient time to
design processes and systems necessary to comply with the data
submission requirements of section 9825(a) of the Code, section 725(a)
of ERISA, and section 2799A-10(a) of the PHS Act, and to enable the
Departments to comply with the public reporting requirements of section
9825(b) of the Code, section 725(b) of ERISA, and section 2799A-10(b)
of the PHS Act, as explained further in this section of this preamble.
Although these provisions constitute the Departments' primary authority
for issuing these interim final rules, the Departments also note that
section 553(b) of the Administrative Procedure Act (5 U.S.C. 551, et
seq.) (APA), provides that a general notice of proposed rulemaking is
not required when an agency for good cause finds that notice and
comment procedures are impracticable, unnecessary, or contrary to the
public interest and incorporates a statement of the finding and its
reasons in the rule issued. In addition, subtitle E of the Small
Business Regulatory Enforcement Fairness Act of 1996 (also known as the
Congressional Review Act or CRA) requires a 60-day delay in the
effective date for major rules unless an agency finds good cause that
notice and public procedure are impracticable, unnecessary, or contrary
to the public interest, in which case the rule shall take effect at
such time as the agency determines. 5 U.S.C. 801(a)(3), 808(2). The
Secretaries of the Departments and the OPM Director have determined
that these interim final rules meet the exception to the default
requirement of notice and comment rulemaking under section 553(b) of
the APA. Specifically, the Secretaries of the Departments and the OPM
Director have determined that it would be impracticable and contrary to
the public interest to delay putting the provisions in these interim
final rules in place until a full public notice and comment process has
been completed, as explained further in this section of this preamble.
The Secretaries of the Departments and the OPM Director also find that
there is good cause to waive the delay in effective date for these
interim final rules.
The time period between enactment of the CAA and the date by which
plans and issuers must comply with the provisions of section 9825(a) of
the Code, section 725(a) of ERISA, and section 2799A-10(a) of the PHS
Act, as added by the CAA, is insufficient to permit the Departments and
OPM to pursue notice and comment rulemaking. The CAA was enacted on
December 27, 2020. Section 204 of Title II of Division BB of the CAA
requires plans and issuers to begin submitting the required
prescription drug and health care spending information to the
Departments by December 27, 2021, and to submit this information by
June 1 of each year thereafter. Due to the novelty and complexity of
the requirements in section 9825 of the Code, section 725 of ERISA, and
section 2799A-10 of the PHS Act, the Departments and OPM determined it
necessary to issue an RFI to inform the Departments' and OPM's
implementation of the statutory requirements through rulemaking.
Following an analysis of the statutory provisions, the technical and
regulatory issues surrounding the concepts, definitions, and reporting
related to prescription drugs, and industry practices related to
prescription drug costs and data reporting processes and capabilities,
among other things, the Departments and OPM published the RFI on June
23, 2021 with a 30-day comment period.\32\
---------------------------------------------------------------------------
\32\ 86 FR 32813.
---------------------------------------------------------------------------
In their responses to the RFI, regulated entities and other
interested parties indicated that they would need significant time to
come into compliance after final rules implementing the requirements in
section 9825 of the Code, section 725 of ERISA, and section 2799A-10 of
the PHS Act are issued. In implementing these requirements, these
interim final rules require plans, issuers, and FEHB carriers to
establish complex internal data compilation and reporting processes,
and may require plans, issuers, FEHB carriers, TPAs, PBMs, and drug
manufacturers to modify various contracts and arrangements and to
coordinate data compilation and sharing among themselves in order to
enable submission of complete and accurate data to the Departments in
accordance with the requirements in these interim final rules. All of
these entities will require time to implement the changes necessary to
comply with these new requirements. In response to the RFI, although
several commenters stated that they would be able to submit the
required data 6 months after the Departments and OPM published the
final rules, the instructions for the information collection
instrument, and the technical specifications for the data collection
system, the overwhelming majority of commenters advised that they would
need 12 months to comply. Commenters advised that they could not begin
renegotiating contracts and investing in the necessary IT systems
modifications prior to the final rules, the instructions for the
information collection instrument, and the technical specifications for
the data collection system being issued.
In recognition of stakeholders' concerns about the feasibility of
meeting the first two statutory reporting deadlines of December 27,
2021 and June 1, 2022, as discussed in section II.C.1.b. of this
preamble, the Departments are exercising discretion to not initiate
enforcement actions against plans or issuers that submit the section
204 data submissions for the 2020 and 2021 reference years by December
27, 2022. Although this deferred enforcement may have allowed for the
promulgation of regulations with notice and comment before the
Departments would consider taking enforcement action, doing so
nonetheless would not have provided sufficient time for the regulated
entities to come into compliance with the requirements by December 27,
2022. Issuing these rules as proposed rules would have resulted in the
final rules and final technical specifications becoming available to
the regulated entities no earlier than June 2022, leaving them only 6
months--well short of the 12 months that most commenters advised is
necessary--to complete the complex tasks required to come into
compliance. In addition, deferred enforcement does not alter the
statutory deadlines, and therefore the Departments must promulgate
final rules that become effective no later than December 27, 2021, and
must promulgate final rules timely to enable plans and issuers to rely
on these rules and adhere to the law by the December 27, 2021 and June
1, 2022 statutory deadlines. The Departments strongly encourage plans
and issuers that are able to submit the required information by either
the December 27, 2021 or June 1, 2022 statutory deadlines to do so.
Further, although deferring enforcement for an additional period of
time beyond December 27, 2022 could have provided sufficient time to
issue these rules as proposed rules, the Departments are of the view
that any additional delays in collecting the
[[Page 66682]]
information required under section 9825(a) of the Code, section 725(a)
of ERISA, and section 2799A-10(a) of the PHS Act would be inappropriate
and contrary to the public interest. First, section 9825(b) of the
Code, section 725(b) of ERISA, and section 2799A-10(b) of the PHS Act
require the Departments to publish biannual section 204 public reports,
with the first such report due no later than 18 months after the date
on which the first section 204 data submission is required.
Consequently, deferring enforcement further than December 27, 2022
would foreclose the Departments' ability to prepare and timely publish
the first section 204 public report. Thus, the Departments are of the
view that additional delays related to the section 204 data submissions
would risk causing undue and cascading delays in the publication of the
section 204 public reports, potentially delaying important legislative
and policymaking initiatives that may be spurred by the section 204
public reports and depriving the public of the benefit of any such
initiatives. Second, any additional delays related to the section 204
data submissions could require plans and issuers to submit 3, rather
than 2, years of data at once (for example, if the Departments were to
defer enforcement until June 1, 2023--the statutory deadline for
submission of the 2022 data--then plans and issuers would have to
submit the data for 2020, 2021, and 2022 by that date). This would
place a significant burden on plans and issuers and would lead to
lower-quality 2022 data because plans, issuers, and other reporting
entities would lose the opportunity to incorporate lessons learned from
preparation and submission of the 2020 and 2021 data, and the
Departments would lose the ability to provide feedback or guidance to
the regulated entities based on challenges or inconsistencies
identified in the 2020 and 2021 data submissions.
In addition, the Departments will require time to design, build,
and test a fully operational data collection system, which cannot be
done prior to the definitions and requirements in these interim final
rules being finalized. The reporting entities will in turn require time
to familiarize themselves with the data collection system and to adapt
their processes to the technical specifications prescribed for the data
collection system. Therefore, issuing these rules as interim final
rules, rather than as proposed rules, will allow the Departments to
develop and operationalize the data collection system and will allow
the reporting entities to provide feedback on the design of this system
to the Departments and to incorporate the specifications of the data
collection system into their processes.
It is therefore necessary, appropriate, and in the public interest
that plans, issuers, FEHB carriers, TPAs, PBMs, and the Departments
have certainty regarding the standards of these requirements in order
to begin implementation. Accordingly, to allow plans, issuers, FEHB
carriers, TPAs, PBMs, and the Departments sufficient time to implement
these new requirements and any changes necessary to comply with these
new requirements, these interim final rules must be published and
available to the public well in advance of the December 27, 2022
enforcement date for the initial data collection. Allowing time for a
full notice and comment process prior to the requirements taking effect
would not provide sufficient time for the reporting entities to comply
with the requirements, and would risk collection of inaccurate and low-
quality data, thwarting the statute's objective of producing an
actionable section 204 public report on prescription drug pricing and
its impact on premiums.
Finally, although these interim final rules reflect public comments
submitted in response to the RFI, the Departments and OPM intend to
expeditiously and thoroughly review and analyze the public comments
that will be submitted on the specific provisions of these interim
final rules, as well as any additional feedback that may be provided by
reporting entities and other stakeholders following publication of
these interim final rules and the information collection requirements.
The Departments and OPM intend to promptly issue final rules based on
these public comments.
For the foregoing reasons, the Departments and OPM have determined
that it is necessary, appropriate, and in the public interest to issue
these interim final rules to allow regulated entities to timely comply
with the statutory data submission requirements. The Departments and
OPM have further determined that it would be impracticable and contrary
to the public interest to engage in full notice and comment rulemaking
before putting these interim final rules into effect.
V. Regulatory Impact Analysis
A. Summary
These interim final rules implement the provisions of section 9825
of the Code, section 725 of ERISA, and section 2799A-10 of the PHS Act
as enacted by section 204 of Title II of Division BB of the CAA. These
provisions are applicable to group health plans and health insurance
issuers offering group or individual health insurance coverage. These
interim final rules implement section 9825 of the Code, section 725 of
ERISA, and section 2799A-10 of the PHS Act, which increase transparency
by requiring plans and issuers to annually submit to the Departments
information about prescription drugs and health care spending.
Section 9825(a) of the Code, section 725(a) of ERISA, and section
2799A-10(a) of the PHS Act require plans and issuers to submit certain
information to the Departments on prescription drug and health care
spending, including, but not limited to, average monthly premium
amounts (paid by participants, beneficiaries, and enrollees and paid by
employers on behalf of participants, beneficiaries, and enrollees, as
applicable), and the number of participants, beneficiaries, and
enrollees, as applicable, with respect to the plan or coverage in the
previous plan year. Additionally, plans and issuers must report
prescription drug rebates, fees, and any other remuneration paid by
drug manufacturers and any impact on premiums and out-of-pocket costs
associated with these rebates, fees, or other remuneration. Pursuant to
5 U.S.C. 8910, OPM is joining the Departments to require the submission
of prescription drug and health care spending data from FEHB plans in
the same manner as plans and issuers must provide such data under
section 9825 of the Code, section 725 of ERISA, and section 2799A-10 of
the PHS Act. The Departments and OPM highlight that nothing prevents a
TPA or a PBM from reporting the required information on behalf of
plans, issuers, and FEHB carriers, or the subset of the required
information that is available to them.
Section 9825(b) of the Code, section 725(b) of ERISA, and section
2799A-10(b) of the PHS Act require the Departments to publish on the
internet biannual reports on prescription drug reimbursements under
group health plans and group and individual health insurance coverage,
prescription drug pricing trends, and the role of prescription drug
costs in contributing to premium increases or decreases under these
plans or coverage, aggregated in such a way that no drug or plan
specific information is made public.
The Departments and OPM have examined the effects of these interim
final rules as required by Executive Order 13563 (76 FR 3821, January
21,
[[Page 66683]]
2011, Improving Regulation and Regulatory Review); Executive Order
12866 (58 FR 51735, October 4, 1993, Regulatory Planning and Review);
the Regulatory Flexibility Act (September 19, 1980, Pub. L. 96-354);
section 1102(b) of the Social Security Act (42 U.S.C. 1102(b)); section
202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995, Pub.
L. 104-4); Executive Order 13132 (64 FR 43255, August 10, 1999,
Federalism); and the Congressional Review Act (5 U.S.C. 804(2)).
B. Executive Order 12866 and 13563
Executive Order 12866 directs agencies to assess costs and benefits
of available regulatory alternatives and, if regulation is necessary,
to select regulatory approaches that maximize net benefits (including
potential economic, environmental, public health and safety effects,
distributive impacts, and equity). Executive Order 13563 emphasizes the
importance of quantifying both costs and benefits, of reducing costs,
of harmonizing rules, and of promoting flexibility. A regulatory impact
analysis (RIA) must be prepared for rules with economically significant
effects ($100 million or more in any 1 year).
Section 3(f) of Executive Order 12866 defines a ``significant
regulatory action'' as an action that is likely to result in a rule:
(1) Having an annual effect on the economy of $100 million or more in
any one year, or adversely and materially affecting a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or state, local or tribal governments or communities
(also referred to as ``economically significant''); (2) creating a
serious inconsistency or otherwise interfering with an action taken or
planned by another agency; (3) materially altering the budgetary
impacts of entitlement grants, user fees, or loan programs or the
rights and obligations of recipients thereof; or (4) raising novel
legal or policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in the Executive Order.
An RIA must be prepared for major rules with economically
significant effects (for example, $100 million or more in any one
year), and a ``significant'' regulatory action is subject to review by
the Office of Management and Budget (OMB). The Departments anticipate
that this regulatory action is likely to have economic impacts of $100
million or more in at least 1 year, and thus meets the definition of a
``significant rule'' under Executive Order 12866. Therefore, the
Departments and OPM have provided an assessment of the potential costs,
benefits, and transfers associated with these interim final rules. In
accordance with the provisions of Executive Order 12866, these interim
final rules were reviewed by OMB.
1. Need for Regulatory Action
There is currently limited information available about how
prescription drug costs influence premiums and out-of-pocket costs.
There is also limited information available on the prescription drug
rebates, fees, and other remuneration paid by drug manufacturers to
plans and issuers (or to their administrators or service providers) and
the impact of these reimbursements on premiums and out-of-pocket costs.
The data submission requirements in these interim final rules will
provide the Departments and OPM with a better understanding of
prescription drug and health care spending in the United States.
Further, these interim final rules are necessary to meet the statutory
requirements of section 9825 of the Code, section 725 of ERISA, and
section 2799A-10 of the PHS Act.
Plans, issuers, FEHB carriers, and other reporting entities will
incur costs related to the data submission requirements set forth in
these interim final rules. However, in accordance with Executive Order
12866, the Departments determined that the benefits of these interim
final rules justify the costs.
2. Summary of Impacts
In accordance with OMB Circular A-4, Table 1 depicts an accounting
statement summarizing the Departments' and OPM's assessment of the
benefits, costs, and transfers associated with these interim final
rules. The Departments and OPM are unable to quantify all benefits,
costs, and transfers associated with these interim final rules but have
sought, where possible, to describe these non-quantified impacts below.
The effects in Table 1 reflect non-quantified impacts and estimated
direct monetary costs resulting from the data submission requirements
in these interim final rules.
Table 1--Accounting Statement
------------------------------------------------------------------------
-------------------------------------------------------------------------
Benefits:
------------------------------------------------------------------------
Qualitative:
Production of a dataset that satisfies the requirements in
section 9825 of the Code, section 725 of ERISA, and section 2799A-
10 of the PHS Act and informs the development of the section 204
public reports, which will increase transparency about prescription
drugs and health care spending and potentially promote more
competitive health care markets.
The ability of the Departments and OPM to identify the
factors contributing to changes in plan expenditures, including
prescription drug costs, hospital costs, health care provider and
clinical service costs, and other medical costs, which may inform
future policymaking that addresses health care costs.
The ability of the Departments and OPM to identify the most
frequently dispensed brand prescription drugs and the most costly
prescription drugs covered by plans and issuers and the
corresponding expenditures, which may inform future policymaking
that addresses prescription drug costs.
Improved understanding of prescription drug pricing trends
by the Departments and OPM.
Improved understanding by the public and the Departments
and OPM of the impact of prescription drug rebates, fees, and other
remuneration paid by drug manufacturers to plans, issuers, or FEHB
carriers (or to their administrators or service providers) on
premiums and out-of-pocket costs.
Potential to inform Congress and shape future policymaking
that could benefit consumers and employers.
------------------------------------------------------------------------
Estimate Discount rate
Costs (million) Year dollar (percent) Period covered
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year)................... $363.63 2021 7 2021-2025
361.09 2021 3 2021-2025
----------------------------------------------------------------------------------------------------------------
Quantitative:
[[Page 66684]]
One-time costs to issuers, FEHB carriers, TPAs, and PBMs to design, develop, and implement needed
IT systems changes and submit required information, in 2022, estimated to be approximately $1,034 million..
One-time costs to issuers, FEHB carriers, TPAs, and PBMs to update and maintain their IT systems
and submit required information in 2023, estimated to be approximately $290 million........................
Annual recurring costs to issuers, FEHB carriers, TPAs, and PBMs to maintain their IT systems and
report data in 2024, and yearly thereafter, estimated to be approximately $211 million.....................
One-time costs to issuers, FEHB carriers, TPAs, and PBMs to prepare standard operating procedures
and provide training to staff, in 2022, estimated to be approximately $4.7 million.........................
One-time costs to issuers, FEHB carriers, TPAs, and PBMs to modify existing contracts, in 2022,
estimated to be approximately $8 million...................................................................
Costs to the federal government to build and maintain a system to receive, store, and analyze data
submitted by issuers, FEHB carriers, TPAs, and PBMs, and to prepare section 204 reports, of approximately
$4.4 million in 2021, $8.5 million in 2022, $7.3 million in 2023, $7.4 million in 2024, and $7.9 million in
2025.......................................................................................................
----------------------------------------------------------------------------------------------------------------
Transfers:
----------------------------------------------------------------------------------------------------------------
Non-Quantified:
Potential transfers from providers, facilities, pharmaceutical manufacturers, and PBMs to plans,
issuers, and FEHB carriers if plans, issuers, and FEHB carriers are able to achieve greater negotiating
power due to improved understanding of prescription drug costs.............................................
----------------------------------------------------------------------------------------------------------------
a. Benefits
The reporting requirements in these interim final rules will lead
to the development of a dataset that satisfies the requirements in
section 9825 of the Code, section 725 of ERISA, and section 2799A-10 of
the PHS Act. This dataset will inform the development of the biannual
section 204 public reports by the Departments regarding prescription
drug and health care spending.
The prescription drug and health care spending data collection and
the resultant section 204 public reports will benefit plans, issuers,
FEHB carriers, employers, and policymakers by advancing their
understanding of prescription drug costs and the impact of prescription
drug rebates, fees, and other remuneration on premiums and out-of-
pocket costs. Consumers could potentially benefit from the section 204
public reports if plans, issuers, and FEHB carriers are able to
negotiate lower prescription drug prices and those reductions are
passed on to the consumer in the form of reduced out-of-pocket costs
and lower premiums. The section 204 data submissions will allow the
Departments and OPM to identify the most frequently dispensed brand
prescription drugs and the costliest prescription drugs covered by
plans, issuers, and FEHB carriers along with the prescription drugs
that have contributed to the greatest annual increases in plan
expenditures, and the prescription drugs that have generated the
highest prescription drug rebates, fees, and other remuneration. These
reports will provide the Departments and OPM with an improved
understanding of prescription drug costs. The dataset will also allow
the Departments and OPM to identify other major drivers of increases in
health care spending, including hospital costs, primary and specialty
health care provider and clinical service costs, and other medical
costs. The data may also allow the Departments and OPM to examine
variation in health care costs across the country.
Policymakers will be able to use the information provided in the
section 204 public reports to set policies that may result in lower
premiums, reduced out-of-pocket costs, and decreased labor costs.
Policymakers will also be able to use this information to set policies
that may promote transparency and more competition in health care and
prescription drug markets, consistent with the goals of Executive Order
14036.
b. Costs
The Departments and OPM estimate the burden to report the
information will be the time and effort necessary for plans, issuers,
FEHB carriers, and other reporting entities to submit the required
information in the required format to the Departments. The Departments
and OPM assume that issuers, TPAs, and PBMs will submit the required
information on behalf of group health plans or FEHB carriers. The
Departments and OPM acknowledge that TPAs and PBMs are likely to pass
on any related costs to plans, issuers, and FEHB carriers. The
Departments and OPM estimate there are 473 health insurance issuers
offering individual and group health insurance,\33\ 205 TPAs \34\
(generally submitting on behalf of self-funded group health plans), 46
FEHB carriers, and 66 PBMs \35\ (submitting on behalf of plans,
issuers, and FEHB carriers) that will submit the required information
annually. The Departments and OPM assume that all costs will be
incurred in 2022 and beyond, since reporting entities are unlikely to
begin implementation in the last month of 2021. The costs related to
these information collection requirements are estimated to be
$1,033,758,440 in 2022, $289,786,640 in 2023, and $211,128, 360 in 2024
and onward, as discussed in detail later in section V.D. (Paperwork
Reduction Act) of this preamble. These total costs have a tendency
toward overestimation because the estimate does not reflect process
efficiencies for FEHB carriers that are also issuers.
---------------------------------------------------------------------------
\33\ Based on data from MLR annual reports for the 2019 MLR
reporting year, available at https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.
\34\ Estimates for Non-issuer TPAs are based on data derived
from the 2016 Benefit Year reinsurance program contributions.
\35\ Source: National Association of Insurance Commissioners,
last updated on March 16, 2021. Available at https://content.naic.org/cipr_topics/topic_pharmacy_benefit_managers.htm.
---------------------------------------------------------------------------
Issuers, FEHB carriers, TPAs, and PBMs will incur additional costs
related to the data submission. To estimate these costs, the
Departments and OPM used data from the Bureau of Labor Statistics (BLS)
to derive average labor costs (including a 100 percent increase for
fringe benefits and overhead).\36\ As explained in section V.D.1.
(Paperwork Reduction Act) of this preamble, the Departments and OPM
used a different data set to estimate costs related to the information
collection requirements.
---------------------------------------------------------------------------
\36\ May 2020 Bureau of Labor Statistics, Occupational
Employment Statistics, National Occupational Employment and Wage
Estimates, available at https://www.bls.gov/oes/current/oes_nat.htm.
[[Page 66685]]
Table 2--Adjusted Hourly Wage Rates
----------------------------------------------------------------------------------------------------------------
Fringe
Occupational Mean hourly benefits and Adjusted
Occupation title code wage ($/hour) overhead ($/ hourly wage ($/
hour) hour)
----------------------------------------------------------------------------------------------------------------
Chief Executives................................ 11-1011 $95.12 $95.12 $190.24
General and Operations Managers................. 11-1021 60.45 60.45 120.90
Computer and Information Systems Managers....... 11-3021 77.76 77.76 155.52
Lawyers......................................... 23-1011 71.59 71.59 143.18
Paralegals and Legal Assistants................. 23-2011 27.22 27.22 54.44
Executive Secretaries and Executive 43-6011 31.36 31.36 62.72
Administrative Assistants......................
Legal Secretaries and Administrative Assistants. 43-6012 25.36 25.36 50.72
Business Operations Specialists................. 13-1198 40.53 40.53 81.06
Computer Programmers............................ 15-1251 45.98 45.98 91.96
Secretaries and Administrative Assistants....... 43-6014 19.43 19.43 38.86
----------------------------------------------------------------------------------------------------------------
Issuers, FEHB carriers, TPAs, and PBMs will incur costs associated
with contract modifications regarding these reporting requirements. The
Departments and OPM assume that each of the 473 issuers, 46 FEHB
carriers, and 205 TPAs will need to modify or enter into contracts with
PBMs for the PBMs to provide information on prescription drug rebates,
or other required information, that is generally maintained primarily
by PBMs. The Departments and OPM estimate that a total of 724 contracts
will be modified. The Departments assume that the contract
modifications will involve the time of chief executives, general and
operations managers, lawyers, paralegals and legal assistants,
executive secretaries and executive administrative assistants, and
legal secretaries and administrative assistants from both entities. The
adjusted hourly wages (which incorporate a 100 percent markup for
fringe benefits and overhead costs) for those involved in contract
modifications are presented in Table 2.
The Departments and OPM estimate that in order to negotiate
contract revisions between issuers, FEHB carriers, TPAs, and their
PBMs, for each issuer, FEHB carrier, TPA, and PBM, a chief executive
will need 1 hour, general and operations managers will need 2 hours,
lawyers will need 20 hours, paralegals will need 20 hours,
administrative assistants will need 2 hours, and legal secretaries will
need 20 hours for a total of 65 hours, at a cost of approximately
$5,524 for each entity negotiating a contract revision. The total
burden related to each contract negotiation between issuers, FEHB
carriers, TPAs, and their PBMs is estimated to be 130 hours, with an
associated cost of approximately $11,049. The total burden for all 724
contract modifications is estimated to be approximately 94,120 hours,
with an associated cost of approximately $7,999,157.\37\ The
Departments and OPM assume that this cost will be incurred in 2022. The
calculations and the total burden and cost associated with these
contract modifications are presented in Table 3. The Departments and
OPM seek comment on these estimates.
---------------------------------------------------------------------------
\37\ The total hour burden and equivalent cost of burden were
calculated as follows: Burden Hours per Contract Modification x
Number of Contract Modifications = Total Burden Hours (130 x 724 =
94,120); Total Cost per Contract Modification x Number of Contract
Modifications = Equivalent Total Cost ($11,049 x 724 = $7,999,157).
Table 3--Burden and Costs to Issuers, FEHB Carriers, TPAs, and PBMs Associated With Contract Modifications
----------------------------------------------------------------------------------------------------------------
2022
-----------------------------------------------
Occupation Adjusted
hourly wage ($/ Time (hours) Estimated
hour) labor cost
----------------------------------------------------------------------------------------------------------------
Chief Executives................................................ $190.24 1 $190.24
General and Operations Managers................................. 120.90 2 241.80
Lawyers......................................................... 143.18 20 2,863.60
Paralegals and Legal Assistants................................. 54.44 20 1,088.80
Executive Secretaries and Executive Administrative Assistants... 62.72 2 125.44
Legal Secretaries and Administrative Assistants................. 50.72 20 1,014.40
----------------------------------------------------------------------------------------------------------------
Burden and Cost for Each Issuer, FEHB Carrier, TPA, and PBM................. 65 5,524.28
-----------------------------------------------
Total Burden and Cost for Each Contract Negotiation Between an Issuer, FEHB 130 11,048.56
Carrier, or TPA and Their PBM..............................................
-----------------------------------------------
Total Burden and Cost for All Contract Negotiations......................... 94,120 7,999,157.44
----------------------------------------------------------------------------------------------------------------
[[Page 66686]]
All reporting entities will incur costs associated with developing
standard operating procedures and training staff responsible for
submitting the required data. The Departments and OPM assume that each
of the 473 issuers, 46 FEHB carriers, 205 TPAs, and 66 PBMs will
require the time of general and operations managers, computer and
information systems managers, business operation specialists, computer
programmers, and secretaries and administrative assistants to develop
new standard operating procedures and deliver or receive training. The
adjusted hourly wages for those involved in these changes in standard
operating procedures and training requirements are presented in Table
2.
The Departments and OPM estimate that for each issuer, FEHB
carrier, TPA, and PBM, it will take 8 hours for general managers, 8
hours for information system managers, 40 hours for business operation
specialists, 4 hours for computer programmers, and 4 hours for
administrative assistants to prepare new standard operating procedures
and train staff regarding the data submission requirements. The total
burden for each issuer, FEHB carrier, TPA, and PBM will be 64 hours
with an associated cost of approximately $5,977. The total estimated
burden of changing standard operating procedures and training staff for
all 790 issuers, FEHB carriers, TPAs, and PBMs is 50,560 hours, with an
associated equivalent cost of $4,721,862.\38\ The Departments and OPM
assume that this cost will be incurred in 2022. The calculations and
the total burden and cost associated with developing standard operating
procedures and training staff are presented in Table 4. The Departments
and OPM seek comment on these estimates.
---------------------------------------------------------------------------
\38\ The total hour burden and equivalent cost of burden were
calculated as follows: Burden Hours per Entity x Number of Entities
= Total Burden Hours (64 x 790 = 50,560); Total Cost per Entity x
Number of Entities = Equivalent Total Cost ($5,977 x 790 =
$4,721,862).
Table 4--Burden and Costs to Issuers, FEHB Carriers, TPAs, and PBMs Associated With Developing Standard
Operating Procedures and Training Staff
----------------------------------------------------------------------------------------------------------------
2022
-----------------------------------------------
Occupation Adjusted
hourly wage ($/ Time (hours) Estimated
hour) labor cost
----------------------------------------------------------------------------------------------------------------
General and Operations Managers................................. $120.90 8 $967.20
Computer and Information Systems Managers....................... 155.52 8 1,244.16
Project Management Specialists and Business Operations 81.06 40 3,242.40
Specialists, All Other.........................................
Computer Programmers............................................ 91.96 4 367.84
Secretaries and Administrative Assistants, Except Legal, 38.86 4 155.44
Medical, and Executive.........................................
----------------------------------------------------------------------------------------------------------------
Burden and Cost for Each Issuer, FEHB Carrier, TPA, and PBM................. 64 5,977.04
-----------------------------------------------
Total Burden and Cost Associated with Developing Standard Operating 50,560 4,721,861.60
Procedures and Training Staff..............................................
----------------------------------------------------------------------------------------------------------------
The federal government will incur costs of approximately $4.4
million in 2021, $8.5 million in 2022, $7.3 million in 2023, $7.4
million in 2024, and $7.9 million in 2025 to build and maintain a
system to receive and store the information submitted by issuers, FEHB
carriers, TPAs, and PBMs, to analyze the data, and to prepare section
204 public reports.
c. Transfers
These interim final rules could potentially lead to transfers from
providers, facilities, pharmaceutical manufacturers, and/or PBMs to
plans, issuers, and FEHB carriers if plans, issuers, and FEHB carriers
are able to achieve greater negotiating power because of improved
understanding of prescription drug costs. If consumers are able to make
informed plan selections or prescription drug purchases in response to
improved understanding of prescription drug costs (including trends in
prescription drug prices and the impact of pharmaceutical manufacturer
rebates, fees, and other remuneration on premiums and out-of-pocket
costs), these interim final rules could also potentially lead to
transfers from pharmaceutical manufacturers, PBMs, and/or plans,
issuers, and FEHB carriers to consumers in the form of lower
prescription drug prices. The Departments and OPM seek comment on any
potential transfers that may occur as a result of the data submission
requirements in these interim final rules.
C. Regulatory Alternatives
In developing these interim final rules, the Departments considered
various alternative approaches.
Aggregation. The Departments and OPM considered requiring plans,
issuers, and FEHB carriers to submit all of the required information on
a plan-by-plan basis, rather than allowing reporting entities to submit
aggregated data. However, as explained in section II.C.3. of this
preamble, this approach would impose a large administrative burden on
regulated entities and would also result in less accurate and
meaningful top 50 and top 25 lists, which would inhibit the
Departments' ability to produce accurate and meaningful section 204
public reports as required by the statute. Collecting the top 50 lists
separately for each group health plan could produce a distorted view of
the market due to the small sample sizes that would underlie these top
50 lists, and due to the Departments' inability to combine data from
such plan-specific top 50 lists to determine aggregate prescription
drug and rebate trends nationwide and within market segments.
Collecting the top 25 rebate list for each group health plan would
produce an inaccurate view of rebates, fees, and other remuneration as
these rebates are not provided at the individual prescription level,
and often not even at the plan level; thus, TPAs and issuers would have
to speculate as to actual amounts of rebates and any price concessions
for each plan. In addition, this approach would be inconsistent with
the approach taken in other HHS data collections. Further, collecting
plan-level, drug-specific data would increase the likelihood of
collecting and transmitting patient health data and personally
identifiable information, and the attendant risk of inadvertent or
inappropriate disclosure of this information.
[[Page 66687]]
However, as noted in section II.C.3. of this preamble, the
Departments and OPM will continue to review the merits of this
alternative approach and may modify the approach to aggregation in
future rulemaking.
Plan Year. The Departments and OPM considered requiring plans,
issuers, and FEHB carriers to submit the required data by plan or
coverage year determined according to the effective dates of each plan
or policy. However, this approach is inconsistent with other HHS data
collections and would limit the Departments' ability to compare trends
among group and individual market segments, public- and private-
sponsored health coverage, and multiple data sources. Evaluation of
market trends is important both for policy development and for the
required section 204 public report.
Definition of Drug. The Departments and OPM considered several
different classification systems to define a drug for the purposes of
section 204 data submissions. The NDC is very granular, containing
information on the labeler, active ingredient, form, strength, and
packaging of drugs, and would provide robust information if the
Departments could collect data for every code. However, section 9825 of
the Code, section 725 of ERISA, and section 2799A-10 of the PHS Act
give the Departments authority to collect only the information on the
top 50 or top 25 drugs, as applicable, by plan or coverage. Given this
limited scope of the data collection, a lower level of granularity is
preferable for obtaining the most representative information possible,
since multiple variations of essentially the same drug \39\ are unique
NDCs. With access to only the top 50 NDCs, the Departments therefore
would not have the data for all NDCs associated with a given
prescription drug, and thus would not be able to consolidate the NDC
information to identify meaningful trends in the prescription drug
markets. The Departments and OPM also considered using the RxNorm
Concept Unique Identifier (RxCUI), which is slightly less granular than
the NDC, but RxCUI-level data collection suffers from many of the same
limitations as NDC-level data collection, and commenters responding to
the RFI overwhelmingly advised against collecting the data based on
RxCUI because it is not widely used by reporting entities. Instead,
many public reports, such as the 2020 Report to Congress on
Prescription Drug Pricing prepared by the HHS Office of the Assistant
Secretary for Planning and Evaluation (ASPE),\40\ use a name and
ingredient system that identifies drugs at a higher level, rather than
granular systems such as NDC or RxCUI, to compare drug information
across markets and across time. Most commenters responding to the RFI
also recommended the use of a classification that would ensure that the
same drug in various formulations or dosages would not appear on the
top 50 lists multiple times, such as a classification based on name and
ingredient. Ultimately, the Departments and OPM determined that the
most useful data would be collected if prescription drug information is
grouped by name and ingredient.
---------------------------------------------------------------------------
\39\ This characterization is used only for purposes of these
interim final rules and is not intended to reflect or suggest any
such characterization by FDA.
\40\ https://aspe.hhs.gov/system/files/aspe-files/263451/2020-drug-pricing-report-congress-final.pdf.
---------------------------------------------------------------------------
Most Costly Drugs. The Departments and OPM considered requiring
plans, issuers, and FEHB carriers to rank the 50 most costly drugs
based on spending per dosage unit rather than based on total annual
spending. Per-unit spending would reflect drug prices and capture in
the top 50 list the cost of the drug without the influence of the
number of times a drug was prescribed. In contrast, total spending may
capture the top 50 list inexpensive generic drugs that are frequently
prescribed and purchased. However, the statutory language suggests that
in the section 204 data submission requirements, Congress sought to
identify the drugs that drive the overall prescription drug expenditure
in the United States, rather than the drugs with the highest unit
prices. Ranking the top 50 most costly drugs by total annual spending
will provide a more informative comparison to the top 25 drugs that
yielded the highest amount of prescription drug rebates because both
lists would be based on total, rather than per-unit, dollar amounts.
Leveraging Similar Data Collections under the PHS Act. The
Departments analyzed the reporting requirements under several existing
PHS Act provisions related to prescription drug and health care
spending to determine whether any of the data required under section
9825(a) of the Code, section 725(a) of ERISA, and section 2799A-10(a)
of the PHS Act are already available to the Departments pursuant to
other reporting requirements. The data collection requirements under
section 9825(a) of the Code, section 725(a) of ERISA, and section
2799A-10(a) of the PHS Act have some similarities to the requirements
under section 2718(a) of the PHS Act implemented in the MLR rules,\41\
as well as section 1150A of the Social Security Act, which is
implemented in the Exchange Establishment rule and the PBM Transparency
rule. However, there are several important distinctions.
---------------------------------------------------------------------------
\41\ 75 FR 74863 (Dec. 1, 2010); see also 76 FR 76573 (Dec. 7,
2011), 77 FR 28790 (May 16, 2012), 78 FR 15409 (Mar. 11, 2013), 79
FR 30339 (May 27, 2014), 80 FR 10749 (Feb. 27, 2015), 85 FR 29164
(May 14, 2020), 86 FR 24140 (May 5, 2021).
---------------------------------------------------------------------------
Section 2718(a) of the PHS Act addresses clear accounting for the
costs of health insurance coverage, including health care spending, and
generally requires issuers to submit annual MLR reports to HHS. HHS
implemented these reporting requirements in the MLR rules, codified at
45 CFR part 158. Similar to section 9825(a) of the Code, section 725(a)
of ERISA, and section 2799A-10(a) of the PHS Act, the MLR rules require
issuers to report data on premiums \42\ and claims, including
prescription drug claims and rebates.\43\ However, unlike the
requirements in section 9825(a) of the Code, section 725(a) of ERISA,
and section 2799A-10(a) of the PHS Act, the MLR rules do not require
that premiums be broken down by amounts paid by employers versus
employees; do not break down health care spending costs, other than
prescription drug costs, by type; do not break down prescription drug
costs by amounts paid by the plan or issuer versus participants,
beneficiaries, and enrollees; and do not require reporting of drug-
level prescription drug and rebate data. Therefore, while the total
amounts for certain items reported under section 9825(a) of the Code,
section 725(a) of ERISA, and section 2799A-10(a) of the PHS Act and the
MLR rules may match, the amounts currently reported by issuers under
the MLR rules cannot be used to satisfy all of the relevant
requirements of section 9825(a) of the Code, section 725(a) of ERISA,
and section 2799A-10(a) of the PHS Act. Additionally, the MLR rules do
not apply to self-funded group health plans (although issuers report
certain aggregate information with respect to the experience of self-
funded group health plans for which issuers provide administrative
services), and data attributable to FEHB plans is not separated out
under the MLR rules.
---------------------------------------------------------------------------
\42\ 45 CFR 158.130.
\43\ 45 CFR 158.140.
---------------------------------------------------------------------------
Section 1150A of the Social Security Act requires a health benefit
plan or a PBM that manages prescription drug coverage under a contract
with a QHP issuer to provide certain prescription drug information to
the Secretary of
[[Page 66688]]
HHS.\44\ This information includes: (a) The percentage of prescriptions
dispensed through retail versus mail order pharmacies; (b) the
percentage of prescriptions for generic drugs; (c) the amount and type
of rebates, discounts, or price concessions (excluding bona fide
service fees) that the PBM negotiates that are attributable to
utilization under the plan; (d) the amount of rebates, discounts, or
price concessions passed through to the plan sponsor; (e) the total
number of prescriptions that were dispensed; and (f) the difference
between the amount that the plan pays the PBM and the amount that the
PBM pays pharmacies. HHS implemented these reporting requirements as
they apply to QHP issuers in the Exchange Establishment rule,\45\ and
implemented these reporting requirements as they apply to PBMs in the
PBM Transparency rule.\46\
---------------------------------------------------------------------------
\44\ QHPs are offered in the individual and small group markets.
Section 1150A(a) of the Social Security Act also applies to Medicare
Part D plans and Medicare Advantage plans offering a prescription
drug plan, and PBMs that manage prescription drug coverage under
contract with a prescription drug plan sponsor of a prescription
drug plan or a Medicare Advantage organization offering a Medicare
Advantage prescription drug plan.
\45\ 77 FR 18308 (Mar. 27, 2012).
\46\ 86 FR 24140 (May 5, 2021).
---------------------------------------------------------------------------
Section 9825(a) of the Code, section 725(a) of ERISA, and section
2799A-10(a) of the PHS Act, the Exchange Establishment rule, and the
PBM Transparency rule require issuers to report some of the same
information regarding prescription drug rebates. However, section
9825(a) of the Code, section 725(a) of ERISA, and section 2799A-10(a)
of the PHS Act apply to all plans and issuers, whereas the Exchange
Establishment rule and the PBM Transparency rule only apply to
individual and small group market QHPs and their PBMs. Therefore,
reporting under the Exchange Establishment rule and PBM Transparency
rule will not fully satisfy the relevant requirements of section
9825(a) of the Code, section 725(a) of ERISA, and section 2799A-10(a)
of the PHS Act. However, as discussed in section II.C.2.e. of the
preamble, to reduce reporting burden, these interim final rules align
collection of certain data elements in the section 204 data submissions
with the data elements collected under the Exchange Establishment rule
and the PBM Transparency rule.
D. Paperwork Reduction Act--Department of Health and Human Services
Under the Paperwork Reduction Act of 1995 (PRA), the Departments
and OPM are required to provide 60-day notice in the Federal Register
and solicit public comment before a collection of information
requirement is submitted to the Office of Management and Budget (OMB)
for review and approval. These interim final rules contain information
collection requirements (ICRs) that are subject to review by OMB. A
description of these provisions is given in the following paragraphs
with an estimate of the annual burden, summarized in Table 18. To
fairly evaluate whether an information collection should be approved by
OMB, section 3506(c)(2)(A) of the PRA requires that the Departments and
OPM solicit comment on:
The need for the information collection and its usefulness
in carrying out the proper functions of the agency;
The accuracy of the Departments' estimate of the
information collection burden;
The quality, utility, and clarity of the information to be
collected; and
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
The Departments and OPM are soliciting public comment on each of
the required issues under section 3506(c)(2)(A) of the PRA for the
following ICRs.
Contemporaneously with the publication of these interim final
rules, HHS has submitted a request for a new ICR containing the
information collection requirements for the prescription drug and
health care spending requirements created by section 204 of Title II of
Division BB of the CAA. HHS has requested emergency review and approval
in accordance with 5 CFR 1320.13(a)(2)(i) and (iii) of the PRA. The
Secretaries of the Departments and the OPM Director have determined
that public harm is likely to result and the collection of information
is likely to be delayed if normal clearance procedures are followed.
The ICR will be available at https://www.RegInfo.gov.
The Departments and OPM will be requesting approval of the
emergency review requests by the effective date of these interim final
rules. The Departments and OPM will be seeking approval for the ICRs
for 180 days, the maximum allowed for an ICR approved using an
emergency review. These interim final rules also serve as the notice
providing the public with a 60-day period to submit written comments on
the ICRs as part of the normal clearance process under the PRA.
1. Wage Estimates
The Departments and OPM have chosen to use the Contract Awarded
Labor Category (CALC) \47\ database tool to derive the hourly rates for
the burden and cost estimates in these interim final rules to derive
estimates of costs related to the ICR. The Departments and OPM chose to
use wages derived from the CALC database because, even though the BLS
data set is valuable to economists, researchers, and others that would
be interested in larger, more macro-trends in parts of the economy, the
CALC data set is meant to help market research based on existing
government contracts in determining how much a project/product will
cost based on the required skill sets needed and it includes some
occupation types that are not available in the BLS data set.
---------------------------------------------------------------------------
\47\ The CALC tool (https://calc.gsa.gov/) was built to assist
acquisition professionals with market research and price analysis
for labor categories on multiple U.S. General Services
Administration (GSA) & Veterans Administration (VA) contracts. Wages
obtained from the CALC database are fully burdened to account for
fringe benefits and overhead costs.
[[Page 66689]]
Table 5--CALC Hourly Wages Used in Burden Estimates
------------------------------------------------------------------------
Hourly wage
Occupation: rate
------------------------------------------------------------------------
Project Manager/Team Lead............................... $110
Scrum Master............................................ 110
Senior Business Analysis................................ 134
Technical Architect/Sr. Developer....................... 207
DevOps Engineer/Security Engineer....................... 143
Application Developer................................... 111
------------------------------------------------------------------------
2. ICRs Regarding Reporting of Prescription Drug and Health Care
Spending (45 CFR 149.720, 149.730, and 149.740)
As discussed in section II.C. of this preamble, section 9825(a) of
the Code, section 725(a) of ERISA, and section 2799A-10(a) of the PHS
Act require plans and issuers to annually submit to the Departments
certain information about prescription drugs and health care spending,
including, but not limited to, average monthly premium amounts, and the
number of participants, beneficiaries, and enrollees, as applicable,
with respect to the plan or coverage in the previous plan year. In
these interim final rules, OPM also directs FEHB carriers to comply
with these requirements with respect to an FEHB plan in the same manner
as such provisions apply to a group health plan or health insurance
issuer offering group or individual health insurance coverage. The
burden estimates are based on the expected time and effort for
reporting entities to prepare and submit the required data. The
Departments assume that for self-funded group health plans, the costs
will be incurred by TPAs and that prescription drug information will be
submitted by PBMs on behalf of plans and issuers. Costs incurred by
TPAs and PBMs are likely to be passed on to plans, issuers, and FEHB
carriers. The Departments acknowledge that some large self-funded plans
may seek to make needed IT changes and report the required information
to HHS without the use or assistance of a TPA or other third-party
entity. In those instances, the self-funded plan will directly incur
the burden and cost to meet the requirements of these interim final
rules. The Departments are unable to determine how many self-funded
plans may choose to develop their IT systems and report the required
information to HHS and seek comment as to the number of plans that may
choose to do so. The Departments assume that all costs will be incurred
in 2022 and beyond.
The Departments and OPM estimate there are 473 issuers and 46 FEHB
carriers offering group and individual and health insurance coverage,
205 TPAs (generally on behalf of self-funded group health plans), and
66 PBMs (on behalf of plans, issuers, and FEHB carriers) that will
submit the required data annually.
In 2022, reporting entities will incur a one-time cost to make
changes to their IT systems to include the development of programs,
processes, and systems for reporting the data. In 2023 and beyond, each
entity will incur annual costs to update and maintain reporting
capabilities and to report the required data to the Departments.
---------------------------------------------------------------------------
\48\ Calculation of totals was done as follows: Burden Hours per
Respondent x Number of Respondent = Total Burden Hours (9,360 x 519
= 4,857,840). Total Cost per Respondent x Number of Respondents =
Total Cost ($1,275,560 x 519 = $662,015,640).
---------------------------------------------------------------------------
For issuers and FEHB carriers, the Departments and OPM estimate
that in 2022, each issuer and FEHB carrier will incur a one-time first-
year cost and hour burden to design, develop, and implement needed IT
systems changes to collect and submit the required data to the
Departments as set forth in these interim final rules, including
obtaining employer and employee premium contributions from employers
providing group health coverage. The Departments and OPM estimate that
for each issuer and FEHB carrier, on average, it will take Project
Managers/Team Leads 2,080 hours (at $110 per hour), Scrum Masters 1,560
hours (at $110 per hour), Senior Business Analysts 1,040 hours (at $134
per hour), Technical Architects/Sr. Developers 2,080 hours (at $207 per
hour), Application Developers 2,080 hours (at $111 per hour), and
DevOps Engineers/Security Engineers 520 hours (at $143 per hour) to
complete this task. The Departments and OPM estimate the total burden
per issuer will be approximately 9,360 hours, with an equivalent cost
of approximately $1,275,560. For all 519 issuers and FEHB carriers, the
total first-year burden is estimated to be 4,857,840 hours with an
equivalent total cost of approximately $662,015,640.\48\
[[Page 66690]]
Table 6--Estimated Total First-Year Cost and Hour Burden for Issuers and FEHB Carriers to Design, Develop and
Implement Needed IT System Changes and Submit Required Data
----------------------------------------------------------------------------------------------------------------
Number of Burden hours Total burden
Number of respondents responses per respondent hours Total cost
----------------------------------------------------------------------------------------------------------------
519......................................... 519 9,360 4,857,840 $662,015,640
----------------------------------------------------------------------------------------------------------------
In addition to the one-time first-year cost and burden estimated in
the previous section of this preamble, issuers and FEHB carriers will
incur an additional one-time cost and burden in the second year of
implementation to maintain and update their IT systems and to submit
the required data to the Departments. The Departments and OPM estimate
that for each issuer and FEHB carrier it will take Project Managers/
Team Leads 520 hours (at $110 per hour), Scrum Masters 260 hours (at
$110 per hour), Senior Business Analysts 260 hours (at $134 per hour),
Technical Architects/Sr. Developers 520 hours (at $207 per hour),
Application Developers 520 hours (at $111 per hour), and DevOps
Engineers/Security Engineers 260 hours (at $143 per hour) to perform
these tasks. The Departments and OPM estimate the total second-year
burden for each issuer will be 2,340 hours, with an equivalent cost of
approximately $323,180. For all 519 issuers and FEHB carriers, the
total one-time second-year implementation and reporting burden is
estimated to be 1,214,460 hours with an equivalent total cost of
approximately $167,730,420. The cost and burden associated with the
second year will be incurred in 2023.\49\
---------------------------------------------------------------------------
\49\ Calculation of totals was done as follows: Burden Hours per
Respondent x Number of Respondent = Total Burden Hours (2,340 x 519
= 1,214,460). Total Cost per Respondent x Number of Respondents =
Total Cost ($323,180 x 519 = $167,730,420).
Table 7--Estimated One-Time Second-Year Cost and Hour Burden for Issuers and FEHB Carriers To Update and
Maintain IT Systems and Submit Required Data
----------------------------------------------------------------------------------------------------------------
Number of Burden hours Total burden
Number of respondents responses per respondent hours Total cost
----------------------------------------------------------------------------------------------------------------
519......................................... 519 2,340 1,214,460 $167,730,420
----------------------------------------------------------------------------------------------------------------
In addition to the one-time first-year and second-year costs and
burdens estimated earlier in this section of this preamble, issuers and
FEHB carriers will incur ongoing annual costs, to be incurred from 2024
onward, related to ensuring submission accuracy, providing quality
assurance, conducting maintenance and making updates, enhancing or
updating any needed security measures, and submitting the required data
to the Departments. The Departments and OPM estimate that for each
issuer and FEHB carrier it will take Project Managers/Team Leads 520
hours (at $110 per hour), Scrum Masters 260 hours (at $110 per hour),
Senior Business Analyst 40 hours (at $134 per hour), Technical
Architects/Sr. Developers 520 hours (at $207 per hour), Application
Developers 260 hours (at $111 per hour), and DevOps Engineers/Security
Engineers 260 hours (at $143 per hour) to perform these tasks. The
total annual burden for each issuer and FEHB carrier will be 1,860
hours, with an equivalent cost of approximately $264,840. For all 519
issuers and FEHB carriers, the total annual maintenance and reporting
burden is estimated to be 965,340 hours with an equivalent total cost
of approximately $137,451,960.\50\ The Departments and OPM consider
this to be an upper-bound estimate and expect maintenance costs to
decline in succeeding years as issuers gain efficiencies and experience
in updating, managing, and submitting the required data.
---------------------------------------------------------------------------
\50\ Calculation of totals was done as follows: Burden Hours per
Respondent x Number of Respondent = Total Burden Hours (1,860 x 519
= 965,340). Total Cost per Respondent x Number of Respondents =
Total Cost ($264,840 x 519 = $137,451,960).
Table 8--Estimated Annual Cost and Hour Burden for Maintenance and Reporting for All Issuers
----------------------------------------------------------------------------------------------------------------
Number of Burden hours Total burden
Number of respondents responses per respondent hours Total cost
----------------------------------------------------------------------------------------------------------------
519......................................... 519 1,860 965,340 $137,451,960
----------------------------------------------------------------------------------------------------------------
The Departments and OPM estimate the three-year average annual
total burden for all 519 issuers and FEHB carriers to develop, build,
and maintain needed IT systems changes to collect and aggregate the
required data, and submit that data to the Departments, will be
2,345,880 hours with an average annual total cost of $322,399,340. The
total annual burden for all respondents is likely overestimated because
the estimate does not reflect process efficiencies for FEHB carriers
that are also issuers. As HHS, DOL, the Department of the Treasury, and
OPM share jurisdiction, HHS will account for 45 percent of the burden,
or approximately 1,055,646 burden hours with an equivalent cost of
approximately $145,079,703. The Departments and OPM seek comment on
these estimates.
[[Page 66691]]
Table 9--Annual Burden for Issuers and FEHB Carriers in the Individual and Group Markets
----------------------------------------------------------------------------------------------------------------
Total
Estimated Estimated Burden per estimated Total
number of number of response annual burden estimated
respondents responses (hours) (hours) labor cost ($)
----------------------------------------------------------------------------------------------------------------
2022............................ 234 234 9,360 2,186,028 $297,907,038
2023............................ 234 234 2,340 546,507 75,478,689
2024............................ 234 234 1,860 434,403 61,853,382
-------------------------------------------------------------------------------
Three-year average.......... 234 234 4,520 1,055,646 145,079,703
----------------------------------------------------------------------------------------------------------------
For TPAs, the Departments and OPM estimate that in 2022, each TPA
will incur a one-time first-year cost and burden to design, develop,
and implement needed IT systems changes to collect and submit,
generally on behalf of self-funded group health plans, the data
required under these interim final rules, including obtaining employer
and employee premium contributions from employers providing group
health coverage. The Departments and OPM estimate that for each TPA, on
average, it will take Project Managers/Team Leads 2,080 hours (at $110
per hour), Scrum Masters 1,560 hours (at $110 per hour), Senior
Business Analysts 1,040 hours (at $134 per hour), Technical Architects/
Sr. Developers 2,080 hours (at $207 per hour), Application Developers
2,080 hours (at $111 per hour), and DevOps Engineers/Security Engineers
520 hours (at $143 per hour) to complete this task. The Departments and
OPM estimate the total burden per TPA will be approximately 9,360
hours, with an equivalent cost of approximately $1,275,560. For all 205
TPAs, the total one-time first-year implementation and reporting burden
is estimated to be 1,918,800 hours with an equivalent total cost of
approximately $261,489,800.\51\
---------------------------------------------------------------------------
\51\ Calculation of totals was done as follows: Burden Hours per
Respondent x Number of Respondent = Total Burden Hours (9,360 x 205
= 1,918,800). Total Cost per Respondent x Number of Respondents =
Total Cost ($1,275,560 x 205 = $261,489,800).
Table 10--Estimated Total One-Time First-Year Cost and Hour Burden for TPAs To Design, Develop, and Implement
Needed IT Systems Changes and Submit Required Data
----------------------------------------------------------------------------------------------------------------
Number of Burden hours Total burden
Number of respondents responses per respondent hours Total cost
----------------------------------------------------------------------------------------------------------------
205......................................... 205 9,360 1,918,800 $261,489,800
----------------------------------------------------------------------------------------------------------------
In addition to the one-time first-year cost and burden estimated in
the previous section of this preamble, TPAs will incur an additional
one-time cost and burden in the second year of implementation to
maintain and update their IT systems and to submit the data to the
Departments. The Departments and OPM estimate that for each TPA it will
take Project Managers/Team Leads 520 hours (at $110 per hour), Scrum
Masters 260 hours (at $110 per hour), Senior Business Analysts 260
hours (at $134 per hour), Technical Architects/Sr. Developers 520 hours
(at $207 per hour), Application Developers 520 hours (at $111 per
hour), and DevOps Engineers/Security Engineers 260 hours (at $143 per
hour) to perform these tasks. The total second-year burden for each TPA
will be 2,340 hours, with an equivalent cost of approximately $323,180.
For all 205 TPAs, the total one-time second-year implementation and
reporting burden is estimated to be 479,700 hours with an equivalent
total cost of approximately $66,251,900.\52\ The cost and burden
associated with the second year will be incurred in 2023.
---------------------------------------------------------------------------
\52\ Calculation of totals was done as follows: Burden Hours per
Respondent x Number of Respondent = Total Burden Hours (2,340 x 205
= 479,700). Total Cost per Respondent x Number of Respondents =
Total Cost ($323,180 x 205 = $66,251,900).
Table 11--Estimated One-Time Second-Year Cost and Hour Burden for TPAs To Update and Maintain IT Systems and
Submit Required Data
----------------------------------------------------------------------------------------------------------------
Number of Burden hours Total burden
Number of respondents responses per respondent hours Total cost
----------------------------------------------------------------------------------------------------------------
205......................................... 205 2,340 479,700 $66,251,900
----------------------------------------------------------------------------------------------------------------
In addition to one-time first-year and second-year costs and
burdens estimated in the previous sections of this preamble, TPAs will
incur ongoing annual costs, in 2024 and subsequent years, related to
ensuring submission accuracy, providing quality assurance, conducting
maintenance and making updates, enhancing or updating any needed
security measures, and submitting the required data to the Departments.
The Departments and OPM estimate that for each TPA it will take Project
Managers/Team Leads 520 hours (at $110 per hour), Scrum Masters 260
hours (at $110 per hour), Senior Business Analysts 40 hours (at $134
per hour), Technical Architects/Sr. Developers 520 hours (at $207 per
hour), Application Developers 260 hours (at $111 per hour), and DevOps
Engineers/Security Engineers 260 hours (at $143 per hour) to perform
these tasks. The total annual burden for each TPA will be 1,860 hours,
with an equivalent cost of approximately $264,480. For all 205 TPAs,
the total
[[Page 66692]]
annual ongoing maintenance and reporting burden is estimated to be
381,300 hours with an equivalent total cost of approximately
$54,292,200.\53\ The Departments and OPM consider this to be an upper-
bound estimate and expect maintenance costs to decline in succeeding
years as issuers gain efficiencies and experience in updating,
managing, and submitting the required data.
---------------------------------------------------------------------------
\53\ Calculation of totals was done as follows: Burden Hours per
Respondent x Number of Respondent = Total Burden Hours (1,860 x 205
= 381,300). Total Cost per Respondent x Number of Respondents =
Total Cost ($264,480 x 205 = $54,292,200).
Table 12--Estimated Annual Cost and Hour Burden for Maintenance and Reporting for All TPAs
----------------------------------------------------------------------------------------------------------------
Number of Burden hours Total burden
Number of respondents responses per respondent hours Total cost
----------------------------------------------------------------------------------------------------------------
205......................................... 205 1,860 381,300 $54,292,200
----------------------------------------------------------------------------------------------------------------
The Departments and OPM estimate the 3-year average annual total
burden for all 205 TPAs to develop, build, and maintain needed IT
systems changes to collect and aggregate the required data, and submit
that data to the Departments, will be 926,600 hours with an average
annual total cost of $127,344,633. As HHS, DOL, the Department of the
Treasury, and OPM share jurisdiction, HHS will account for 45 percent
of the burden, or approximately 416,970 burden hours with an equivalent
cost of approximately $57,305,085. The Departments and OPM seek comment
on these burden estimates.
Table 13--Annual Burden for TPAs To Develop and Maintain Needed IT Systems Changes and Submit Required Data
----------------------------------------------------------------------------------------------------------------
Total Total
Estimated Estimated Burden per estimated estimated
number of number of response annual burden labor cost
respondents responses (hours) (hours) ($)
----------------------------------------------------------------------------------------------------------------
2022............................ 92 92 9,360 863,460 $117,670,410
2023............................ 92 92 2,340 215,865 19,813,355
2024............................ 92 92 1,860 171,585 24,431,490
-------------------------------------------------------------------------------
Three-year Average.......... 92 92 4,520 416,970 57,305,085
----------------------------------------------------------------------------------------------------------------
For PBMs, the Departments and OPM estimate that in 2022, each PBM
will incur a one-time first-year cost and burden to design, develop,
and implement needed IT systems changes to collect and submit, on
behalf of plans and issuers, the data required under these interim
final rules. The Departments and OPM estimate that for each PBM, on
average, it will take Project Managers/Team Leads 2,080 hours (at $110
per hour), Scrum Masters 2,080 hours (at $110 per hour), Senior
Business Analysts 1,560 hours (at $134 per hour), Technical Architects/
Sr. Developers 2,080 hours (at $207 per hour), Application Developers
4,160 hours (at $111 per hour), and DevOps Engineers/Security Engineers
780 hours (at $143 per hour) to complete this task. The Departments and
OPM estimate the total burden per PBM will be approximately 12,740
hours, with an equivalent cost of approximately $1,670,500. For all 66
PBMs, the total one-time first-year implementation and reporting burden
is estimated to be 840,840 hours with an equivalent total cost of
approximately $110,253,000.\54\
---------------------------------------------------------------------------
\54\ Calculation of totals was done as follows: Burden Hours per
Respondent x Number of Respondents = Total Burden Hours (12,740 x 66
= 840,840). Total Cost per Respondent x Number of Respondents =
Total Cost ($1,670,500 x 66 = $110,253,000).
TABLE 14--Estimated Total One-Time First-Year Cost and Hour Burden for PBMs To Design, Develop, and Implement
Needed IT Systems Changes and Submit Required Data
----------------------------------------------------------------------------------------------------------------
Number of Burden hours Total burden
Number of respondents responses per respondent hours Total cost
----------------------------------------------------------------------------------------------------------------
66.......................................... 66 12,740 840,840 $110,253,000
----------------------------------------------------------------------------------------------------------------
In addition to the one-time first-year cost and burden estimated in
the previous section of this preamble, PBMs will incur additional one-
time cost and burden in the second year of implementation to maintain
and update their IT systems and to submit the required data to the
Departments. The Departments and OPM estimate that for each PBM it will
take Project Managers/Team Leads 1,040 hours (at $110 per hour), Scrum
Master 1,040 hours (at $110 per hour), Senior Business Analysts 780
hours (at $134 per hour), Technical Architects/Sr. Developers 1,040
hours (at $207 per hour), Application Developers 2,340 hours (at $111
per hour), and DevOps Engineers/Security Engineers 260 hours (at $143
per hour) to perform these tasks. The total second-year burden for each
PBM will be 6,500 hours, with an equivalent cost of approximately
$845,520. For all 66 PBMs, the total one-time second-year
implementation and reporting burden is estimated to be 429,000 hours
with an
[[Page 66693]]
equivalent total cost of approximately $55,804,320.\55\
---------------------------------------------------------------------------
\55\ Calculation of totals was done as follows: Burden Hours per
Respondent x Number of Respondents = Total Burden Hours (6,500 x 66
= 429,000). Total Cost per Respondent x Number of Respondents =
Total Cost ($845,520 x 66 = $55,804,320).
Table 15--Estimated One-Time Second-Year Cost and Hour Burden for PBMs To Update and Maintain IT Systems and
Submit Required Data
----------------------------------------------------------------------------------------------------------------
Number of Burden hours Total burden
Number of respondents responses per respondent hours Total cost
----------------------------------------------------------------------------------------------------------------
66.......................................... 66 6,500 429,000 $55,804,320
----------------------------------------------------------------------------------------------------------------
In addition to the one-time first-year and second-year costs and
burdens estimated in the previous sections of this preamble, PBMs will
incur ongoing annual costs related to ensuring submission accuracy,
providing quality assurance, conducting maintenance and making updates,
enhancing or updating any needed security measures, and submitting the
required data to the Departments. The Departments and OPM estimate that
for each PBM it will take Project Managers/Team Leads 520 hours (at
$110 per hour), Scrum Masters 260 hours (at $110 per hour), Senior
Business Analysts 40 hours (at $134 per hour), Technical Architects/Sr.
Developers 520 hours (at $207 per hour), Application Developers 520
hours (at $111 per hour), and DevOps Engineers/Security Engineers 260
hours (at $143 per hour) to perform these tasks. The Departments and
OPM estimate the total annual burden for each PBM will be 2,120 hours,
with an equivalent cost of approximately $293,700. For all 66 PBMs, the
total annual maintenance and submission burden is estimated to be
139,920 hours with an equivalent total cost of approximately
$19,384,200.\56\ The Departments and OPM consider this to be an upper-
bound estimate and expect maintenance costs to decline in succeeding
years as PBMs gain efficiencies and experience in updating, managing,
and submitting the required data.
---------------------------------------------------------------------------
\56\ Calculation of totals was done as follows: Burden Hours per
Respondent x Number of Respondent = Total Burden Hours (2,120 x 66 =
139,920). Total Cost per Respondent x Number of Respondents = Total
Cost ($293,700 x 66 = $19,384,200).
Table 16--Estimated Annual Cost and Hour Burden for Maintenance and Reporting for All PBMs
----------------------------------------------------------------------------------------------------------------
Number of Burden hours Total burden
Number of respondents responses per respondent hours Total cost
----------------------------------------------------------------------------------------------------------------
66.......................................... 66 2,120 139,920 $19,384,200
----------------------------------------------------------------------------------------------------------------
The Departments and OPM estimate the three-year average annual
total burden for all 66 PBMs to develop, build, and maintain needed IT
systems changes to collect and aggregate the required data, and submit
that data to the Departments, will be 469,920 hours with an average
annual total cost of $61,813,840. As HHS, DOL, the Department of the
Treasury, and OPM share jurisdiction, HHS will account for 45 percent
of the burden, or approximately 211,464 hours, with an equivalent cost
of approximately $27,816,228. The Departments and OPM seek comment on
these burden estimates.
Table 17--Annual Burden for PBMs To Develop and Maintain Needed IT Systems Changes and Submit Required Data
----------------------------------------------------------------------------------------------------------------
Total Total
Estimated Estimated Burden per estimated estimated
number of number of response annual burden labor cost
respondents responses (hours) (hours) ($)
----------------------------------------------------------------------------------------------------------------
2022............................ 30 30 12,740 378,378 $49,613,850
2023............................ 30 30 6,500 193,050 25,111,944
2024............................ 30 30 2,120 62,964 8,722,890
-------------------------------------------------------------------------------
Three-year Average.......... 30 30 7,120 211,464 27,816,228
----------------------------------------------------------------------------------------------------------------
Plans will need to provide information on the average monthly
premiums paid by participants, beneficiaries, and enrollees, as
applicable, and paid by employers on behalf of participants,
beneficiaries, and enrollees, as applicable, to issuers and TPAs, so
that issuers and TPAs can report this information to the Departments on
behalf of plans. This information is compiled by plans for other
reporting purposes and should be readily available. The Departments and
OPM assume that plans will be able to provide the information to
issuers, FEHB carriers, and TPAs at minimal cost.
In developing the cost and burden estimates in this ICR, the
Departments and OPM recognize that while there may be various reporting
entities that submit the required information, IT development will
require varying
[[Page 66694]]
degrees of effort across the reporting entities. The Departments and
OPM also recognize that some reporting entities will have mature in-
house engineering teams and systems that can quickly respond to the
requirements in these interim final rules, while others may have
contracts with external firms and may require contract negotiation to
develop and build the IT systems needed to meet the requirements. There
may also be process efficiencies for issuers that are also FEHB
carriers. Additionally, software and system maintenance will depend on
various factors such as: The maturity of software in use; the ability
to access data; software development resources or ability; any
dependency upon third-party developers; the size of the reporting
entity; and the number of plans. Due to these unknown factors, the
estimates in these ICRs are the average cost and burden each entity
will assume to develop and build an IT system from scratch. The
Departments and OPM seek comment on these assumptions and what barriers
reporting entities may face in developing their IT systems to meet the
requirements in these interim final rules. HHS is seeking an OMB
control number and approval for the proposed information collection
(OMB control number: 0938-NEW (Prescription Drug and Health Care
Spending (CMS-10788))).
3. Summary of Annual Burden Estimates for Information Collection
Requirements
Table 18--Annual Recordkeeping and Reporting Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
Burden per Total annual Hourly labor
Regulation OMB control No. Respondents Responses response burden cost of Total cost ($)
(hours) (hours) reporting
--------------------------------------------------------------------------------------------------------------------------------------------------------
45 CFR 149.720, 730, 740--issuer 0938-NEW.............. 234 234 4,520 1,055,646 $137 $145,079,703
45 CFR 149.720, 730, 740--TPA... 0938-NEW.............. 92 92 4,520 416,970 137 57,305,085
45 CFR 149.720, 730, 740--PBM... 0938-NEW.............. 30 30 7,120 211,464 132 27,816,228
-----------------------------------------------------------------------------------------------
Total....................... ...................... 356 356 .............. 1,684,080 .............. 230,201,016
--------------------------------------------------------------------------------------------------------------------------------------------------------
4. Submission of PRA-Related Comments
The Departments and OPM submitted a copy of these interim final
rules to OMB for review of the rules' information collection and
recordkeeping requirements. These requirements are not effective until
they have been approved by OMB.
To obtain copies of the supporting statement and any related forms
for the proposed collections discussed above, please visit
www.cms.hhs.gov/PaperworkReductionActof1995 or call the Reports
Clearance Office at 410-786-1326.
The Departments and OPM invite public comments on these potential
information collection requirements. If you wish to comment, please
submit your comments electronically as specified in the ``Addresses''
section of these rules and identify the rule (CMS-9905-IFC) and the
ICR's CFR citation.
ICR-related comments are due January 24, 2022.
E. Paperwork Reduction Act--Department of Labor, Department of the
Treasury, and the Office of Personnel Management
As part of the continuing effort to reduce paperwork and respondent
burden, the Departments and OPM conduct a preclearance consultation
program to provide the general public and federal agencies with an
opportunity to comment on proposed and continuing collections of
information in accordance with the PRA. This process helps to ensure
that the public understands the Departments' and OPM's collection
instructions, respondents can provide the requested data in the desired
format, reporting burden (time and financial resources) is minimized,
collection instruments are clearly understood, and the Departments and
OPM can properly assess the impact of collection requirements on
respondents.
Contemporaneously with the publication of these interim final
rules, HHS as the host agency has submitted a request for a new common
form ICR containing the information collection requirements for the
prescription drug and health care spending requirements created by
section 204 of Title II of Division BB of the CAA. Once HHS has
obtained OMB approval for the information collection, DOL, the
Department of the Treasury, and OPM will seek OMB approval to use the
common form ICR by providing its agency-specific information to OMB.
Under the PRA, an agency may not conduct or sponsor, and an
individual is not required to respond to, a collection of information
unless it displays a valid OMB control number.
The information collections are summarized as follows:
1. ICRs Regarding Reporting of Prescription Drug and Health Care
Spending (26 CFR 54.9825-1T--6T, 29 CFR 2590.725-1--4)
As discussed earlier in the HHS Paperwork Reduction Act section
(V.D.2) of this preamble, issuers, FEHB carriers, TPAs, and PBMs will
incur costs to submit the required information to the Departments. The
Departments and OPM estimate the three-year average annual total
burden, for all 519 issuers and FEHB carriers to develop, build, and
maintain needed IT systems changes to collect and aggregate the
required information, and submit that information to the Departments,
will be 2,345,880 hours with an average annual total cost of
$322,399,340. The three-year average annual total burden, for all 205
TPAs to develop, build, and maintain needed IT systems changes to
collect and aggregate the required information, and submit that
information to the Departments, is estimated to be 926,600 hours with
an average annual total cost of $127,344,633. In addition, the three-
year average annual total burden, for all 66 PBMs to develop, build,
and maintain needed IT systems changes to collect and aggregate the
required information, and submit that information to the Departments,
will be 469,920 hours with an average annual total cost of $61,813,840.
As DOL, the Department of the Treasury, OPM, and HHS share
jurisdiction, HHS will account for 45 percent of the burden, DOL will
account for 25 percent, the Department of the Treasury will account for
25 percent, and OPM will account for 5 percent. The burden accounted
for by DOL and the Department of the Treasury each is presented in
Table 19 and the burden accounted for by OPM is presented in Table 20.
[[Page 66695]]
Table 19--Annual Recordkeeping and Reporting Requirements for DOL and the Department of the Treasury
----------------------------------------------------------------------------------------------------------------
Total annual Total labor
Respondent Number of Number of burden cost of
respondents responses (hours) reporting
----------------------------------------------------------------------------------------------------------------
FEHB carrier.................................... 130 130 586,470 $80,599,835
TPA............................................. 51 51 231,650 31,836,158
PBM............................................. 17 17 117,480 15,453,460
---------------------------------------------------------------
Total....................................... 198 198 935,600 127,889,453
----------------------------------------------------------------------------------------------------------------
Agency: DOL-EBSA, Treasury-IRS, OPM-FEHB.
Type of Review: New information collection.
Title: Reporting of Prescription Drug and Health Care Spending.
OMB Control Number: NEW.
Affected Public: Businesses or other for-profits; not-for-profit
institutions.
Forms:
Estimated Total Respondents: 198.
Estimated Total Responses: 198.
Frequency of Response: Annual.
Estimated Total Burden Hours: 935,600 (DOL--425,273, Treasury--
425,273, OPM--85,055).
Estimated Total Cost Burden: $127,889,453 (DOL--$58,131,570,
Treasury--$58,131,570, OPM--$11,626,314).
Table 20--Annual Recordkeeping and Reporting Requirements for OPM
----------------------------------------------------------------------------------------------------------------
Total annual Total labor
Respondent Number of Number of burden cost of
respondents responses (hours) reporting
----------------------------------------------------------------------------------------------------------------
FEHB Carrier.................................... 26 26 117,294 $16,119,967
TPA............................................. 10 10 46,330 6,367,232
PBM............................................. 3 3 23,496 3,090,692
---------------------------------------------------------------
Total....................................... 39 39 187,120 25,577,891
----------------------------------------------------------------------------------------------------------------
F. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.)
requires agencies to analyze options for regulatory relief of small
entities to prepare an initial regulatory flexibility analysis to
describe the impact of the proposed rule on small entities, unless the
head of the agency can certify that the rule will not have a
significant economic impact on a substantial number of small entities.
The RFA generally defines a ``small entity'' as (1) a proprietary firm
meeting the size standards of the Small Business Administration (SBA),
(2) a not-for-profit organization that is not dominant in its field, or
(3) a small government jurisdiction with a population of less than
50,000. States and individuals are not included in the definition of
``small entity.'' HHS uses a change in revenues of more than 3 to 5
percent as its measure of significant economic impact on a substantial
number of small entities. Individuals and states are not included in
the definition of a small entity. These interim final rules are not
preceded by a general proposed rule, and thus the requirements of the
RFA do not apply.
G. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires that agencies assess anticipated costs and benefits and take
certain other actions before issuing a proposed rule or any final rule
for which a general proposed rule was published that includes any
federal mandate that may result in expenditures in any 1 year by state,
local, or Tribal governments, in the aggregate, or by the private
sector, of $100 million in 1995 dollars, updated annually for
inflation. In 2021, that threshold is approximately $158 million. These
interim final rules were not preceded by a general proposed rule, and
thus the requirements of UMRA do not apply.
H. Federalism
Executive Order 13132 outlines fundamental principles of
federalism. It requires adherence to specific criteria by federal
agencies in formulating and implementing policies that have
``substantial direct effects'' on the states, the relationship between
the national government and states, or on the distribution of power and
responsibilities among the various levels of government, including
policies that impose direct costs on states or preempt state laws.
Federal agencies promulgating regulations that have these federalism
implications must consult with state and local officials, and describe
the extent of their consultation and the nature of the concerns of
state and local officials in the preamble to the interim final rules.
These interim final rules require plans, issuers, and FEHB carriers
to submit prescription drug and health care spending data to the
Departments, which will be used to inform a biannual public report that
will be issued by the Departments regarding prescription drug
reimbursements, trends, and impact on premiums. A number of states
currently have laws, regulations, or guidance related to the reporting
of prescription drug and health care spending data, although there is
no consistency among these states in the data elements collected or the
definitions used for those data elements. It is the Departments' and
OPM's view that these interim final rules will not have substantial
direct effects on states' ability to collect such prescription drug and
health care spending data as the states may deem necessary. The rules
do not impose direct costs on states or preempt state laws.
While developing these interim final rules, the Departments
consulted with the states and attempted to balance the states'
interests in regulating health insurance issuers with the need to
ensure transparency in the prescription drug and health care market and
collect data on a consistent basis in order to inform nationwide
analyses. By doing
[[Page 66696]]
so, the Departments complied with the requirements of Executive Order
13132.
I. Congressional Review Act
These interim final rules are subject to the Congressional Review
Act provisions of the Small Business Regulatory Enforcement Fairness
Act of 1996 (5 U.S.C. 801 et seq.) and will be transmitted to the
Congress and to the Comptroller General for review in accordance with
such provisions. Under the Congressional Review Act, the Office of
Information and Regulatory Affairs designated these interim final rules
as a ``major rule'' as that term is defined in 5 U.S.C. 804(2), because
it is likely to result in an annual impact on the economy of $100
million or more.
Statutory Authority
The Office of Personnel Management regulations are adopted pursuant
to the authority contained in 5 U.S.C. 8910 and 5 U.S.C. 8913.
The Department of the Treasury regulations are adopted pursuant to
the authority contained in sections 7805 and 9833 of the Code.
The Department of Labor regulations are adopted pursuant to the
authority contained in 29 U.S.C. 1002, 1135, 1182, 1185d, 1191a, 1191b,
and 1191c; Secretary of Labor's Order 1-2011, 77 FR 1088 (Jan. 9,
2012).
The Department of Health and Human Services regulations are adopted
pursuant to the authority contained in sections 2792 and 2799A-10 of
the Public Health Service Act (42 U.S.C. 300gg-92 and 300gg-120).
Edward DeHarde,
Acting Associate Director, Healthcare and Insurance, Office of
Personnel Management.
Douglas W. O'Donnell,
Deputy Commissioner for Services and Enforcement, Internal Revenue
Service.
Lily L. Batchelder,
Assistant Secretary of the Treasury (Tax Policy).
Signed at Washington, DC, this 12th day of November, 2021.
Ali Khawar,
Acting Assistant Secretary, Employee Benefits Security Administration,
Department of Labor.
Dated: November 12, 2021.
Xavier Becerra,
Secretary, Department of Health and Human Services.
List of Subjects
5 CFR Part 890
Administrative practice and procedure, Government employees, Health
facilities, Health insurance, Health professions, Hostages, Iraq,
Kuwait, Lebanon, Military personnel, Reporting and recordkeeping
requirements, Retirement.
26 CFR Part 54
Excise taxes, Health care, Health insurance, Pensions, Reporting
and recordkeeping requirements.
29 CFR Part 2510
Employee benefit plans, Pensions.
29 CFR Part 2590
Continuation coverage, Disclosure, Employee benefit plans, Group
health plans, Health care, Health insurance, Medical child support,
Reporting and recordkeeping requirements.
45 CFR Part 149
Balance billing, Health care, Health insurance, Reporting and
recordkeeping requirements, Surprise billing, State regulation of
health insurance, Transparency in coverage.
OFFICE OF PERSONNEL MANAGEMENT
For the reasons stated in the preamble, the Office of Personnel
Management amends 5 CFR part 890 as follows:
PART 890--FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM
0
1. The authority citation for part 890 continues to read as follows:
Authority: 5 U.S.C. 8913; Sec. 890.102 also issued under
sections 11202(f), 11232(e), and 11246 (b) of Pub. L. 105-33, 111
Stat. 251; Sec. 890.111 also issued under section 1622(b) of Pub. L.
104-106, 110 Stat. 521 (36 U.S.C. 5522); Sec. 890.112 also issued
under section 1 of Pub. L. 110-279, 122 Stat. 2604 (2 U.S.C. 2051);
Sec. 890.113 also issued under section 1110 of Pub. L. 116-92, 133
Stat. 1198 (5 U.S.C. 8702 note); Sec. 890.301 also issued under
section 311 of Pub. L. 111-3, 123 Stat. 64 (26 U.S.C. 9801); Sec.
890.302(b) also issued under section 1001 of Pub. L. 111-148, 124
Stat. 119, as amended by Pub. L. 111-152, 124 Stat. 1029 (42 U.S.C.
300gg-14); Sec. 890.803 also issued under 50 U.S.C. 3516 (formerly
50 U.S.C. 403p) and 22 U.S.C. 4069c and 4069c-1; subpart L also
issued under section 599C of Pub. L. 101-513, 104 Stat. 2064 (5
U.S.C. 5561 note), as amended; and subpart M also issued under
section 721 of Pub. L. 105-261 (10 U.S.C. 1108), 112 Stat. 2061.
0
2. Amend Sec. 890.114 by revising the section heading and paragraphs
(a) and (d) and adding reserved paragraph (e) and paragraph (f) to read
as follows:
Sec. 890.114 Surprise billing and transparency.
(a) A carrier must comply with requirements described in 26 CFR
54.9816-3T through 54.9816-6T, 54.9816-8T, 54.9817-1T, 54.9817-2T,
54.9822-1T, and 54.9825-3T through 6T; 29 CFR 2590.716-3 through
2590.716-6, 2590.716-8, 2590.717-1, 2590.717-2, 2590.722, 2590.725-1
through 2590.725-4; and 45 CFR 149.30, 149.110 through 149.140,
149.310, 149.510 and 520, and 149.710 through 149.740 in the same
manner as such provisions apply to a group health plan or health
insurance issuer offering group or individual health insurance
coverage, subject to 5 U.S.C. 8902(m)(1), and the provisions of the
carrier's contract. For purposes of application of such sections, all
carriers are deemed to offer health benefits in the large group market.
* * * * *
(d)(1) In addition to notification to the Department per 26 CFR
54.9816-8T(b)(2)(iii), 29 CFR 2590.716-8(b)(2)(iii), and 45 CFR
149.510(b)(2)(iii), a carrier must notify the Director of its
initiation of the Federal IDR process, or its receipt of written notice
that a provider, facility, or provider of air ambulance services has
initiated the Federal IDR process, upon sending or receiving such
notice.
(2) The Director will coordinate with the Departments in resolving
matters under 26 CFR 54.9816-8T(c)(4)(vii)(A)(1), 29 CFR 2590.716-
8(c)(4)(vii)(A)(1), or 45 CFR 149.510(c)(4)(vii)(A)(1) where fraud or
material misrepresentation are presented, and matters involving 26 CFR
54.9816-8T(c)(4)(vii)(A)(2), 29 CFR 2590.716-8(c)(4)(vii)(A)(2), and 45
CFR 149.510(c)(4)(vii)(A)(2). The Director will coordinate with the
Departments in oversight of reports submitted by certified IDR entities
with respect to carriers pursuant to 26 CFR 54.9816-8T(f), 29 CFR
2590.716-8(f), or 45 CFR 149.510(f).
(e) [Reserved]
(f) The Director will coordinate with the Departments in oversight
of prescription drug and health care spending with respect to FEHB
carriers pursuant to 45 CFR 149.710 through 149.740.
INTERNAL REVENUE SERVICE
Amendments to the Regulations
Accordingly, 26 CFR part 54 is amended as follows:
PART 54--PENSION EXCISE TAXES
0
Paragraph 3. The authority citation for part 54 continues to read, in
part, as follows:
Authority: 26 U.S.C. 7805.
0
Par. 4. Sections 54.9825-1T through 54.9825-6T are added to read as
follows:
[[Page 66697]]
Sec.
* * * * *
54.9825-1T Basis and scope (temporary).
54.9825-2T Applicability (temporary).
54.9825-3T Definitions (temporary).
54.9825-4T Reporting requirements related to prescription drug and
health care spending (temporary).
54.9825-5T Aggregate reporting (temporary).
54.9825-6T Required information (temporary).
* * * * *
Sec. 54.9825-1T Basis and scope (temporary).
(a) Basis. This section and Sec. Sec. 54.9825-2T through 54.9825-
6T implement subchapter B of chapter 100 of the Internal Revenue Code
of 1986.
(b) Scope. This part establishes standards for group health plans
with respect to surprise medical bills, transparency in health care
coverage, and additional patient protections.
Sec. 54.9825-2T Applicability (temporary).
(a) In general. The requirements in Sec. Sec. 54.9825-4T through
54.9825-6T apply to group health plans (including grandfathered health
plans as defined in Sec. 54.9815-1251), except as specified in
paragraph (b) of this section.
(b) Exceptions. The requirements in Sec. Sec. 54.9825-4T through
54.9825-6T do not apply to the following:
(1) Excepted benefits as described in Sec. 54.9831-1(c).
(2) Short-term, limited-duration insurance as defined in Sec.
54.9801-2.
(3) Health reimbursement arrangements or other account-based group
health plans as described in Sec. 54.9815-2711(d).
Sec. 54.9825-3T Definitions (temporary).
The definitions in Sec. 54.9816-3T apply to Sec. Sec. 54.9825-4T
through 54.9825-6T unless otherwise specified. In addition, for
purposes of Sec. Sec. 54.9825-4T through 54.9825-6T, the following
definitions apply:
Brand prescription drug means a drug for which an application is
approved under section 505(c) of the Federal Food, Drug, and Cosmetic
Act (21 U.S.C. 355(c)), or under section 351 of the PHS Act (42 U.S.C.
262), and that is generally marketed under a proprietary, trademark-
protected name. The term ``brand prescription drug'' includes a drug
with Emergency Use Authorization issued pursuant to section 564 of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 360bbb-3), and that is
generally marketed under a proprietary, trademark-protected name. The
term ``brand prescription drug'' includes drugs that the U.S. Food and
Drug Administration determines to be interchangeable biosimilar
products under sections 351(i)(3) and 351(k)(4) of the PHS Act (42
U.S.C. 262).
Dosage unit means the smallest form in which a pharmaceutical
product is administered or dispensed, such as a pill, tablet, capsule,
ampule, or measurement of grams or milliliters.
Federal Employees Health Benefits (FEHB) line of business refers to
all health benefit plans that are offered to eligible enrollees
pursuant to a contract between the Office of Personnel Management and
Federal Employees Health Benefits (FEHB) Program carriers. Such plans
are Federal governmental plans offered pursuant to 5 U.S.C. chapter 89.
Life-years means the total number of months of coverage for
participants and beneficiaries, as applicable, divided by 12.
Market segment means one of the following: The individual market
(excluding the student market), the student market, the fully-insured
small group market, the fully-insured large group market (excluding the
FEHB line of business), self-funded plans offered by small employers,
self-funded plans offered by large employers, and the FEHB line of
business.
Premium amount means, with respect to individual health insurance
coverage and fully-insured group health plans, earned premium as that
term is defined in 45 CFR 158.130, excluding the adjustments specified
in 45 CFR 158.130(b)(5). Premium amount means, with respect to self-
funded group health plans and other arrangements that do not rely
exclusively or primarily on payments of premiums as defined in 45 CFR
158.130, the premium equivalent amount representing the total cost of
providing and maintaining coverage, including claims costs,
administrative costs, and stop-loss premiums, as applicable.
Prescription drug (drug) means a set of pharmaceutical products
that have been assigned a National Drug Code (NDC) by the Food and Drug
Administration and are grouped by name and ingredient in the manner
specified by the Secretary, jointly with the Secretary of Labor and the
Secretary of Health and Human Services.
Prescription drug rebates, fees, and other remuneration means all
remuneration received by or on behalf of a plan or issuer, its
administrator or service provider, including remuneration received by
and on behalf of entities providing pharmacy benefit management
services to the plan or issuer, with respect to prescription drugs
prescribed to participants and beneficiaries in the plan or coverage,
as applicable, regardless of the source of the remuneration (for
example, pharmaceutical manufacturer, wholesaler, retail pharmacy, or
vendor). Prescription drug rebates, fees, and other remuneration also
include, for example, discounts, chargebacks or rebates, cash
discounts, free goods contingent on a purchase agreement, up-front
payments, coupons, goods in kind, free or reduced-price services,
grants, or other price concessions or similar benefits. Prescription
drug rebates, fees, and other remuneration include bona fide service
fees. Bona fide service fees mean fees paid by a drug manufacturer to
an entity providing pharmacy benefit management services to the plan or
issuer that represent fair market value for a bona fide, itemized
service actually performed on behalf of the manufacturer that the
manufacturer would otherwise perform (or contract for) in the absence
of the service arrangement, and that are not passed on in whole or in
part to a client or customer of the entity, whether or not the entity
takes title to the drug.
Reference year means the calendar year immediately preceding the
calendar year in which data submissions under this section are
required.
Reporting entity means an entity that submits some or all of the
information required under Sec. Sec. 54.9825-4T through 54.9825-6T
with respect to a plan or issuer, and that may be different from the
plan or issuer that is subject to the requirements of Sec. Sec.
54.9825-4T through 54.9825-6T.
Student market has the meaning given in 45 CFR 158.103.
Therapeutic class means a group of pharmaceutical products that
have similar mechanisms of action or treat the same types of
conditions, grouped in the manner specified by the Secretary, jointly
with the Secretary of Labor and the Secretary of Health and Human
Services, in guidance. The Secretary may require plans and issuers to
classify drugs according to a commonly available public or commercial
therapeutic classification system, a therapeutic classification system
provided by the Secretary of Health and Human Services, or a
combination thereof.
Total annual spending means incurred claims, as that term is
defined in 45 CFR 158.140, excluding the adjustments specified in 45
CFR 158.140(b)(1)(i), (b)(2)(iv), and (b)(4), and including cost
sharing. With respect to prescription drugs, total annual spending is
net of prescription drug rebates, fees, and other remuneration.
[[Page 66698]]
Sec. 54.9825-4T Reporting requirements related to prescription drug
and health care spending (temporary).
(a) General requirement. A group health plan or a health insurance
issuer offering group health insurance coverage must submit an annual
report to the Secretary, the Secretary of Health and Human Services,
and the Secretary of Labor, on prescription drug and health care
spending, premiums, and enrollment under the plan or coverage.
(b) Timing and form of report. The report for the 2020 reference
year must be submitted to the Secretary by December 27, 2021. Beginning
with the 2021 reference year, the report for each reference year is due
by June 1 of the year following the reference year. The report must be
submitted in the form and manner prescribed by the Secretary, jointly
with the Secretary of Health and Human Services and the Secretary of
Labor.
(c) Transfer of business. Issuers that acquire a line or block of
business from another issuer during a reference year are responsible
for submitting the information and report required by this section for
the acquired business for that reference year, including for the part
of the reference year that was prior to the acquisition.
(d) Reporting entities and special rules to prevent unnecessary
duplication--(1) Special rule for insured group health plans. To the
extent coverage under a group health plan consists of group health
insurance coverage, the plan may satisfy the requirements of paragraph
(a) of this section if the plan requires the health insurance issuer
offering the coverage to report the information required by this
section in compliance with this subpart pursuant to a written
agreement. Accordingly, if a health insurance issuer and a group health
plan sponsor enter into a written agreement under which the issuer
agrees to provide the information required under paragraph (a) of this
section in compliance with this section, and the issuer fails to do so,
then the issuer, but not the plan, violates the reporting requirements
of paragraph (a) of this section with respect to the relevant
information.
(2) Other contractual arrangements. A group health plan or health
insurance issuer offering group health insurance coverage may satisfy
the requirements under paragraph (a) of this section by entering into a
written agreement under which one or more other parties (such as health
insurance issuers, pharmacy benefit managers, third-party
administrators, or other third parties) report some or all of the
information required under paragraph (a) of this section in compliance
with this section. Notwithstanding the preceding sentence, if a group
health plan or health insurance issuer chooses to enter into such an
agreement and the party with which it contracts fails to provide the
information in accordance with paragraph (a) of this section, the plan
or issuer violates the reporting requirements of paragraph (a) of this
section.
(e) Applicability date. The provisions of this section are
applicable beginning December 27, 2021.
Sec. 54.9825-5T Aggregate reporting (temporary).
(a) General requirement. A group health plan or a health insurance
issuer offering group health insurance coverage must submit, or arrange
to be submitted, the information required in Sec. 54.9825-6T(b)
separately for each State in which group health coverage or group
health insurance coverage was provided in connection with the group
health plan or by the health insurance issuer. The report must include
the experience of all plans and policies in the State during the
reference year covered by the report, and must include the experience
separately for each market segment as defined in Sec. 54.9825-3T.
(b) Aggregation by reporting entity--(1) In general. If a reporting
entity submits data on behalf of more than one group health plan in a
State and market segment, the reporting entity may aggregate the data
required in Sec. 54.9825-6T(b) for the group health plans for each
market segment in the State.
(2) Multiple reporting entities. (i) If multiple reporting entities
submit the required data related to one or more plans or issuers in a
State and market segment, the data submitted by each of these reporting
entities must not be aggregated at a less granular level than the
aggregation level used by the reporting entity that submits the data on
total annual spending on health care services, as required by Sec.
54.9825-6T(b)(4), on behalf of these plans or issuers.
(ii) The Secretary, jointly with the Secretary of Health and Human
Services and the Secretary of Labor, may specify in guidance
alternative or additional aggregation methods for data submitted by
multiple reporting entities, to ensure a balance between compliance
burdens and a data aggregation level that facilitates the development
of the biannual public report required under section 9825(b) of the
Code.
(3) Group health insurance coverage with dual contracts. If a group
health plan involves health insurance coverage obtained from two
affiliated issuers, one providing in-network coverage only and the
second providing out-of-network coverage only, the plan's out-of-
network experience may be treated as if it were all related to the
contract provided by the in-network issuer.
(c) Aggregation by State. (1) Experience with respect to each
fully-insured policy must be included on the report for the State where
the contract was issued, except as specified in paragraphs (c)(3) and
(4) of this section.
(2) Experience with respect to each self-funded group health plan
must be included on the report for the State where the plan sponsor has
its principal place of business.
(3) For individual market business sold through an association,
experience must be attributed to the issue State of the certificate of
coverage.
(4) For health coverage provided to plans through a group trust or
multiple employer welfare arrangement, the experience must be included
in the report for the State where the employer (if the plan is
sponsored at the individual employer level) or the association (if the
association qualifies as an employer under ERISA section 3(5)) has its
principal place of business or the state where the association is
incorporated, in the case of an association with no principal place of
business.
(d) Applicability date. The provisions of this section are
applicable beginning December 27, 2021.
Sec. 54.9825-6T Required information (temporary).
(a) Information for each plan or coverage. The report required
under Sec. 54.9825-4T must include the following information for each
plan or coverage, at the plan or coverage level:
(1) The identifying information for plans, issuers, plan sponsors,
and any other reporting entities.
(2) The beginning and end dates of the plan year that ended on or
before the last day of the reference year.
(3) The number of participants and beneficiaries, as applicable,
covered on the last day of the reference year.
(4) Each State in which the plan or coverage is offered.
(b) Information for each state and market segment. The report
required under Sec. 54.9825-4T must include the following information
with respect to plans or coverage for each State and market segment for
the reference year, unless otherwise specified:
(1) The 50 brand prescription drugs most frequently dispensed by
pharmacies, and for each such drug, the
[[Page 66699]]
data elements listed in paragraph (b)(5) of this section. The most
frequently dispensed drugs must be determined according to total number
of paid claims for prescriptions filled during the reference year for
each drug.
(2) The 50 most costly prescription drugs and for each such drug,
the data elements listed in paragraph (b)(5) of this section. The most
costly drugs must be determined according to total annual spending on
each drug.
(3) The 50 prescription drugs with the greatest increase in
expenditures between the year immediately preceding the reference year
and the reference year, and for each such drug: The data elements
listed in paragraph (b)(5) of this section for the year immediately
preceding the reference year, and the data elements listed in paragraph
(b)(5) of this section for the reference year. The drugs with the
greatest increase in expenditures must be determined based on the
increase in total annual spending from the year immediately preceding
the reference year to the reference year. A drug must be approved for
marketing or issued an Emergency Use Authorization by the Food and Drug
Administration for the entirety of the year immediately preceding the
reference year and for the entirety of the reference year to be
included in the data submission as one of the drugs with the greatest
increase in expenditures.
(4) Total annual spending on health care services by the plan or
coverage and by participants and beneficiaries, as applicable, broken
down by the type of costs, including--
(i) Hospital costs;
(ii) Health care provider and clinical service costs, for primary
care and specialty care separately;
(iii) Costs for prescription drugs, separately for drugs covered by
the plan's or issuer's pharmacy benefit and drugs covered by the plan's
or issuer's hospital or medical benefit; and
(iv) Other medical costs, including wellness services.
(5) Prescription drug spending and utilization, including--
(i) Total annual spending by the plan or coverage;
(ii) Total annual spending by the participants and beneficiaries,
as applicable, enrolled in the plan or coverage, as applicable;
(iii) The number of participants and beneficiaries, as applicable,
with a paid prescription drug claim;
(iv) Total dosage units dispensed; and
(v) The number of paid claims.
(6) Premium amounts, including--
(i) Average monthly premium amount paid by employers and other plan
sponsors on behalf of participants and beneficiaries, as applicable;
(ii) Average monthly premium amount paid by participants and
beneficiaries, as applicable; and
(iii) Total annual premium amount and the total number of life-
years.
(7) Prescription drug rebates, fees, and other remuneration,
including--
(i) Total prescription drug rebates, fees, and other remuneration,
and the difference between total amounts that the plan or issuer pays
the entity providing pharmacy benefit management services to the plan
or issuer and total amounts that such entity pays to pharmacies.
(ii) Prescription drug rebates, fees, and other remuneration,
excluding bona fide service fees, broken down by the amounts passed
through to the plan or issuer, the amounts passed through to
participants and beneficiaries, as applicable, and the amounts retained
by the entity providing pharmacy benefit management services to the
plan or issuer; and the data elements listed in paragraph (b)(5) of
this section--
(A) For each therapeutic class; and
(B) For each of the 25 prescription drugs with the greatest amount
of total prescription drug rebates and other price concessions for the
reference year.
(8) The method used to allocate prescription drug rebates, fees,
and other remuneration, if applicable.
(9) The impact of prescription drug rebates, fees, and other
remuneration on premium and cost sharing amounts.
(c) Applicability date. The provisions of this section are
applicable beginning December 27, 2021.
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Chapter XXV
For the reasons set forth in the preamble, the Department of Labor
amends 29 CFR part 2590 as set forth below:
PART 2590--RULES AND REGULATIONS FOR GROUP HEALTH PLANS
0
5. The authority citation for part 2590 continues to read as follows:
Authority: 29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169, 1181-
1183, 1181 note, 1185, 1185a-n, 1191, 1191a, 1191b, and 1191c; sec.
101(g), Pub. L. 104-191, 110 Stat. 1936; sec. 401(b), Pub. L. 105-
200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 512(d), Pub. L. 110-
343, 122 Stat. 3881; sec. 1001, 1201, and 1562(e), Pub. L. 111-148,
124 Stat. 119, as amended by Pub. L. 111-152, 124 Stat. 1029;
Division M, Pub. L. 113-235, 128 Stat. 2130; Pub. L. 116-260 134
Stat. 1182; Secretary of Labor's Order 1-2011, 77 FR 1088 (Jan. 9,
2012).
Subpart D--Surprise Billing and Transparency Requirements
0
6. Section 2590.716-1 is amended by revising paragraph (a) to read as
follows:
Sec. 2590.716-1 Basis and scope.
(a) Basis. Sections 2590.716-1 through 2590.725-4 implement
sections 716-725 of ERISA.
* * * * *
0
7. Section 2590.716-2 is amended by revising paragraph (a) and
paragraph (b) introductory text to read as follows:
Sec. 2590.716-2 Applicability.
(a) In general. (1) The requirements in Sec. Sec. 2590.716-4
through 2590.716-7, 2590.717-1, 2590.722, and 2590.725-1 through
2590.725-4 apply to group health plans and health insurance issuers
offering group health insurance coverage (including grandfathered
health plans as defined in Sec. 2590.715-1251), except as specified in
paragraph (b) of this section.
(2) The requirements in Sec. Sec. 2590.716-8 and 2590.717-2 apply
to certified IDR entities and group health plans and health insurance
issuers offering group health insurance coverage (including
grandfathered health plans as defined in Sec. 2590.715-1251) except as
specified in paragraph (b) of this section.
(b) Exceptions. The requirements in Sec. Sec. 2590.716-4 through
2590.716-8, 2590.717-1, 2590.717-2, 2590.722, and 2590.725-1 through
2590.725-4 do not apply to the following:
* * * * *
0
8. Add Sec. Sec. 2590.725-1, 2590.725-2, 2590.725-3, and 2590.725-4 to
read as follows:
Sec.
* * * * *
2590.725-1 Definitions.
2590.725-2 Reporting requirements related to prescription drug and
health care spending.
2590.725-3 Aggregate reporting.
2590.725-4 Required information.
* * * * *
Sec. 2590.725-1 Definitions.
For purposes of this section, the following definitions apply in
addition to the definitions in Sec. 2590.716-3:
Brand prescription drug means a drug for which an application is
approved under section 505(c) of the Federal Food, Drug, and Cosmetic
Act (21 U.S.C. 355(c)) or under section 351 of the Public Health
Service Act (42 U.S.C. 262), and that is generally marketed under a
proprietary, trademark-protected name. The term ``brand
[[Page 66700]]
prescription drug'' includes a drug with Emergency Use Authorization
issued pursuant to section 564 of the Federal Food, Drug, and Cosmetic
Act (21 U.S.C. 360bbb-3), and that is generally marketed under a
proprietary, trademark-protected name. The term ``brand prescription
drug'' includes drugs that the U.S. Food and Drug Administration
determines to be interchangeable biosimilar products under sections
351(i)(3) and 351(k)(4) of the PHS Act (42 U.S.C. 262).
Dosage unit means the smallest form in which a pharmaceutical
product is administered or dispensed, such as a pill, tablet, capsule,
ampule, or measurement of grams or milliliters.
Federal Employees Health Benefits (FEHB) line of business refers to
all health benefit plans that are offered to eligible enrollees
pursuant to a contract between the Office of Personnel Management and
Federal Employees Health Benefits (FEHB) Program carriers. Such plans
are Federal governmental plans offered pursuant to 5 U.S.C. chapter 89.
Life-years means the total number of months of coverage for
participants and beneficiaries, as applicable, divided by 12.
Market segment means one of the following: The individual market
(excluding the student market), the student market, the fully-insured
small group market, the fully-insured large group market (excluding the
FEHB line of business), self-funded plans offered by small employers,
self-funded plans offered by large employers, and the FEHB line of
business.
Premium amount means, with respect to fully-insured group health
plans, earned premium as that term is defined in 45 CFR 158.130,
excluding the adjustments specified in 45 CFR 158.130(b)(5). Premium
amount means, with respect to self-funded group health plans and other
arrangements that do not rely exclusively or primarily on payments of
premiums as defined in 45 CFR 158.130, the premium equivalent amount
representing the total cost of providing and maintaining coverage,
including claims costs, administrative costs, and stop-loss premiums,
as applicable.
Prescription drug (drug) means a set of pharmaceutical products
that have been assigned a National Drug Code (NDC) by the Food and Drug
Administration and are grouped by name and ingredient in the manner
specified by the Secretary, jointly with the Secretary of the Treasury
and the Secretary of Health and Human Services.
Prescription drug rebates, fees, and other remuneration means all
remuneration received by or on behalf of a plan or issuer, its
administrator or service provider, including remuneration received by
and on behalf of entities providing pharmacy benefit management
services to the plan or issuer, with respect to prescription drugs
prescribed to participants or beneficiaries in the plan or coverage, as
applicable, regardless of the source of the remuneration (for example,
pharmaceutical manufacturer, wholesaler, retail pharmacy, or vendor).
Prescription drug rebates, fees, and other remuneration also include,
for example, discounts, chargebacks or rebates, cash discounts, free
goods contingent on a purchase agreement, up-front payments, coupons,
goods in kind, free or reduced-price services, grants, or other price
concessions or similar benefits. Prescription drug rebates, fees, and
other remuneration include bona fide service fees. Bona fide service
fees mean fees paid by a drug manufacturer to an entity providing
pharmacy benefit management services to the plan or issuer that
represent fair market value for a bona fide, itemized service actually
performed on behalf of the manufacturer that the manufacturer would
otherwise perform (or contract for) in the absence of the service
arrangement, and that are not passed on in whole or in part to a client
or customer of the entity, whether or not the entity takes title to the
drug.
Reference year means the calendar year immediately preceding the
calendar year in which data submissions under this section are
required.
Reporting entity means an entity that submits some or all of the
information required under this section with respect to a plan or
issuer, and that may be different from the plan or issuer that is
subject to the requirements of this section.
Student market has the meaning given in 45 CFR 158.103.
Therapeutic class means a group of pharmaceutical products that
have similar mechanisms of action or treat the same types of
conditions, grouped in the manner specified by the Secretary, jointly
with the Secretary of the Treasury and the Secretary of Health and
Human Services, in guidance. The Secretary may require plans and
issuers to classify drugs according to a commonly available public or
commercial therapeutic classification system, a therapeutic
classification system provided by the Secretary of Health and Human
Services, or a combination thereof.
Total annual spending means incurred claims, as that term is
defined in 45 CFR 158.140, excluding the adjustments specified in 45
CFR 158.140(b)(1)(i), (b)(2)(iv), and (b)(4), and including cost
sharing. With respect to prescription drugs, total annual spending is
net of prescription drug rebates, fees, and other remuneration.
Sec. 2590.725-2 Reporting requirements related to prescription drug
and health care spending.
(a) General requirement. A group health plan or a health insurance
issuer offering group health insurance coverage must submit an annual
report to the Secretary, the Secretary of the Treasury, and the
Secretary of Health and Human Services, on prescription drug and health
care spending, premiums, and enrollment under the plan or coverage.
(b) Timing and form of report. The report for the 2020 reference
year must be submitted to the Secretary by December 27, 2021. Beginning
with the 2021 reference year, the report for each reference year is due
by June 1 of the year following the reference year. The report must be
submitted in the form and manner prescribed by the Secretary, jointly
with the Secretary of the Treasury and the Secretary of Health and
Human Services.
(c) Transfer of business. Issuers that acquire a line or block of
business from another issuer during a reference year are responsible
for submitting the information and report required by this section for
the acquired business for that reference year, including for the part
of the reference year that was prior to the acquisition.
(d) Reporting entities and special rules to prevent unnecessary
duplication--(1) Special rule for insured group health plans. To the
extent coverage under a group health plan consists of group health
insurance coverage, the plan may satisfy the requirements of paragraph
(a) of this section if the plan requires the health insurance issuer
offering the coverage to report the information required by this
section in compliance with this subpart pursuant to a written
agreement. Accordingly, if a health insurance issuer and a group health
plan sponsor enter into a written agreement under which the issuer
agrees to provide the information required under paragraph (a) of this
section in compliance with this section, and the issuer fails to do so,
then the issuer, but not the plan, violates the reporting requirements
of paragraph (a) of this section with respect to the relevant
information.
[[Page 66701]]
(2) Other contractual arrangements. A group health plan or health
insurance issuer offering group health insurance coverage may satisfy
the requirements under paragraph (a) of this section by entering into a
written agreement under which one or more other parties (such as health
insurance issuers, pharmacy benefit managers, third-party
administrators, or other third parties) report some or all of the
information required under paragraph (a) of this section in compliance
with this section. Notwithstanding the preceding sentence, if a group
health plan or health insurance issuer chooses to enter into such an
agreement and the party with which it contracts fails to provide the
information in accordance with paragraph (a) of this section, the plan
or issuer violates the reporting requirements of paragraph (a) of this
section.
(e) Applicability date. The provisions of this section are
applicable beginning December 27, 2021.
Sec. 2590.725-3 Aggregate reporting.
(a) General requirement. A group health plan or a health insurance
issuer offering group health insurance coverage must submit, or arrange
to be submitted, the information required in Sec. 2590.725-4(b) of
this section separately for each State in which group health coverage
or group health insurance coverage was provided in connection with the
group health plan or by the health insurance issuer. The report must
include the experience of all plans and policies in the State during
the reference year covered by the report, and must include the
experience separately for each market segment as defined in Sec.
2590.725-1 of this section.
(b) Aggregation by reporting entity--(1) In general. If a reporting
entity submits data on behalf of more than one group health plan in a
State and market segment, the reporting entity may aggregate the data
required in Sec. 2590.725-4(b) of this section for the group health
plans for each market segment in the State.
(2) Multiple reporting entities. (i) If multiple reporting entities
submit the required data related to one or more plans or issuers in a
State and market segment, the data submitted by each of these reporting
entities must not be aggregated at a less granular level than the
aggregation level used by the reporting entity that submits the data on
total annual spending on health care services, as required by Sec.
2590.725-4(b)(4), on behalf of these plans or issuers.
(ii) The Secretary, jointly with the Secretary of the Treasury and
the Secretary of Health and Human Services, may specify in guidance
alternative or additional aggregation methods for data submitted by
multiple reporting entities, to ensure a balance between compliance
burdens and a data aggregation level that facilitates the development
of the biannual public report required under section 725(b) of ERISA.
(3) Group health insurance coverage with dual contracts. If a group
health plan involves health insurance coverage obtained from two
affiliated issuers, one providing in-network coverage only and the
second providing out-of-network coverage only, the plan's out-of-
network experience may be treated as if it were all related to the
contract provided by the in-network issuer.
(c) Aggregation by State. (1) Experience with respect to each
fully-insured policy must be included on the report for the State where
the contract was issued, except as specified in paragraphs (c)(3) and
(4) of this section.
(2) Experience with respect to each self-funded group health plan
must be included on the report for the State where the plan sponsor has
its principal place of business.
(3) For individual market business sold through an association,
experience must be attributed to the issue State of the certificate of
coverage.
(4) For health coverage provided to plans through a group trust or
multiple employer welfare arrangement, the experience must be included
in the report for the State where the employer (if the plan is
sponsored at the individual employer level) or the association (if the
association qualifies as an employer under ERISA section 3(5)) has its
principal place of business or the state where the association is
incorporated, in the case of an association with no principal place of
business.
(d) Applicability date. The provisions of this section are
applicable beginning December 27, 2021.
Sec. 2590.725-4 Required information.
(a) Information for each plan or coverage. The report required
under Sec. 2590.725-2 must include the following information for each
plan or coverage, at the plan or coverage level:
(1) The identifying information for plans, issuers, plan sponsors,
and any other reporting entities.
(2) The beginning and end dates of the plan year that ended on or
before the last day of the reference year.
(3) The number of participants and beneficiaries, as applicable,
covered on the last day of the reference year.
(4) Each State in which the plan or coverage is offered.
(b) Information for each state and market segment. The report
required under Sec. 2590.725-2 must include the following information
with respect to plans or coverage for each State and market segment for
the reference year, unless otherwise specified:
(1) The 50 brand prescription drugs most frequently dispensed by
pharmacies, and for each such drug, the data elements listed in
paragraph (b)(5) of this section. The most frequently dispensed drugs
must be determined according to total number of paid claims for
prescriptions filled during the reference year for each drug.
(2) The 50 most costly prescription drugs and for each such drug,
the data elements listed in paragraph (b)(5) of this section. The most
costly drugs must be determined according to total annual spending on
each drug.
(3) The 50 prescription drugs with the greatest increase in
expenditures between the year immediately preceding the reference year
and the reference year, and for each such drug: The data elements
listed in paragraph (b)(5) of this section for the year immediately
preceding the reference year, and the data elements listed in paragraph
(b)(5) of this section for the reference year. The drugs with the
greatest increase in expenditures must be determined based on the
increase in total annual spending from the year immediately preceding
the reference year to the reference year. A drug must be approved for
marketing or issued an Emergency Use Authorization by the Food and Drug
Administration for the entirety of the year immediately preceding the
reference year and for the entirety of the reference year to be
included in the data submission as one of the drugs with the greatest
increase in expenditures.
(4) Total annual spending on health care services by the plan or
coverage and by participants and beneficiaries, as applicable, broken
down by the type of costs, including--
(i) Hospital costs;
(ii) Health care provider and clinical service costs, for primary
care and specialty care separately;
(iii) Costs for prescription drugs, separately for drugs covered by
the plan's or issuer's pharmacy benefit and drugs covered by the plan's
or issuer's hospital or medical benefit; and
(iv) Other medical costs, including wellness services.
(5) Prescription drug spending and utilization, including--
(i) Total annual spending by the plan or coverage;
[[Page 66702]]
(ii) Total annual spending by the participants and beneficiaries,
as applicable, enrolled in the plan or coverage, as applicable;
(iii) The number of participants and beneficiaries, as applicable,
with a paid prescription drug claim;
(iv) Total dosage units dispensed; and
(v) The number of paid claims.
(6) Premium amounts, including--
(i) Average monthly premium amount paid by employers and other plan
sponsors on behalf of participants and beneficiaries, as applicable;
(ii) Average monthly premium amount paid by participants and
beneficiaries, as applicable; and
(iii) Total annual premium amount and the total number of life-
years.
(7) Prescription drug rebates, fees, and other remuneration,
including--
(i) Total prescription drug rebates, fees, and other remuneration,
and the difference between total amounts that the plan or issuer pays
the entity providing pharmacy benefit management services to the plan
or issuer and total amounts that such entity pays to pharmacies.
(ii) Prescription drug rebates, fees, and other remuneration,
excluding bona fide service fees, broken down by the amounts passed
through to the plan or issuer, the amounts passed through to
participants and beneficiaries, as applicable, and the amounts retained
by the entity providing pharmacy benefit management services to the
plan or issuer; and the data elements listed in paragraph (b)(5) of
this section--
(A) For each therapeutic class; and
(B) For each of the 25 prescription drugs with the greatest amount
of total prescription drug rebates and other price concessions for the
reference year.
(8) The method used to allocate prescription drug rebates, fees,
and other remuneration, if applicable.
(9) The impact of prescription drug rebates, fees, and other
remuneration on premium and cost sharing amounts.
(c) Applicability date. The provisions of this section are
applicable beginning December 27, 2021.
DEPARTMENT OF HEALTH AND HUMAN SERVICES
For the reasons set forth in the preamble, the Department of Health
and Human Services amends 45 CFR part 149 as set forth below:
PART 149--SURPRISE BILLING AND TRANSPARENCY REQUIREMENTS
0
9. The authority citation for part 149 continues to read as follows:
Authority: 42 U.S.C. 300gg-111 through 300gg-139, as amended.
0
10. Amend Sec. 149.20 by revising paragraph (a)(1) and paragraph (b)
introductory text to read as follows:
Sec. 149.20 Applicability.
(a) * * *
(1) The requirements in subparts B, D, and H of this part apply to
group health plans and health insurance issuers offering group or
individual health insurance coverage (including grandfathered health
plans as defined in Sec. 147.140 of this subchapter), except as
specified in paragraph (b) of this section.
* * * * *
(b) Exceptions. The requirements in subparts B, D, E, F, and H of
this part do not apply to the following:
* * * * *
0
11. Add subpart H to read as follows:
Subpart H--Prescription Drug and Health Care Spending
Sec.
149.710 Definitions.
149.720 Reporting Requirements Related to Prescription Drug and
Health Care Spending.
149.730 Aggregate Reporting.
149.740 Required Information.
Subpart H--Prescription Drug and Health Care Spending
Sec. 149.710 Definitions.
For purposes of this subpart, the following definitions apply in
addition to the definitions in Sec. 149.30:
Brand prescription drug means a drug for which an application is
approved under section 505(c) of the Federal Food, Drug, and Cosmetic
Act (21 U.S.C. 355(c)), or under section 351 of the PHS Act (42 U.S.C.
262), and that is generally marketed under a proprietary, trademark-
protected name. The term ``brand prescription drug'' includes a drug
with Emergency Use Authorization issued pursuant to section 564 of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 360bbb-3), and that is
generally marketed under a proprietary, trademark-protected name. The
term ``brand prescription drug'' includes drugs that the U.S. Food and
Drug Administration determines to be interchangeable biosimilar
products under sections 351(i)(3) and 351(k)(4) of the PHS Act (42
U.S.C. 262).
Dosage unit means the smallest form in which a pharmaceutical
product is administered or dispensed, such as a pill, tablet, capsule,
ampule, or measurement of grams or milliliters.
Enrollee means an individual who is enrolled, within the meaning of
Sec. 144.103 of this subchapter, in group health insurance coverage,
or an individual who is covered by individual health insurance
coverage, at any time during the reference year, and includes
dependents.
Federal Employees Health Benefits (FEHB) line of business refers to
all health benefit plans that are offered to eligible enrollees
pursuant to a contract between the Office of Personnel Management and
Federal Employees Health Benefits (FEHB) Program carriers. Such plans
are Federal governmental plans offered pursuant to 5 U.S.C. chapter 89.
Life-years means the total number of months of coverage for
participants and beneficiaries, or for enrollees, as applicable,
divided by 12.
Market segment means one of the following: The individual market
(excluding the student market), the student market, the fully-insured
small group market, the fully-insured large group market (excluding the
FEHB line of business), self-funded plans offered by small employers,
self-funded plans offered by large employers, and the FEHB line of
business.
Premium amount means, with respect to individual health insurance
coverage and fully-insured group health plans, earned premium as that
term is defined in Sec. 158.130 of this subchapter, excluding the
adjustments specified in Sec. 158.130(b)(5). Premium amount means,
with respect to self-funded group health plans and other arrangements
that do not rely exclusively or primarily on payments of premiums as
defined in Sec. 158.130 of this subchapter, the premium equivalent
amount representing the total cost of providing and maintaining
coverage, including claims costs, administrative costs, and stop-loss
premiums, as applicable.
Prescription drug (drug) means a set of pharmaceutical products
that have been assigned a National Drug Code (NDC) by the Food and Drug
Administration and are grouped by name and ingredient in the manner
specified by the Secretary, jointly with the Secretary of the Treasury
and the Secretary of Labor.
Prescription drug rebates, fees, and other remuneration means all
remuneration received by or on behalf of a plan or issuer, its
administrator or service provider, including remuneration received by
and on behalf of entities providing pharmacy benefit management
services to the plan or issuer, with respect to prescription drugs
prescribed to participants, beneficiaries, or enrollees in the plan or
coverage, as applicable, regardless of the source of the remuneration
(for example, pharmaceutical manufacturer,
[[Page 66703]]
wholesaler, retail pharmacy, or vendor). Prescription drug rebates,
fees, and other remuneration also include, for example, discounts,
chargebacks or rebates, cash discounts, free goods contingent on a
purchase agreement, up-front payments, coupons, goods in kind, free or
reduced-price services, grants, or other price concessions or similar
benefits. Prescription drug rebates, fees, and other remuneration
include bona fide service fees. Bona fide service fees mean fees paid
by a drug manufacturer to an entity providing pharmacy benefit
management services to the plan or issuer that represent fair market
value for a bona fide, itemized service actually performed on behalf of
the manufacturer that the manufacturer would otherwise perform (or
contract for) in the absence of the service arrangement, and that are
not passed on in whole or in part to a client or customer of the
entity, whether or not the entity takes title to the drug.
Reference year means the calendar year immediately preceding the
calendar year in which data submissions under this section are
required.
Reporting entity means an entity that submits some or all of the
information required under this subpart with respect to a plan or
issuer, and that may be different from the plan or issuer that is
subject to the requirements of this subpart.
Student market has the meaning given in Sec. 158.103 of this
subchapter.
Therapeutic class means a group of pharmaceutical products that
have similar mechanisms of action or treat the same types of
conditions, grouped in the manner specified by the Secretary, jointly
with the Secretary of the Treasury and the Secretary of Labor, in
guidance. The Secretary may require plans and issuers to classify drugs
according to a commonly available public or commercial therapeutic
classification system, a therapeutic classification system provided by
the Secretary, or a combination thereof.
Total annual spending means incurred claims, as that term is
defined in Sec. 158.140 of this subchapter, excluding the adjustments
specified in Sec. 158.140(b)(1)(i), (b)(2)(iv), and (b)(4), and
including cost sharing. With respect to prescription drugs, total
annual spending is net of prescription drug rebates, fees, and other
remuneration.
Sec. 149.720 Reporting requirements related to prescription drug and
health care spending.
(a) General requirement. A group health plan or a health insurance
issuer offering group or individual health insurance coverage must
submit an annual report to the Secretary, the Secretary of the
Treasury, and the Secretary of Labor, on prescription drug and health
care spending, premiums, and enrollment under the plan or coverage.
(b) Timing and form of report. The report for the 2020 reference
year must be submitted to the Secretary by December 27, 2021. Beginning
with the 2021 reference year, the report for each reference year is due
by June 1 of the year following the reference year. The report must be
submitted in the form and manner prescribed by the Secretary, jointly
with the Secretary of the Treasury and the Secretary of Labor.
(c) Transfer of business. Issuers that acquire a line or block of
business from another issuer during a reference year are responsible
for submitting the information and report required by this section for
the acquired business for that reference year, including for the part
of the reference year that was prior to the acquisition.
(d) Reporting entities and special rules to prevent unnecessary
duplication--(1) Special rule for insured group health plans. To the
extent coverage under a group health plan consists of group health
insurance coverage, the plan may satisfy the requirements of paragraph
(a) of this section if the plan requires the health insurance issuer
offering the coverage to report the information required by this
section in compliance with this subpart pursuant to a written
agreement. Accordingly, if a health insurance issuer and a group health
plan sponsor enter into a written agreement under which the issuer
agrees to provide the information required under paragraph (a) of this
section in compliance with this section, and the issuer fails to do so,
then the issuer, but not the plan, violates the reporting requirements
of paragraph (a) of this section with respect to the relevant
information.
(2) Other contractual arrangements. A group health plan or health
insurance issuer offering group or individual health insurance coverage
may satisfy the requirements under paragraph (a) of this section by
entering into a written agreement under which one or more other parties
(such as health insurance issuers, pharmacy benefit managers, third-
party administrators, or other third parties) report some or all of the
information required under paragraph (a) of this section in compliance
with this section. Notwithstanding the preceding sentence, if a group
health plan or health insurance issuer chooses to enter into such an
agreement and the party with which it contracts fails to provide the
information in accordance with paragraph (a) of this section, the plan
or issuer violates the reporting requirements of paragraph (a) of this
section.
(e) Applicability date. The provisions of this section are
applicable beginning December 27, 2021.
Sec. 149.730 Aggregate reporting.
(a) General requirement. A group health plan or a health insurance
issuer offering group or individual health insurance coverage must
submit, or arrange to be submitted, the information required in Sec.
149.740(b) separately for each State in which group health coverage or
group or individual health insurance coverage was provided in
connection with the group health plan or by the health insurance
issuer. The report must include the experience of all plans and
policies in the State during the reference year covered by the report,
and must include the experience separately for each market segment as
defined in Sec. 149.710.
(b) Aggregation by reporting entity--(1) In general. If a reporting
entity submits data on behalf of more than one group health plan in a
State and market segment, the reporting entity may aggregate the data
required in Sec. 149.740(b) for the group health plans for each market
segment in the State.
(2) Multiple reporting entities. (i) If multiple reporting entities
submit the required data related to one or more plans or issuers in a
State and market segment, the data submitted by each of these reporting
entities must not be aggregated at a less granular level than the
aggregation level used by the reporting entity that submits the data on
total annual spending on health care services, as required by Sec.
149.740(b)(4), on behalf of these plans or issuers.
(ii) The Secretary, jointly with the Secretary of the Treasury and
the Secretary of Labor, may specify in guidance alternative or
additional aggregation methods for data submitted by multiple reporting
entities, to ensure a balance between compliance burdens and a data
aggregation level that facilitates the development of the biannual
public report required under section 2799A-10(b) of the PHS Act.
(3) Group health insurance coverage with dual contracts. If a group
health plan involves health insurance coverage obtained from two
affiliated issuers, one providing in-network coverage only and the
second providing out-of-network coverage only, the plan's out-of-
network experience may be treated as if it were all related to the
contract provided by the in-network issuer.
(c) Aggregation by State. (1) Experience with respect to each
fully-
[[Page 66704]]
insured policy must be included on the report for the State where the
contract was issued, except as specified in paragraphs (c)(3) and (4)
of this section.
(2) Experience with respect to each self-funded group health plan
must be included on the report for the State where the plan sponsor has
its principal place of business.
(3) For individual market business sold through an association,
experience must be attributed to the issue State of the certificate of
coverage.
(4) For health coverage provided to plans through a group trust or
multiple employer welfare arrangement, the experience must be included
in the report for the State where the employer (if the plan is
sponsored at the individual employer level) or the association (if the
association qualifies as an employer under ERISA section 3(5)) has its
principal place of business or the State where the association is
incorporated, in the case of an association with no principal place of
business.
(d) Applicability date. The provisions of this section are
applicable beginning December 27, 2021.
Sec. 149.740 Required information.
(a) Information for each plan or coverage. The report required
under Sec. 149.720 must include the following information for each
plan or coverage, at the plan or coverage level:
(1) The identifying information for plans, issuers, plan sponsors,
and any other reporting entities.
(2) The beginning and end dates of the plan year that ended on or
before the last day of the reference year.
(3) The number of participants, beneficiaries, and enrollees, as
applicable, covered on the last day of the reference year.
(4) Each State in which the plan or coverage is offered.
(b) Information for each state and market segment. The report
required under Sec. 149.720 must include the following information
with respect to plans or coverage for each State and market segment for
the reference year, unless otherwise specified:
(1) The 50 brand prescription drugs most frequently dispensed by
pharmacies, and for each such drug, the data elements listed in
paragraph (b)(5) of this section. The most frequently dispensed drugs
must be determined according to total number of paid claims for
prescriptions filled during the reference year for each drug.
(2) The 50 most costly prescription drugs and for each such drug,
the data elements listed in paragraph (b)(5) of this section. The most
costly drugs must be determined according to total annual spending on
each drug.
(3) The 50 prescription drugs with the greatest increase in
expenditures between the year immediately preceding the reference year
and the reference year, and for each such drug: The data elements
listed in paragraph (b)(5) of this section for the year immediately
preceding the reference year, and the data elements listed in paragraph
(b)(5) of this section for the reference year. The drugs with the
greatest increase in expenditures must be determined based on the
increase in total annual spending from the year immediately preceding
the reference year to the reference year. A drug must be approved for
marketing or issued an Emergency Use Authorization by the Food and Drug
Administration for the entirety of the year immediately preceding the
reference year and for the entirety of the reference year to be
included in the data submission as one of the drugs with the greatest
increase in expenditures.
(4) Total annual spending on health care services by the plan or
coverage and by participants, beneficiaries, and enrollees, as
applicable, broken down by the type of costs, including--
(i) Hospital costs;
(ii) Health care provider and clinical service costs, for primary
care and specialty care separately;
(iii) Costs for prescription drugs, separately for drugs covered by
the plan's or issuer's pharmacy benefit and drugs covered by the plan's
or issuer's hospital or medical benefit; and
(iv) Other medical costs, including wellness services.
(5) Prescription drug spending and utilization, including--
(i) Total annual spending by the plan or coverage;
(ii) Total annual spending by the participants, beneficiaries, and
enrollees, as applicable, enrolled in the plan or coverage, as
applicable;
(iii) The number of participants, beneficiaries, and enrollees, as
applicable, with a paid prescription drug claim;
(iv) Total dosage units dispensed; and
(v) The number of paid claims.
(6) Premium amounts, including--
(i) Average monthly premium amount paid by employers and other plan
sponsors on behalf of participants, beneficiaries, and enrollees, as
applicable;
(ii) Average monthly premium amount paid by participants,
beneficiaries, and enrollees, as applicable; and
(iii) Total annual premium amount and the total number of life-
years.
(7) Prescription drug rebates, fees, and other remuneration,
including--
(i) Total prescription drug rebates, fees, and other remuneration,
and the difference between total amounts that the plan or issuer pays
the entity providing pharmacy benefit management services to the plan
or issuer and total amounts that such entity pays to pharmacies.
(ii) Prescription drug rebates, fees, and other remuneration,
excluding bona fide service fees, broken down by the amounts passed
through to the plan or issuer, the amounts passed through to
participants, beneficiaries, and enrollees, as applicable, and the
amounts retained by the entity providing pharmacy benefit management
services to the plan or issuer; and the data elements listed in
paragraph (b)(5) of this section--
(A) For each therapeutic class; and
(B) For each of the 25 prescription drugs with the greatest amount
of total prescription drug rebates and other price concessions for the
reference year.
(8) The method used to allocate prescription drug rebates, fees,
and other remuneration, if applicable.
(9) The impact of prescription drug rebates, fees, and other
remuneration on premium and cost sharing amounts.
(c) Applicability date. The provisions of this section are
applicable beginning December 27, 2021.
[FR Doc. 2021-25183 Filed 11-17-21; 4:15 pm]
BILLING CODE 6523-63-P; 4830-01-P; 4510-29-P; 4120-01-P
