Compliance Q&A: Reporting Prescription Drug and Health Care Spending

Introduction

The Consolidated Appropriations Act (CAA) of 2021 introduced several provisions affecting group health plans, including the requirement for plan sponsors to submit annual reports on prescription drug and health care spending. This article provides a comprehensive overview of the steps plan sponsors need to take to comply with these requirements and how they fit into the larger landscape of healthcare transparency laws.

Who Must Report

All group health plans, regardless of size, grandfathered status, or funding arrangement, are responsible for complying with the reporting requirements. Although third parties like insurers, Third Party Administrators (TPAs), and Pharmacy Benefit Managers (PBMs) are expected to provide much of the reporting, the ultimate responsibility lies with the plan sponsors.

Reporting Deadlines

The reports, known as “RxDC” reports, are due annually on June 1st for the prior calendar year. This deadline applies irrespective of the plan’s renewal date or plan year. Plan sponsors may need to coordinate with multiple vendors to ensure complete reporting, especially if there are changes in insurers, TPAs, or PBMs mid-year.

Information Required in the Reports

The reports must include:

• General identifying information (e.g., Federal Employer Identification Number, plan year dates, covered lives, states of coverage)
• Healthcare spending by type of cost (hospital costs, primary and specialty care, prescription drugs, etc.)
• Average monthly premium amounts paid by employers and participants
• Top 50 drug lists (most frequently dispensed, most expensive, greatest increase in plan expenditures)
• Prescription drug rebates, fees, and other remuneration paid by manufacturers
• Top 25 drugs generating the highest rebate amounts

What Should Plan Sponsors Do Now?

1. Communicate with Vendors: Plan sponsors should discuss with insurers and/or TPAs who will prepare and submit the necessary reporting for each plan. Agreements should be documented in writing.
2. Fully-insured Plan Sponsors: Confirm with carriers who will submit the required data and ensure any additional information needed by the carrier is provided. Consider obtaining a written agreement to shift liability to the carrier.
3. Self-funded Plan Sponsors: Determine which sources possess the required information and decide who will perform the reporting. Obtain contractual commitments from vendors if possible, and coordinate with prior service providers for data from previous years.
4. Stay Informed: Remain alert to future guidance or clarification to the existing rules.

Penalties

Failure to comply may result in IRS excise tax penalties of $100 per day per affected individual. The Department of Labor and the Department of Health and Human Services can also enforce compliance for ERISA and non-ERISA plans, respectively.

Conclusion

Compliance with the CAA’s prescription drug and healthcare reporting requirements requires coordination and collaboration between plan sponsors and their vendors. Plan sponsors should take proactive steps to ensure they are prepared to meet the reporting deadlines and fulfill their obligations.