On October 3, 2023, the DOL, HHS, and IRS (the departments) issued a request for information (RFI) regarding the application of preventive services requirements under the ACA to over-the-counter (OTC) preventive items and services available without a prescription.

The RFI focuses on four key areas of information:

1. Gathering input from the public regarding the costs and benefits of requiring non-grandfathered group health plans to cover OTC preventive items and services without a prescription and without cost-sharing.
2. Seeking comment on any potential challenges associated with providing such coverage.
3. Understanding how providing such coverage may benefit consumers.
4. Assessing any potential burdens plans or health insurance issuers may face if required to provide such coverage.

While the ACA already requires non-grandfathered group health plans and health insurance issuers offering non-grandfathered group or individual health insurance coverage to cover preventive items and services, most of these preventive services require a healthcare provider to either provide a prescription or directly furnish the service. However, some preventive products are available to consumers OTC, which do not need a prescription from a provider. Examples include some tobacco cessation products, prenatal and breastfeeding supplies, and some oral contraceptives. Most health plans currently do not cover these OTC preventive products without a prescription.

Therefore, the departments have requested comments to better understand how requiring coverage of OTC preventive products may affect health plans and participants. Comments can be submitted no later than 5:00 p.m. ET on December 4, 2023.

Federal Register: Request for Information; Coverage of Over-the-Counter Preventive Services »

On September 29, 2023, the United States District Court for the District of Columbia set aside a 2021 regulation from HHS and CMS (together, “the agencies”) that permitted rather than required plans and insurers to count drug manufacturer assistance toward cost-sharing limits.

Generally, “manufacturer assistance” is any financial support for patients to pay for specific prescription drugs. Subsidies like these are common, but they also give rise to the question of how they should count toward plan cost-sharing limits.

For instance, a patient may have a $20 manufacturer coupon for a drug for which the patient is usually responsible for a $50 copayment under their plan. If the patient then presents the coupon at a pharmacy, they can purchase that drug for just $30 since the pharmacy will bill the drug manufacturer for the $20 difference.

Assume the patient in the above example was covered by a self-only plan with a cost-sharing limit of $9,100, which would be the maximum allowable under the ACA for 2023. Should that patient be credited $50 toward that limit with that drug purchase since that was their copayment, or just $30 since that was the amount they actually paid?

In its Notice of Benefit and Payment Parameters for 2020, the agencies determined that health plans were not required to count drug manufacturer coupons toward the annual limit on cost-sharing when a medically appropriate generic equivalent was otherwise available. The agencies removed the generic equivalent condition in 2021, however, to address concerns that the 2020 rule conflicted with IRS HDHP rules, under which only amounts actually paid by the individual may be taken into account when determining whether the HDHP deductible is satisfied.

Using the above example, the 2020 rules would not have required the patient’s plan to credit the entire $50 (the $30 the patient paid plus the manufacturer’s $20 coupon) toward the patient’s cost-share so long as an appropriate generic equivalent was otherwise available to the patient. In contrast, under the 2021 rule, the plan could credit the patient with either $30 or $50 at its discretion, regardless of whether a generic equivalent was otherwise available.

The court determined that this broad discretion rendered the 2021 rule arbitrary and capricious. Accordingly, the court vacated the rule and directed the agencies to provide an interpretation of the statutory definition of cost-sharing rather than delegating that task to the parties the agencies were supposed to be regulating.

The ruling has renewed the conflict between the ACA’s cost-sharing rules and the IRS HDHP rules that the agencies’ 2021 rule had sought to resolve. The agencies must now follow the court’s directive to provide a single interpretation of the ACA’s cost-sharing provisions as applied to drug manufacturer assistance to patients. Employers that sponsor prescription drug plans should be aware of this ruling and monitor for further developments.

HIV and Hepatitis Policy Inst. v. HHS, (D.D.C. 2023) »

On September 27, 2023, the DOL, HHS, and IRS (the departments) issued FAQs regarding implementing certain requirements under the Transparency in Coverage (TiC) Final Rules. The guidance rescinds the departments’ prior nonenforcement policy with respect to the TiC prescription drug disclosure.

The TiC Final Rules were published on November 12, 2020, and require non-grandfathered group health plans and insurers to disclose the following information on a public website in machine-readable files (MRFs):

1. In-network provider rates for covered items and services.
2. Historical out-of-network allowed amounts and billed charges.
3. Negotiated rates and historical net prices for prescription drugs.

The TiC public pricing disclosures were effective for plan years beginning on or after January 1, 2022.

However, on December 27, 2020, the CAA, 2021 was enacted and also included transparency provisions requiring prescription drug reporting (now known as “RxDC” reporting) by plans and insurers. Due to concerns regarding potentially duplicative and overlapping requirements under both sets of rules, in the August 20, 2021, FAQs, the departments deferred enforcement of the TiC prescription drug MRF disclosure pending further review. In the April 19, 2022, FAQs, the departments also provided a limited enforcement safe harbor from the TiC in-network provider rate disclosure for plans and insurers that could not reasonably express the rate in a dollar amount, as otherwise required.

In the new guidance, the departments withdraw their prior enforcement discretion for the TiC prescription drug MRF disclosure. Based upon the collection of the CAA, 2021 RxDC reporting data for the 2020, 2021, and 2022 reference years, the departments determined there is “no meaningful conflict” between the TiC and CAA, 2021 prescription drug reporting requirements. Rather, the CAA, 2021 requires disclosure of different and additional information than required by the TiC Final Rules. Therefore, the departments have determined that a general or categorical exercise of enforcement discretion is no longer warranted, and a case-by-case enforcement approach is more appropriate. They further emphasize that the previous enforcement relief was intended to be temporary and did not change the TiC requirements. The departments intend to develop technical requirements and an implementation timeline for the TiC prescription drug MRF disclosure in future guidance that considers any reliance interest that plans and insurers developed based on the prior guidance.

Additionally, the departments withdrew the enforcement discretion provided for plans and insurers unable to report in-network provider rates as a dollar amount and instructed such plans and insurers to adhere to the existing guidance for expressing percentage-of-billed-charges arrangements. Prospectively, any enforcement decisions regarding this in-network rate requirement will also be addressed on a case-by-case basis.

Employers that sponsor prescription drug plans should be aware of the updated guidance and consult with their carriers, TPAs, pharmacy benefit managers, and/or other service providers regarding the posting of the prescription drug MRF, once required. Employers should also monitor for additional guidance regarding the implementation timeline.

FAQs About Affordable Care Act Implementation Part 61 »

On September 21, 2023, the Federal District Court for the Northern District of Texas (the court) issued a ruling on a case involving a challenge to a 2022 amendment to the DOL’s 2020 Investment Duties Rule (the 2020 Rule). (The amendment is referred to hereinafter as the 2022 Rule). The court determined the 2022 Rule should remain in effect.

On January 26, 2023, twenty-five states and some oil and gas entities, including Western Energy Alliance, a trade association representing 200 oil and gas companies, filed the lawsuit against Martin Walsh, the Secretary of Labor, and the DOL, requesting that the court invalidate the 2022 Rule, which was scheduled to take effect on January 30, 2023. The 2022 Rule clarifies the duties of fiduciaries to ERISA employee benefit plans concerning the selection of investments and investment courses of action.

The plaintiffs alleged that the 2022 Rule violates the Administrative Procedure Act (APA) because it is arbitrary and capricious and runs afoul of ERISA. The legal arguments in the case focused largely on fiduciary duties under ERISA, and specifically, whether and how a retirement plan fiduciary may take environmental, social, and governance (ESG) issues into account when making plan investment decisions. Prior to 2020, the DOL recognized that ESG issues are proper components of the fiduciary’s primary analysis of the economic merits of plan investments and that ERISA’s obligations do not forbid consideration of collateral or nonfinancial benefits in the selection of competing investments. In 2020, the DOL under the Trump Administration changed the Investment Duties Rule to allow consideration of other factors, such as ESG issues, only when investments being considered are indistinguishable based on pecuniary factors alone.

In 2022, the DOL under the Biden Administration released the 2022 Rule, which changed the wording back to similar wording prior to the 2020 Rule, allowing plan fiduciaries to make investment decisions based on risk and return analysis, including ESG factors, depending on the facts and circumstances of the situation.

Since both parties moved for summary judgment, the court determined that it was required to determine if the 2022 Rule violates ERISA in two steps. First, has Congress addressed the specific question at issue in the case? The court found that Congress had not. Second, is the 2022 Rule arbitrary or capricious in substance or manifestly contrary to ERISA? The court found that it is neither.

The court also considered the requirement under the APA that courts set aside agencies’ actions if they are found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. Agencies are also required to examine all the evidence and explain their actions, including a rational connection between the facts found and the action taken. The court found that the DOL took action based on comments received on the existing and proposed Rules and, therefore, could not conclude that the DOL’s actions violated the APA.

The court denied the plaintiffs’ motion and granted the defendants’ motion. The 2022 Rule is in effect and has been since January 30, 2023.

Retirement plan fiduciaries should be aware of this ruling and consult with their counsel or plan investment advisors for further information.

Opinion: Utah v. Walsh »