Rule aims to identify medical and drug pricing trends to control costs

By Stephen Miller, CEBS

November 19, 2021

The U.S. Department of Labor (DOL), working with the Department of Health and Human Services (HHS), the Department of the Treasury, and the Office of Personnel Management, issued an interim final rule that spells out upcoming requirements for self-funded health plan sponsors and insurers of fully funded plans to report annually the cost of prescription drugs and certain medical expenses under their plans. The rule also delays enforcement of these reporting requirements by a year, until the end of 2022.

The rule, Prescription Drug and Health Care Spending, released Nov. 17 and to be published in the Federal Register on Nov. 23, is the latest in a series of regulations implementing price transparency provisions in the Consolidated Appropriations Act, 2021, which was signed at the end of 2020. The law includes the No Surprises Act and other measures to curtail unscheduled “surprise” out-of-network health care charges and improve the transparency of health care costs.

“The No Surprises Act has helped to end surprise billing. This rule monitors pricing trends and builds on that work so we can find other barriers to affordable care,” said Ali Khawar, the DOL’s acting assistant secretary for employee benefits.

fact sheet from the Centers for Medicare & Medicaid Services provides additional details on reporting requirements, including data collection and analysis.

Earlier this year, federal agencies issued No Surprises Act interim final rules on limiting surprise medical bills and implementing surprise billing arbitration,as well as a proposed rule on requirements for plans and issuers to report on the cost of air ambulance services.

Applicability Dates

The Consolidated Appropriations Act, 2021, requires plans and issuers to begin submitting the required information to federal agencies by Dec. 27, 2021, and to submit this information by June 1 of each year thereafter. However, under the interim final rule, regulators will not initiate enforcement action against a plan or issuer that submits the required information for 2020 and 2021 by Dec. 27, 2022.

The deferred enforcement of reporting requirements will “give health plans and insurance issuers time to come into compliance,” wrote Ayla Ellison, editor-in-chief of Becker’s Hospital Review.

Taking Advantage of Delayed Enforcement

“Although HHS said they will not enforce the rule until December 2022, employers should certainly be having conversations now with their carriers and third-party administrators [TPAs] to confirm who will be handling this reporting and when they expect to be able to comply,” Kim Buckey, vice president of client services at DirectPath, a benefits advocacy and education firm, said in an e-mail.

“Unfortunately, it’s reasonable to expect that TPAs and carriers will pass on the added costs of this required reporting to employers/plan sponsors and then, ultimately, to plan participants,” she noted.

Denise Stefanoff, interim executive director of Benefit Advisors Network (BAN), a consortium of health and welfare benefit brokers, advised that “despite the delays, employers should use  this time to prepare by reviewing their contracts with carriers and other administrators to determine if they are in compliance with the regulations. In the meantime, employers should continue to track any updates to the provisions and work with their advisors, if applicable, to get educated on what this means to them and the employees.”

Reporting Requirements

Reportable cost-sharing information includes average monthly premiums and drug spending by plan enrollees in comparison with spending by their employers or health insurance issuers.

Plans and issuers will also need to report total health care spending by the type of care patients receive. This includes spending on hospital care, primary care and specialty care, as well as on prescription drugs and wellness programs.

Because prescription drugs account for a significant portion of health care spending, the interim final rule includes requirements to identify specific cost drivers. Plans and issuers must now provide federal agencies with an annual overview of their top 50 drugs across key areas of concern, including:

  • The brand-name prescription drugs dispensed most frequently.
  • The prescription drugs generating the highest total annual spending.
  • The drugs that resulted in the greatest increase in total annual spending over the previous year.

Additional information on drug rebates paid by drug manufacturers to plans, issuers and pharmacy benefit managers, including details on the top 25 drugs generating the highest rebate amounts, is intended to give regulators a better picture of prescription drug costs and fluctuations in their costs.

To reduce administrative burden while ensuring data is as valuable as possible for experts and consumers, the rule allows for data collection at an aggregate level and on a calendar-year basis. Plans and issuers will be able to provide information based on all their offerings collectively, rather than the more difficult details associated with plan-specific data.

Educating Employees About Costs

Although HHS intends to release aggregate reports every two years and use them to identify pricing trends and barriers to care, “given how quickly things move in the health care space, I’m not sure what value these reports will have, other than to confirm what the industry already knows,” Buckey said. “It remains to be seen just how this data will promote competition and curb the rising cost of drugs.”

However, employers on their own, she added, can “educate employees about the value of generics and the importance of shopping for the best prescription pricing—sharing plan data such as the 50 most frequently dispensed brand drugs, the 50 costliest drugs and the 50 drugs with the greatest cost increase over the previous year—and how individual choices can lead to big savings on the cost of their medications.”

Comments Requested

Federal agencies are accepting comments on the interim rule through Jan. 24, 2022. Written comments may be submitted electronically at