These regulations are applicable on December 27, 2021. The effective date for the first set of reporting is still December 27, 2021, but the Departments are deferring enforcement until December 27, 2022 to provide additional time for regulated entities to comply. For subsequent years, the deadline is June 1. This means that data for the 2020 and 2021 calendar years must be reported by December 27, 2022, and data for the 2022 calendar year must be reported by June 1, 2023. 

The Departments welcome comments on the interim final rules. The comment deadline is January 24, 2022. Comments should be sent to the Centers for Medicare & Medicaid Services.

The reporting requirement

Group health plans are required to report the following information to the secretaries of the DOL and HHS for calendar years beginning with 2020:

• Identifying information for the plan and its reporting entities
• The beginning and end dates of the plan year
• The number of participants and beneficiaries covered on the last day of the applicable calendar year
• Each state in which the plan coverage is offered
• The 50 brand prescription drugs most frequently dispensed by pharmacies for claims paid by the plan and the total number of paid claims for each drug
• The 50 most costly prescription drugs with respect to the plan by total annual spending and the annual amounts spent for each drug
• The 50 prescription drugs with the greatest increase in plan expenditures over the calendar year and for each, the change in amounts expended by the plan in each calendar year
• Total annual spending on health care services by the plan broken down by type of costs (hospital, provider, Rx and other) and spending on prescription drugs broken down by health plan spending and participant spending
• Average monthly premium paid by plan sponsors and by participants
• Prescription drug rebates, fees and other remuneration, excluding bona fide service fees, broken down by the amounts passed through to the plan, its participants, and its pharmacy benefit manager, for each therapeutic class and for each of the 25 drugs that yielded the highest amount of rebates or other remuneration
• The method used to allocate prescription drug rebates, fees and other remuneration
• The impact of prescription drug rebates, fees or other remuneration on premiums and cost-sharing amounts

The Departments will provide an internet portal where reporting entities can submit the required data. They intend to build a data-collection system that will allow multiple reporting entities to submit data that can be aggregated for various plans. For example, a third-party administrator may submit aggregated data for all of the group health plans that it administers. However, the aggregated data will be subject to certain parameters for reporting to assure that the Departments can link the data as appropriate. Reporting on an aggregate basis will make the Departments’ role in analyzing data easier, but may limit the usefulness of the data collection for individual plan sponsors.

In addition, the Departments stated they will provide detailed technical guidance in the instructions to the data collection instrument regarding reporting, including examples of the costs that should be reported in each category.

For more information, refer to this fact sheet.

Departments will publish information

Using the information reported by plans, the Departments will analyze trends in overall spending and publish analyses intended to enable plans to negotiate fairer rates and lower prescription drug costs. 

The Departments will issue the first report in June 2023. Thereafter, they will issue a report every two years.

The guidance

Plans and insurers are required to submit information for the previous plan year. The Departments are requiring plans and insurers to submit information based on the “reference year,” which is defined as the calendar year immediately preceding the calendar year in which the data submissions are due (regardless of the plan year).

Plan sponsors that fail to report the required data may be subject to penalties under both ERISA and the Internal Revenue Code. Governmental plans may be subject to penalties under the PHSA. The rules provide guidance concerning reporting responsibilities for fully insured plans and self-insured plans. Plan sponsors of fully insured plans may satisfy the reporting rules if the plan sponsor requires the health insurance issuer offering the coverage to report the information pursuant to a written agreement. In case of a violation, the insurance issuer would be responsible, not the group health plan. However, for self-insured plans, the plan sponsor may delegate responsibility for reporting to other entities but retains responsibility for any reporting violations by that other entity.

The rules clarify that these reporting requirements apply to grandfathered group health plans as well as non-grandfathered. These interim final rules do not apply to health reimbursement arrangements and other account-based group health plans, dental plans or other excepted benefits.

Action item for plan sponsors

Plan sponsors should begin to prepare for this new reporting requirement. This will involve working with the plan’s service providers to determine reporting roles and amend contracts to clarify obligations between the entities. 

For additional information about the Consolidated Appropriations Act requirements, see Segal’s compliance plan.