Background

Plan sponsors with copay coupon policies often use “copay accumulator” programs. Under these programs, a participant uses the manufacturer coupon to pay for medications, but the value of the coupon is not credited toward the participant’s deductibles or cost sharing for purposes of reaching the out-of-pocket maximum. The programs are often used to ensure that participants do not use a high-cost brand or specialty drug that has a coupon, when a lower-cost alternative is available.

The National Conference of State Legislatures provides this example of a copay accumulator program: A patient is enrolled in an insurance plan with a $2,000 annual deductible. The patient has a $500 copay coupon. With no copay accumulator program, the $500 coupon would count toward the annual deductible, reducing it to $1,500. With the copay accumulator program, the $500 coupon does not count toward the deductible, and the patient must pay the full $2,000 before satisfying the annual deductible.

Copay accumulator programs are not without controversy. There are questions about whether the programs violate the ACA’s out-of-pocket maximum limitation.

The ACA provides that the annual participant cost sharing imposed by a non-grandfathered group health plan or insurer may not exceed a specific limit, which is indexed annually. For the 2024 plan year, the out-of-pocket maximum is $9,450 for self-only coverage and $18,900 for family coverage. The concern with copay accumulator programs is whether the value of the coupon counts toward participant cost sharing.

Previous guidance on copay accumulator programs

The Departments of Health and Human Services (HHS), Treasury and Labor as well as the Centers for Medicare & Medicaid Services (CMS) have issued several sets of guidance concerning the ACA and manufacturer coupons. 

First, the Notice of Benefit and Payment Parameters for 2020 (2020 NBPP), issued by HHS and CMS on April 25, 2019, provided for plan years beginning on or after January 1, 2020, that plans are permitted to exclude the value of drug manufacturers’ coupons from counting toward the annual limitation on cost sharing when a medically appropriate generic equivalent is available. However, it shortly came to the agencies’ attention that this provision could be read to imply that, in any other circumstances, group health plans would be required to count such coupon amounts toward the annual limitation on cost sharing. Accordingly, in August 2019, the Departments of Labor, Treasury and HHS issued FAQs Part 40, which stated that until the 2021 NBPP is issued, they would not initiate enforcement against a non-grandfathered group health plan that excludes the value of drug manufacturer coupons from the annual out-of-pocket maximum, including in circumstances where no medically appropriate generic equivalent is available.

In May 2020, the agencies announced a flexible approach in the 2021 NBPP, giving plan sponsors complete flexibility in deciding whether and when the value of manufacturer coupons (or other forms of direct support) count toward or are excluded from the ACA-required out-of-pocket maximum. The exception is when an applicable state law requires a different approach. HHS encouraged plan sponsors to be transparent in plan materials about whether and when these coupons count toward the plan’s deductible and/or out-of-pocket maximum.

Recent litigation

In 2022, the HIV and Hepatitis Policy Institute, the Diabetes Patient Advocacy Coalition and the Diabetes Leadership Council sued HHS over the approach in the 2021 NBPP. In addition, several individual plaintiffs joined the lawsuit, alleging that due to their carrier’s copay accumulator, manufacturer assistance was not credited toward their out-of-pocket maximum and they were required to pay additional money out of pocket before reaching the maximum.

On September 29, 2023, the U.S. District Court for the District of Columbia overturned and remanded the 2021 NBPP regulation in HIV and Hepatitis Policy Institute v. U.S. Department of Health and Human Services. The court found that the regulation was arbitrary and capricious because it authorized a choice of conduct based on contradictory interpretations of the same statute. Accordingly, the court vacated the regulation and remanded the matter to the agencies for further guidance.

Implications for plan sponsors

Plan sponsors are not required to take immediate action in response to this ruling. However, they should examine their current coupon programs to determine whether they could be affected. It is likely that there will be additional activity concerning this case, including further guidance from HHS and/or a stay or appeal of the decision.

Plan sponsors have been able to exclude manufacturer coupons from the ACA participant out-of-pocket maximums under existing guidance. They should closely monitor future guidance and litigation to assure that they comply with the ACA’s cost-sharing requirements. Plans that use a copay accumulator program should ensure that their plan documents clearly state how coupons are treated with respect to the out-of-pocket maximum.

Additionally, plan sponsors should consult with legal counsel concerning any copay accumulator programs currently in place.