What is the Annual Maximum Out-Of-Pocket Limit (“MOOP”)?
MOOP is the most a participant must pay for covered services under a group health plan in a plan year. After a participant spends this amount on deductibles, copayments, and coinsurance, the health plan must pay 100% of the costs of covered benefits.
What are Drug Manufacturers’ Coupons (“Coupons”)?
Many drug manufacturers offer coupons to patients to reduce out-of-pocket costs. Drug manufacturers may offer these coupons for various reasons including: (1) to compete with another brand name drug in the same therapeutic class; (2) to compete with a generic equivalent when released; or (3) to assist consumers whose drug costs would otherwise be extremely high due to a rare or costly condition.
Do Coupons Count Toward MOOP?
In April 2019, HHS issued its Notice of Benefit and Payment Parameter (“NBPP”) for 2020 Rules addressing this issue. It stated that for plan years beginning on or after January 1, 2020, if a health plan covers a medically appropriate and available generic equivalent, the health plan can exclude the value of the coupon from the participant’s MOOP. Additionally, the NBPP for 2020 Rules suggested that if a health plan does not cover a medically appropriate generic equivalent, or such generic equivalent is not available, the health plan must count the coupon toward the participant’s MOOP. It is beneficial for a participant if a plan counts a coupon towards MOOP because it will help the participant hit his or her MOOP faster.
HHS explained that it issued this rule to promote: (1) prudent prescribing and purchasing choices by physicians and patients based on the true costs of drugs; and (2) price competition in the pharmaceutical market. Despite these commendable goals, the new rule is problematic because it contradicts previous IRS guidance regarding high deductible health plans (“HDHPs”). Specifically, IRS Notice 2004-50, Q&A-9 requires an HDHP to disregard drug discounts and other manufacturers’ and providers’ discounts in determining if the minimum deductible for an HDHP has been satisfied and only allows amounts actually paid by the individual to count against the deductible. Therefore, employers were forced to choose whether to comply with HHS coupon rules or IRS HDHP rules.
To address this problem, on August 26, 2019, the Departments of Labor, HHS, and Treasury (the “Departments”) issued FAQs About Affordable Care Act Implementation Part 40 (the “FAQs”). The FAQs indicated that:
- The Departments understand that there is an inconsistency in the 2020 NBPP final Rules regarding counting coupons toward MOOP and IRS HDHP guidance.
- The Departments will address this inconsistency when HHS issues its NBPP 2021 Rules.
- Until HHS issues its NBPP 2021 Rules, the Departments will not initiate an enforcement action if a group health plan does not count coupons toward MOOP.
What Compliance Risks Remain?
Despite, the FAQs’ nonenforcement relief, there is still legal uncertainty and therefore risks of either including or excluding the value of coupons in MOOP.
Risks of Including the Value of Coupons in MOOP
- In the absence of IRS guidance to the contrary, a plan will fail to qualify as an HDHP because it allows participants to obtain prescription drugs without meeting their minimum deductible.
- If a plan fails to qualify as an HDHP, it will render its participants health savings account-ineligible.
Risks of Excluding the Value of Coupons In MOOP
- Some states, including Arizona, Illinois, Virginia, and West Virginia, have state insurance laws regarding when drug discounts count towards MOOP, deductibles, copayments, coinsurance, or other applicable cost sharing requirements. Therefore, insured plans in these states may have no choice but to count coupons toward deductibles and MOOP, or they would violate state insurance laws. Employers in states with such laws need to consider whether their health plans cannot operate as HDHPs, which would also make participants in those plans ineligible to make or receive health savings account contributions. This would be the case for all plan participants, not just participants who use coupons.
Until guidance is issued resolving these issues, employers should confer with their TPAs, insurance companies, and legal counsel and analyze how their plan(s) currently treat coupons, the impact on HDHP status, and the safest approach going forward.