WHAT IS AN ACCUMULATOR PROGRAM?
Many prescription drug manufacturers offer financial assistance (e.g. coupons) to patients in order to reduce their out of pocket costs, particularly for very expensive drugs. Standard practice is for an "accumulator program" to exclude the value of such financial assistance from counting toward a health plan enrollee’s annual "cost sharing" limit, defined to include: deductibles, coinsurance, copayments or similar charges; and any other expenditure required of an enrollee which is a qualified medical expense with respect to an essential health benefit covered under the plan. In other words, financial assistance in the form of coupons or other direct support provided by a manufacturer did not count as money spent by an enrollee toward their out of pocket maximum (OOPM or MOOP).
WHAT DOES THE FINAL RULE SAY ABOUT ACCUMULATOR PROGRAMS?
Under the final rule published in the Federal Register on May 14, 2020, to the extent consistent with applicable state law, health plans and issuers can choose whether to count or exclude towards the annual limitation on cost sharing, any amount a participant pays using a drug manufacturer's coupon or any form of direct support offered by drug manufacturers for a specific brand-name prescription drug regardless of whether they have a medically appropriate generic equivalent available. Note, that some states (e.g. Arizona, Illinois, Virginia, and West Virginia) have insurance laws requiring in certain circumstances, the support offered by drug manufacturers be included in the participant's annual cost-sharing limit. Fully insured health plans and insurers will need to be aware of any state law restrictions, however the state laws would not apply to self-funded health plans.
This is different from the rule for 2020, which a plan could exclude the amount only if there was a medically appropriate generic equivalent available. The 2020 final rule was not enforced because of conflicting rules with IRS guidance on the requirement to disregard the manufacturer's assistance when determining if the deductible for an HDHP had been satisfied.
WHAT DOES THE FINAL RULE MEAN FOR PLAN SPONSORS?
Plan sponsors may continue to count or exclude the financial assistance provided to patients towards their out of pocket limit, whichever method is provided for in their plan documents. HHS however, encourages employers to be clear and transparent in all enrollment materials (e.g. benefit guides, plan summary descriptions) regarding whether direct drug manufacturer support amounts will or will not count towards the annual limitation on cost sharing. This information may be essential for an employee in deciding between plans.
Plan sponsors and insurers (to the extent consistent with applicable state law) have the option to count or not count prescription drug manufacturer coupons & other discounts toward cost-sharing limits regardless of whether the brand-name drug does or does not have a generic equivalent.
However, there are still unanswered questions regarding whether plan sponsors with qualified HDHPs are able to count the financial assistance toward the HDHP deductible. The IRS has previously made it clear, specifically, Q&A-9 of IRS Notice 2004-50, that an HDHP must disregard drug discounts and other manufacturer and provider discounts when determining if the deductible for an HDHP has been satisfied and does not allow these amounts to be considered towards meeting the required deductible. Also, to meet the requirements of section 223 of the Code, an HDHP may only take into account the amount the individual actually paid, not including any rebates or discounts when determining whether the individual has satisfied the deductible.
Therefore, it appears unless additional IRS guidance is issued, plan sponsors with an HDHP must exclude the value of a drug manufacturer's financial assistance to be an HSA-compatible HSA.
HOW WILL THE FINAL RULE IMPACT HEALTH PLANS?
Issuers and group health plans need not make changes on how they have historically handled direct drug manufacturer support amounts and will continue to have flexibility, subject to state law and other applicable requirements (if any), to determine if and how to factor in direct drug manufacturer support amounts towards the annual limitation on cost sharing.
EXAMPLE 1 – DO NOT COUNT THE COUPON
Alex is an employee of BizCorp and has single-only coverage under its group health plan. The plan’s accumulator program does not count the value of any coupon toward any enrollee’s OOPM ($8150 in 2020).
Alex takes the brand-name drug Helpana (manufactured by RxPharma) for an autoimmune condition. A 30-day supply costs $6000. The plan pays $4500, leaving $1500 for Alex. Because it is so expensive, RxPharma provides a $1250 Helpana coupon.
The accumulator program will not apply the value of the coupon to Alex’s OOPM. Assuming no other expenses, Alex will pay $250/month ($3000 over a year) without reaching the OOPM limit.
EXAMPLE 2 – COUNT THE COUPON
Same fact as Example 1, except BizCorp’s plan does not use an accumulator program. It counts any coupon used by any enrollee toward their OOPM limit. This means the entire $1,500 each month ($1,250 provided by the coupon plus the $250 paid by the employee) will be applied towards the OOPM.
For questions related to these issues, it is advisable to seek legal counsel.
The information contained herein should be understood to be general insurance brokerage information only and does not constitute advice for any particular situation or fact pattern and cannot be relied upon as such. Statements concerning financial, regulatory or legal matters are based on general observations as an insurance broker and may not be relied upon as financial, regulatory or legal advice. This document is owned by Alera Group, Inc., and its contents may not be reproduced, in whole or in part, without the written permission of Alera Group, Inc.
Updated as of 06/22/2020.