Consolidated Appropriations Act Requirements to Increase Health Plan Transparency
The Consolidated Appropriations Act (CAA), 2021, which was signed into law December 27, 2020, includes provisions designed to increase transparency in employee health benefit plans in four key areas.
Removal of Gag Clauses on Price and Quality Information
Section 201 of the CAA amends the Employee Retirement Income Security Act (ERISA), the Public Health Service Act (PHSA), and the Internal Revenue Code to require employer-sponsored health plans to ensure they have access to certain cost and quality of care information. As a result of the amendment, plans may not agree to restrictions in provider network contracts that would prevent them from accessing cost and quality of care information and providing that information to participants. This information includes provider-specific cost and quality of care data.
The amendments also require group health plans to ensure they have access to specific claims data that shows the costs related to claims. Although group health plans would be required to have access to this specific cost data, providers and provider networks would be allowed to prohibit plans and health insurers from publicly disclosing the information received. Plans would have to certify their compliance annually.
Section 201 does not specify an effective date, meaning it would be effective when enacted.
Disclosure of Compensation to Brokers and Consultants
Section 408(b)(2) of ERISA requires that any compensation paid to plan service providers be “reasonable.” Although the U.S. Department of Labor (DOL) issued regulations under that provision in 2012, those regulations apply to retirement plans, not health plans. The regulations reserve space for later guidance related to health plans.
The CAA adds additional requirements into Section 408(b)(2) of ERISA related to brokers and consultants for health plans. Group health plans would be required to disclose the compensation paid to any broker or consultant that receives $1,000 or more. The broker or consultant will be required to make certain disclosures to the plan fiduciary, including a description of the services provided and a description of all covered compensation (direct and indirect). Failure to do so will mean that the contract would not be deemed to be “reasonable” under ERISA.
These changes take effect one year after enactment of the bill.
Mental Health Parity and Substance Use Disorder Benefits
The Mental Health Parity and Addiction Equity Act (MHPAEA) prohibits group health plans from providing disproportionately worse benefits for mental health and substance use disorders than for medical and surgical care. One specific area of concern is “nonquantitative treatment limitations,” which are limitations on benefits that are not tied to specific monetary or visit limits. For example, requiring preauthorization for a treatment is a nonquantitative treatment limitation.
The CAA revises ERISA, the PHSA, and the tax code to require group health plans to formally analyze their compliance with the MHPAEA requirements related to nonquantitative treatment limitations. Plans would have to document and make an analysis available, upon request, to the secretaries of the U.S. Department of Health and Human Services (HHS), the DOL, and the U.S. Department of the Treasury.
The secretaries of HHS, the DOL, and the Treasury are charged with issuing guidance with respect to the required analysis within 18 months of the enactment of the bill. If a participant were to make a complaint, or the secretaries of the agencies suspect a violation, they would request a copy of the plan’s analysis. The CAA directs the secretaries of the agencies to request an analysis from at least 20 group health plans per year. Although the secretaries of the three agencies would have 18 months to issue final guidance under this section, they would be able to request reports as soon as 45 days after enactment of the CAA
Reporting on Pharmacy Benefits and Drug Costs
The CAA updates ERISA, the PHSA, and the tax code to require each group health plan to report certain information related to prescription drugs to the secretaries of the HHS, DOL, and Treasury, including:
the plan year, number of enrollees, and each state in which the plan is offered;
the top 50 brand prescription drugs paid for by the plan, “and the total number of paid claims for each such drug”;
the top 50 most expensive prescription drugs paid for by the plan “by total annual spending, and the annual amount spent by the plan … for each such drug”;
“[t]he 50 prescription drugs with the greatest increase in plan expenditures” since the prior plan year, and the change in amounts spent for each drug;
the total spending on health care services by plan, broken down into specific categories, including hospital costs, primary care costs, specialty care costs, and prescription drug costs;
average monthly premiums paid by employers and by participants; and
the impact on premiums by rebates and fees “paid by drug manufacturers to the plan … or its administrators or service providers,” including “[a]ny reduction in premiums and out-of-pocket costs associated with” the rebates and fees.
The first report would be due one year after enactment of the CAA. Each subsequent report would be due by June 1 each year.
Facing these new compliance obligations, plan sponsors may want to consider how to comply and whether they may need to engage their service providers to gather necessary information.