October 26, 2020

Volume X, Number 300


October 23, 2020

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HHS Rule is Good News for Prescription Drug Accumulator Programs

On May 14, 2020, the Department of Health and Human Services (HHS) issued a final rule stating that group health plans, including employer-sponsored health plans, are not required to count the value of drug manufacturer coupons toward participant deductibles and out-of-pocket maximums (the “Final Rule”).  The Final Rule, published in HHS’s Notice of Benefit and Payment Parameters for 2021, allows group health plans to exclude the value of drug manufacturer coupons from participant annual cost-sharing amounts even where no medically appropriate generic drug is available.

Employer-sponsored health plans may establish accumulator programs in order to obtain the benefits of drug manufacturer coupons and to exclude the value of such coupons from cost-sharing on the basis that only amounts actually paid by participants should be counted toward cost-sharing limits.  The efficiency of accumulator programs looked to be in jeopardy when, in its Notice of Benefit and Payment Parameters for 2020 (the “2020 Notice”) released on April 25, 2019, HHS significantly limited accumulator programs by allowing exclusion of drug manufacturer coupons from cost-sharing only in instances in which a brand name drug was used even though a generic drug was available and medically appropriate.

However, before the 2020 Notice became effective on January 1, 2020, HHS (in conjunction with the Internal Revenue Service (IRS) and the Department of Labor) issued a non-enforcement pledge relating to accumulator programs pending further guidance from HHS. The non-enforcement pledge was mostly due to a conflict between the 2020 Notice and long standing IRS guidance, which generally requires that drug manufacturer coupons be excluded from cost-sharing for purposes of health plans compatible with health savings accounts (HSAs). We previously covered this conflict in an earlier blog post, available here.

In the Final Rule, HHS reverses on the limitations published in the 2020 Notice and instead provides that accumulator programs may be used to exclude all drug manufacturer coupons from cost-sharing, regardless of whether a medically-appropriate generic equivalent is available.  Notably, the Final Rule permits exclusion but does not require it, giving health plans the flexibility to determine whether to exclude or include these coupons. Fully-insured benefit plans may also need to comply with state insurance laws regulating cost accumulator programs. The Final Rule goes into effect on July 13, 2020.

Copyright © 2020, Hunton Andrews Kurth LLP. All Rights Reserved.National Law Review, Volume X, Number 157



About this Author

David G. Branham Labor Attorney Hunton Andrews Kurth Law Firm

David’s legal practice focuses on executive compensation and employee benefits arrangements (including their related tax, accounting, securities and corporate governance aspects).

Corporate Representation: Advises private and publicly traded clients and their boards of directors on compensation and benefits matters, including:

  • Drafting and maintaining equity, phantom equity and cash bonus plans

  • Drafting CD&As

  • Addressing issues under applicable federal securities laws

  • Addressing listing requirements under NYSE...

+1 202 955 1526
Jessica N. Agostinho Employee Benefits Attorney Hunton Andrews Kurth Washington, DC

Jessica helps clients navigate the complex and evolving area of employee benefits law, including health care reform, tax-qualified retirement plans and executive compensation. She is also highly skilled in handling employee benefits issues arising in corporate transactions. 

Jessica works with clients on a broad array of employee benefits matters, advising on compliance with ERISA, the Internal Revenue Code, the Affordable Care Act, HIPAA and COBRA. She regularly assists clients with correcting plan errors under the IRS’ Employee Plans Compliance Resolution System (EPCRS).  She also frequently works with clients on negotiating employee benefit vendor contracts and HIPAA business associate agreements for employee benefit plans.

In corporate transactions, Jessica negotiates employee benefits representations and covenants, conducts due diligence review of employee benefit plan documentation, and advises clients on executive compensation issues arising under Section 409A and Section 280G.

Relevant Experience

  • Advises clients with respect to the design, drafting and operation of defined benefit plans, 401(k) plans, and other tax-qualified retirement plans.
  • Assists clients with the design, implementation and operation of welfare benefit plans including group health plans, cafeteria plans and flexible spending arrangements.
  • Advises clients on the impact of, and compliance with, the Affordable Care Act.
  • Works with clients on designing, drafting and implementing nonqualified deferred compensation arrangements, including Section 409A compliance.
  • Regularly advises clients on equity-based compensation arrangements.
  • Advises clients with respect to employee benefits issues arising in corporate mergers, acquisitions and reorganizations, including compliance with 280G stockholder approval requirements for non-publicly held companies, 409A compliance, and issues arising in connection with benefit plan transitions.
  • Negotiates contractual arrangements and HIPAA business associate agreements with employee benefit plan service providers.
  • Assists clients in correction of violations under the DOL’s Voluntary Fiduciary Correction Program and correcting plan errors under EPCRS.
  • Works with clients on freezing and terminating pension plans in compliance with PBGC and IRS rules.