On August 26, 2019, the Internal Revenue Service (IRS), Department of Labor (DOL), and Department of Health and Human Services (HHS), collectively the “Agencies,” issued a joint FAQ announcing their intent to delay enforcement of a recent HHS final rule that would require group health plans and issuers of health insurance coverage to count certain drug manufacturer coupons toward the maximum annual out-of-pocket cost-sharing limit under the Affordable Care Act (the maximum out-of-pocket or MOOP limit). For plan years beginning in 2020, the MOOP limit on cost sharing is $8,150 for self-only coverage and $16,300 for other than self-only coverage. Drug manufacturers’ “coupons” are a form of cost-sharing assistance that offsets the amount of a participant’s copayment or coinsurance for a brand name drug.
The MOOP limit under ERISA and the Internal Revenue Code incorporates the HHS rule, thereby applying it to all non-grandfathered group health plans, self-funded or insured. The HHS rule states that plans and issuers are permitted to exclude the value of such coupons for specific prescription brand drugs from counting toward MOOP limits when a medically appropriate generic equivalent is available. However, based on language in the preamble to the HHS rule, health plans would have to count coupons toward MOOP limits when a medically appropriate generic drug is not available.
Many health plans have not counted drug manufacturers’ coupons toward participants’ MOOP limits on the basis that participants do not actually pay those amounts toward their prescription drugs. Moreover, for employers with high deductible health plans (HDHPs) paired with health savings accounts (HSAs), the HSA rules appear to prohibit counting drug manufacturers’ coupons toward the HDHP deductible because the IRS has indicated that a HDHP with a HSA may count only amounts actually paid by the participant toward the deductible. To comply with the HHS rule described above and IRS rules on minimum deductibles and maximum out-of-pocket limits for HDHPs, a HDHP would have to accrue different expenses toward the MOOP limit and toward the HDHP deductible and out-of-pocket limit, thus making HDHP administration and compliance difficult, and potentially incompatible with the HHS rule.
The Agencies were made aware of the inconsistencies and issued the joint FAQ, which delays enforcement of the HHS rule until at least 2021, stating that the Agencies “will not initiate an enforcement action if an issuer of group or individual health insurance coverage or a group health plan excludes the value of drug manufacturers’ coupons from the annual limitation on cost sharing, including in circumstances in which there is no medically appropriate generic equivalent available.” Employers should follow developments, though, as HHS in consultation with the DOL and IRS intends to reconsider this issue in 2021.