Legal Alert

The CAA Prescription Drug Benefit Reporting Requirement

by Edward I. Leeds and Paige A. Haughton
February 9, 2022


The Consolidated Appropriations Act, 2021 (CAA) requires group health plans and health insurers to submit information regarding the costs of prescription drug costs and other health care services each year to the federal government.
This is the ninth briefing in Ballard Spahr’s series on the CAA and health transparency regulations. It was originally published in December 2021. Previous installments of the series may be found here.

The Upshot

  • Group health plans and health insurers must submit large amounts of data, including information about the prescription drugs that are driving claims and costs and total health care expenditures for the applicable year, broken down in various ways.
  • Much of the data may be reported by an insurer or other vendor on an aggregate level, but will need to be distinguished by market segment and by state.
  • Enforcement guidance has extended the filing deadline for reports for the first two years (2020 and 2021) to December 27, 2022.  For 2022 and later years, the filing deadline will be June 1 of the following year.

The Bottom Line

Plan sponsors should obtain contractual commitments from their vendors to meet the reporting requirements on time.  Plan sponsors will need to identify which vendor will submit data in a given field (to the extent the plan sponsor does not assume that responsibility); how vendors will share information with each other, as appropriate; and how vendors will confirm that that the required submissions have been made.

Background. For many years, the escalating cost of prescription drugs and other health care items and services has been a concern for plan sponsors and the government.

New Rule. The Consolidated Appropriations Act, 2021 (CAA) requires group health plans and health insurers to submit information each year to the U.S. Departments of the Treasury, Labor, and Health and Human Services (the Departments) regarding drug costs. This information includes the following:

  • The 50 brand name prescription drugs for which the plan most frequently paid claims and the total number of claims paid for each of those drugs.
  • The 50 prescription drugs for which the plan had the greatest expenditures and the amount paid for each of those drugs.
  • The 50 prescription drugs for which the amount of expenditures increased the most over the previous year and the amount of the increase for each drug.
  • The total amount spent on health care, broken down in various ways, such as: 
    • Type of cost (hospital, primary care, specialty care, prescription drugs, and other costs)
    • Prescription drug expenditures by the plan and by enrollees
    • The average monthly premiums paid by the plan and by enrollees
  •  The impact of rebates and similar amounts paid by drug manufacturers, including the amounts paid for each therapeutic class of drugs and for the 25 drugs for which the amounts paid were the largest.
  • Reductions in premiums and out-of-pocket costs associated with drug manufacturer rebates and similar payments.

Citations. ERISA section 725; Internal Revenue Code section 9825; Public Health Services Act 2799A-10; 29 CFR 2590.725-1 et seq.; 26 CFR 9825-1T et seq. and 45 CFR 149.710 et seq.

Effective Date. The first report (for the calendar year ending in 2020) was due December 27, 2021. For subsequent calendar years, the report is due the following June 1. Note the delay in enforcement.

Enforcement. For health plans that are subject to ERISA, the Department of Labor and plan participants and beneficiaries may enforce compliance with these rules. Plans not subject to ERISA may be subject to enforcement by the U.S. Department of Health and Human Services (HHS). HHS shares responsibility for enforcement against insurers with state agencies. In addition, the Internal Revenue Service may impose an excise tax of $100 per day per affected individual under section 4980D of the Code for any failure to comply.

The Departments announced a delay in the enforcement of these new reporting requirements for reports due December 27, 2021, and June 1, 2022. Plans and insurers should now be prepared to issue reports for 2020 and 2021 by December 27, 2022.

Plan Considerations. To comply with these requirements, plans will need to rely on their insurers, pharmacy benefit managers, and other plan vendors. Those entities contractually may assume responsibility for completing and submitting the reports. An insured plan may transfer all liability if the insurer fails to meet the reporting requirements. A self-funded plan will remain legally responsible for a vendor’s failure but may protect itself contractually against a vendor’s failure to report appropriately.

If a plan sponsor reports on its own, the plan sponsor will need to collect all of the information for its plans from vendors. If the plan sponsor contracts with one or more vendors to report, it will need to make sure the vendor has certain information, including information about premiums and the number of enrollees.

Much of the data may be reported by an insurer or other vendor on an aggregate level, but will need to be distinguished by market segment and by state. For example, data for the individual market in New Jersey will need to be separate from the data for the fully insured small-group markets in New Jersey and New York and from the self-funded large employer market in Pennsylvania. However, certain information, including the number of enrollees, will need to be reported on a plan-by-plan basis. Information is to be based on the applicable calendar year, and not the plan year, even if the plan operates on a non-calendar plan year.

The possible need for vendors to act in a coordinated effort to provide all of the required information is one of the reasons enforcement of the new reporting requirements has been delayed. The delay may also allow the Departments to coordinate their efforts to collect and use the data. Presumably, the Departments will facilitate reporting through a single submission to one of the Departments and will act together to produce and post the biannual reports on pricing trends and other findings required of them by the CAA.

Recommended Steps. Plan sponsors should consider the following actions:

  • Identify plan vendors that administer claims for prescription drugs and other health care costs or confirm that a data warehouse vendor has the information necessary to meet the reporting requirements.
  • Obtain contractual commitments from applicable vendors that they will meet the new reporting requirements (or will provide information necessary for the plan to meet the requirements) by the applicable deadline, now expected to be December 27, 2022, for 2020 and 2021.
  • Establish a coordinated approach for reporting data by or among different vendors.
  • Identify the data that the plan will need to provide to the vendor (or, in the event that the plan sponsor is self-reporting, the information that applicable vendors will need to provide).
  • Watch for instructions and other additional guidance on the reporting requirements.
  • Evaluate how the government reports may be useful for plan design and operations.

Lawyers at Ballard Spahr are working with the new rules and are prepared to assist you with questions you may have.

Read previous installments of this Insight series on the CAA and transparency regulations:

Understanding the No Surprises Rules.

Understanding the Mental Health Parity and Addiction Equity Act.

Understanding the New Health Care Transparency Requirements.

Health Plan Fiduciaries Must Solicit Information From Brokers and Consultants.

Prohibitions Against Gag Clauses.

Understanding the New Continuity of Care Rule

The CAA's New Identification Card Requirements

Consolidated Appropriations Act (CAA) and Transparency Regulations

Read The Series

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