Tag Archives: Regs and guidance

Regulatory roundup

More healthcare-related regulatory news for plan sponsors, including links to detailed information.

General information letter correcting mistake contributions to HSAs released
The Internal Revenue Service (IRS) released a general information letter (2018-0033) correcting mistaken contributions to health savings accounts (HSAs). According to the letter, Notice 2008-59 does not specifically address other situations in which contributions to an employee’s HSA are the result of the employer’s or trustee’s administrative or process errors, but the notice also was not intended to provide an exclusive set of circumstances in which an employer may request the return of contributed amounts. Rather, if there is clear documentary evidence demonstrating that there was an administrative or process error, an employer may request that the financial institution return the amounts to the employer, with any correction putting the parties in the same position that they would have been in had the error not occurred. Employers should maintain documentation to support their assertions that mistaken contributions occurred.

To read the entire letter, click here.

CMS announces new Part D Payment Modernization Model and VBID updates for calendar year 2020

On January 18, the Centers for Medicare and Medicaid Services (CMS) Innovation Center announced a new Part D Payment Modernization Model for Part D plans. The aim of this five-year model is to reduce Medicare expenditures by creating incentives to reduce catastrophic phase spending and reinsurance subsidy payments. CMS also announced updates to the Value-Based Insurance Design (VBID) Model for the calendar year (CY) 2020 bid year.

Plans may apply to participate in one or both of these models with applications accepted through March 15, 2019. CMS will be releasing additional details and actuarial guidance in the near future.

Part D Payment Modernization Model
The Part D Payment Modernization Model will allow plans to take two-sided risk for CMS’s federal reinsurance subsidy in the catastrophic phase starting in CY2020. Currently, CMS is responsible for 80% of Part D costs for members whose drug spending exceeds the True Out-of-Pocket (TrOOP) threshold in a given calendar year. Plans project the expected value of this subsidy when submitting Part D bids, and CMS retroactively reconciles the actual value of the reinsurance subsidy with the plan after the bid year is completed.

Under the alternate model, plans will continue to bid prospective reinsurance amounts. After the plan year is completed, CMS will calculate a spending target benchmark that represents an estimate of what the catastrophic reinsurance subsidy would have been if the plan were not participating in the model. If the plan reinsurance amount is less than this estimate, then the plan will receive a share of this savings in the form of a performance-based payment based on the total percentage saved. Plans in this situation will receive 30% of the difference as a bonus payment on the first 3% of the savings, and 50% of any additional savings beyond this point. However, if the plan amount is greater than the CMS target benchmark, then the plan will pay a penalty equal to 10% of the difference.

Payments are calculated at the parent-organization level. As such, if a Medicare Advantage organization (MAO) applies with a standalone Prescription Drug Plan (PDP), then all PDPs in that same region must participate, and if an MAO participates with a Medicare Advantage Prescription Drug (MA-PD) plan, then the MAO must include all eligible MA-PD plans offered in or across the same Part D region that the MA-PD plan serves.

CMS will be maintaining all current Part D bid, payment, and reconciliation processes for these plans. Additionally, the direct subsidy will continue to be calculated and reconciled assuming the current 15% plan liability in the catastrophic phase.

As part of the Part D Payment Modernization Model, CMS will grant plans the flexibility to create Part D Rewards and Incentives programs. Enrollees will be eligible if they participate in disease management programs, engage in medication therapy management, receive preventive health services, and actively engage in understanding their medications, which may include selecting clinically equivalent alternative drugs that are more cost-accessible. CMS also plans to offer additional program flexibilities to participants, which will be announced at a later date.

Plans that are successful at managing their catastrophic phase costs will benefit by participation in this model as plans that outperform the CMS spending target benchmark will receive a share of the difference. The additional flexibility that CMS provides will also facilitate efforts to reduce reinsurance costs, although specific details are still forthcoming.

Value-Based Insurance Design Model
Starting in CY2020, the VBID Model will now include all 50 states and territories, and will allow participation by all Special Needs Plans and regional preferred provider organizations (RPPOs), as required by the Bipartisan Budget Act of 2018. The VBID model will also be extended until CY2024.

Previously, VBID participants were able to offer reduced cost sharing or additional benefits to MA enrollees with specified chronic conditions. Starting in CY2020, participants may now apply to test one or more different interventions:

• Value-based insurance design by condition, socioeconomic status, or both
• Telehealth networks
• Medicare Advantage and Part D Rewards and Incentives Programs
• Wellness and Health Care Planning (required for all VBID participants)

Participants testing the VBID intervention may now vary benefits depending on socioeconomic status, which is defined as low-income subsidy (LIS) eligibility or having dual-eligible status. When the LIS eligibility status is not available, such as in Puerto Rico and other territories, plans may vary benefits for members dually eligible for Medicare and Medicaid. Plans will also be able to offer benefits for “non-primarily health-related” items and services.

Plans may also provide increased access to telehealth services, and in certain circumstances use these services in lieu of in-person visits for network adequacy testing, so long as enrollee choice and access to in-person providers is preserved. CMS will be testing whether plans can successfully use telehealth services to expand their current networks of providers, and how telehealth can permit plans to offer expanded service areas, particularly in counties where MA plans were not previously able to be offered.

CMS will also be testing a broadened Rewards and Incentives (RI) program, where plans may offer RI programs with allowed values that more closely reflect the expected benefit of the health service or activity. This expanded program will also be permitted to offer incentives to enrollees taking covered Part D drugs, as is possible under the Part D Payment Modernization Model.

All VBID participants will be required to offer wellness and healthcare planning, which includes advance care planning. This will be an expansion to what is currently offered under original Medicare. VBID participants will be required to ensure timely access to these benefits for all enrollees.

Regulatory roundup

More healthcare-related regulatory news for plan sponsors, including links to detailed information.

CBO analysis of coverage under the new rules for association health plans and short-term plans
The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) released the report “SOURCE: “How CBO and JCT Analyzed Coverage Effects of New Rules for Association Health Plans and Short-Term Plans.” The report provided an analysis of the coverage effects of the recent final rule on association health plans and short-term, limited-duration health insurance.

To read the report, click here.

Shifting drug coverage from Part B to D

The Fiscal Year 2019 Budget proposes to give the U.S. Department of Health and Human Services (HHS) authority to move certain drugs currently covered under Medicare Fee-for-Service Part B to Part D in order to leverage the negotiating power of Medicare Part D plans. Unlike in Part B, Part D drug prices are negotiated between manufacturers and private Part D plan sponsors. The objective of shifting drugs to Part D is that private insurers could potentially lower the net price of drugs through cost and utilization control mechanisms already in place for Part D drugs but not currently used for Part B.

According to the “Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs,” HHS may send President Trump a report to identify particular Medicare Part B drugs or classes where lower prices could be obtained by Part D. A benefit to Medicare from shifting drugs to Part D is the introduction of another payer, the pharmaceutical manufacturer, to share in the cost of the drug. Pharmaceutical manufacturers will pay 70% of the cost for brand drugs in the Part D coverage gap in 2019 for applicable beneficiaries. As a result, some drug spending liable to Medicare in traditional Part B would be shifted to the manufacturer.

To learn more about the proposals aiming to shift certain drugs from Part B to Part D and to change Medicare’s system for administering Part B drugs, read this article by Mark Koransky.

Primary provisions of latest pharmacy policy blueprint

On November 26, 2018, the Centers for Medicare and Medicaid Services (CMS) issued a proposed rule (CMS-4180-P) that targets the key strategies in President Trump’s “Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs,” released in May 2018. The primary provisions include:

Pharmacy price concessions to drug prices at the point of sale (POS): This provision would redefine the negotiated price of a drug and require incentive-based pharmacy price concessions paid from pharmacies to plans to be reflected at the POS beginning as early as 2020.

  • The negotiated price would reflect the “lowest amount a pharmacy could receive as reimbursement for a covered Part D drug under its contract with the Part D plan sponsor or the sponsor’s intermediary” (p. 7).
  • This arrangement allows for one-directional post-POS incentive-based pharmacy price concessions from plan sponsors to pharmacies (p. 94).
  • Reported 10-year (2020-2029) estimated impacts (p. 10):
    • Beneficiaries: Savings of $7.1 billion to $9.2 billion
    • Federal government: Cost of $13.6 billion to $16.6 billion
    • Pharmaceutical manufacturers: Savings of $4.9 billion to $5.8 billion

Providing plan flexibility to manage protected classes: This provision outlines three exceptions to the protected class policy. In the current Medicare Part D program, plan sponsors are required to include all drugs in six protected classes on their formularies. The three proposed exceptions to this mandate include (p. 13):

  1. Implement broader use of prior authorization (PA) and step therapy (ST) for protected class drugs, including to determine use for protected class indications.
  2. Exclude a protected class drug from a formulary if the drug represents only a new formulation of an existing single-source drug or biological product, regardless of whether the older formulation remains on the market.
  3. Exclude a protected class drug from a formulary if the price of the drug increased beyond a certain threshold over a specified look-back period.

E-prescribing and the Part D Prescription Drug Program: This provision would require plan sponsors to make one or more electronic real-time benefit tools (RTBTs) available to prescribers by January 1, 2020 (p. 8). RTBTs interact with prescribers’ e-prescribing (eRx) and electronic medical record (EMR) systems. Through this tool, prescribers would be able to see beneficiary-specific drug coverage and cost information at the point of prescribing, and suggest “clinically appropriate formulary alternatives, including any utilization management requirements, such as step therapy, quantity limits and prior authorization, and indications-based restrictions, for each specific alternative presented” (p. 52).

Medicare Advantage and step therapy for Part B drugs: This provision would allow Medicare Advantage (MA) plans to implement step therapy for Part B drugs with designated safeguards in place, consistent with the August 7, 2018, Health Plan Management System (HPMS) memo “Prior Authorization and Step Therapy for Part B Drugs in Medicare Advantage” (p. 62).

Additional Proposed Provisions:

  • Require Part D plan sponsors to include information on price changes and lower-cost therapeutic alternatives for drugs the member is taking in the Explanation of Benefits (EOB) (p. 59).
  • Prohibit “gag clauses” from pharmacy contracts for consistency with the “Know the Lowest Price Act of 2018” passed in October (p. 46).

More information on the proposed rule is available in CMS’s fact sheet “Contract Year (CY) 2020 Medicare Advantage and Part D Drug Pricing Proposed Rule (CMS-4180-P).” If implemented, many of these provisions could have a large impact on the 2020 Part D market. Part D plan sponsors that currently receive post-POS incentive-based pharmacy price concessions could see increases to their filed bids if these price concessions are reflected at the POS. Flexibility around protected classes could reduce filed bids if plan sponsors take a proactive approach to managing utilization in these classes. Comments on these provisions are due to CMS by January 25, 2019.

Regulatory roundup

More healthcare-related regulatory news for plan sponsors, including links to detailed information.

Guidance on how to structure integrated HRAs to assessable payments
The Internal Revenue Service (IRS) released Notice 2018-88, which is intended to initiate and inform the process of developing guidance under section 4980H (the employer shared responsibility provisions) and section 105(h) (addressing discriminatory self-insured group health plans). Notice 2018-88 is related to a notice of proposed rulemaking (REG-135724-17) issued on October 23, 2018 (83 FR 54420). The proposed integration regulations and the proposed premium tax credit regulations would raise issues concerning the application of section 4980H and section 105(h) to employers offering integrated health reimbursement arrangements (HRAs) and their employees.

To read the entire notice, click here.