GPAHU Pulse – July 2023

GPAHU - Monthly State and Legislative Updates

Here is something to mention when discussing cost and benefit trends with clients in the month ahead.

Research by the Kaiser Family Foundation shows the 80/20 rule, whereby 80% of cost/effort is attributable to 20% of the people, is alive and well in the Medicare Part D Program. Analysis shows that the ten prescription drugs most prescribed to Part D participants in 2021 accounted for 22% of gross Medicare prescription drug spending that year. However, these medications only represent .3% of the total drugs covered by the Medicare program. The top 100 medications represent just 3% of covered drugs but comprised 66% of total Medicare prescription drug costs in 2021.
Source: Cubanski, Juliette and Neuman, Tricia. “A Small Number of Medicare Part D Drugs Account For a Large Portion of Medicare Spending.” Kaiser Family Foundation, July 12, 2023,

The Big Three

Each month GPAHU identifies three top public policy or legal developments that could impact our members and clients.  Here are this month’s big three!

Michael Humphreys Confirmed as PA Insurance Commissioner  

On June 26, 2023, the Pennsylvania Senate unanimously confirmed Michael Humphreys as Insurance Commissioner for the Commonwealth of Pennsylvania.  Governor Shapiro nominated Humphreys, who had served as Acting Insurance Commissioner since the end of the Wolf Administration. As Commissioner, Humphreys has been tasked by Governor Shapiro with improving health insurance issuer’s mental health parity compliance, improving professional licensing processes, and implementing the state’s new law on cybersecurity protections for insurance consumers.

NJ Passes Three New Laws Concerning RX Costs

Governor Phil Murphy (D-NJ) signed three new measures into law on July 10, 2023, all intended to lower the cost of prescription drugs in the state.  The first, A. 536, requires pharmacy benefit managers (PBMs) operating in New Jersey to be licensed and disclose negotiated rates.  It also prohibits “spread pricing,” which is when the PBM keeps the difference between what they are paid by a health plans and what price they pay to reimburse the pharmacy.

The second law, S. 1615, will require PBMs, prescription drug manufacturers, drug wholesalers, and insurance carriers to disclose specified drug-pricing activities to the state. The measure gives authority to the state Department of Consumer Affairs to track the information and prepare annual reports, which will become publicly available information.  S. 1615 also creates a Drug Affordability Council for the state. The new council will be responsible for providing lawmakers with prescription drug cost control ideas, and the measure includes a $1.5 million appropriation for the Council to commence operations.

The final measure, S. 1614, creates price caps on the cost of insulin ($35), epinephrine pens ($25), and asthma inhalers ($50) for individuals covered by New Jersey-regulated publicly offered plans, like the state employee’s plan and local government and school districts, even if the local government and school plans do not participate in the state’s prescription drug purchasing program. 

The first two laws will take effect in 2024, and the price caps must be operational by 2025.

IRS Confirms Certain “Wellness” Programs Are Too Good To Be True

Internal Revenue Service (IRS) recently issued new guidance in the form of a memo indicating that most of the time, the strategy behind “fixed indemnity wellness plans” is illegal.  These programs are frequently marketed to employer group plans, and they often seem “too good to be true.”  They are structured to allow employees to elect to pay premiums on a pre-tax basis through a cafeteria plan and then receive cash reimbursements (that are not subject to either income or employment taxes) when they participate in “wellness activities.”  The problem is, the “wellness activities” in question are often things like obtaining a vaccine or a preventive care examination, which are reimbursed on a first-dollar basis from the group’s major medical plan. So, the memo from the Office of the IRS Chief Counsel concludes that this type of arrangement is impermissible because “the activity that triggers the payment does not cost the employee anything or . . . the cost of the activity is reimbursed by other coverage.” According to the IRS, a plan cannot be used to avoid taxation if the employee does not have unreimbursed medical expenses related to the payment.

The guidance issued by the IRS is what’s called a “letter ruling,” and it only applies to the specific group referenced in the memo. However, by releasing it publicly, the IRS clearly means to warn brokers and group health plan sponsors that wellness programs or other health plan options which seem “too good to be true,” probably are, and therefore should be avoided.

Check This Out!

If you want to expand your health policy knowledge beyond this newsletter, here is a resource to check out! 

The House Education and Workforce Committee just passed a bipartisan package of four healthcare bills, which, if enacted, would have a significant impact on our industry and make enormous changes to the regulation of PBMs nationally.  The next step is for the full House to vote on them, and then they would need to be taken up by the Senate.  You can read more about them here and send comments to your lawmakers through NABIP’s Operation Shout system

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