Legislative

PA-NABIP Pulse September 2024

The Facts of the Month

Here is something to mention when discussing health trends in the month ahead.

The complexity and lack of transparency in pharmaceutical pricing make it difficult to discern the true costs of drugs. One complicating factor is manufacturer rebates. Recent research examined brand-name drugs claims data and estimated rebates to provide new price index measures based on pharmacy prices, negotiated prices (after rebates), and out-of-pocket prices for the commercially insured population during the period 2007–20. Even though retail pharmacy prices increased 9.1 percent annually, negotiated prices grew by a mere 4.3 percent, highlighting the importance of rebates in price measurement. Meanwhile, consumer out-of-pocket prices diverged from negotiated prices after 2016, growing 5.8 percent annually while negotiated prices remained flat!

Source: Mallet, J., Dunn, A., Fernando, L. “Consumer Out-Of-Pocket Drug Prices Grew Faster Than Prices Faced by Insurers After Accounting for Rebates, 2007–2020,” Health Affairs, Volume 43, Number Nine, September 2024. https://www.healthaffairs.org/doi/10.1377/hlthaff.2023.01344

The Big Three

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

Pennsylvania Legislative Session Winds Down

Only about a dozen days are left in the current two-year Pennsylvania state legislative session. Bills that aren’t passed by both chambers by the end of this year must start the legislative process from scratch when the new session starts in January.

Health care is not projected to be a top priority in the remaining session days. Instead, our lawmakers are expected to focus on transportation funding, gaming regulation, and utility rate measures. The only health-related measures that could see action relate to hospital reforms and price transparency. Since the start of session in 2023, the Democratic-controlled state House has passed a half-dozen bills hospital bills, all with bipartisan support. That they include a bill to cap the number of patients that each hospital nurse attends to, another that would give the state attorney general more power to block hospital mergers and one that would mandate hospitals publicly release their prices for all procedures and services. So far, the Republican-controlled Senate has not taken significant action on any of these bills, but given their bipartisan support, it is possible that one or more of these will become law before the session ends.

Biden Administration Releases Final Mental Health Parity Analysis Rules

On September 9, 2024, the federal Departments of Health and Human Services, Labor, and Treasury (the Departments) released the final version of an update to the rules implementing the Mental Health Parity and Addiction Equity Act (MHPAEA). The final regulation gives specifics about how health insurance carriers and employer plan sponsors must regularly test their health coverage options to make sure non-quantitative treatment limitations (NQTLs) are not applied more stringently to mental health and substance use disorders (MH/SUD) than they are to medical and surgical (M/S) treatments and conditions.

MHPAEA requirements apply to all individual and group fully insured health coverage options, and to self-funded and level-funded employer group plans with 51 or more employees.

At a national level, NABIP worked very hard to reduce the burden the new rule will have on employer plan sponsors, who need to rely on their health insurance carriers, PBMs, TPAs, network vendors, utilization management entities, and other plan vendors to provide them with the data needed to complete their reports, and our efforts were very successful. The rule explicitly acknowledges that plan service providers must assist plan sponsors with providing the data needed for NQTL analyses. While the law requires employer plan sponsors to assume responsibility for mental health parity compliance, to assist plan sponsors with recalcitrant service providers, the Departments provided direct contact information for employers who need their assistance. They also noted that service providers may be considered plan fiduciaries with direct responsibility and enforcement consequences in the case of NQTL violations, stating “Where NQTL violations are identified in a plan or coverage, DOL generally examines the role that each of the plan’s or issuer’s service providers have in the design and administration of each NQTL to ascertain whether any of the service providers play a similar role serving other plans or issuers that might have the same violations, and seeks to bring them into compliance. Where necessary, DOL determines who is a fiduciary under ERISA and what additional enforcement actions are necessary.”

According to the new measure, health insurance carriers and employer plan sponsors must test their plans regularly for parity compliance by examining written requirements and operational data. When conducting NQTL comparative analyses, plans and issuers must:

Define whether a condition or disorder is a MH/SUD using the most current version of the International Classification of Diseases or Diagnostic and Statistical Manual of Mental Disorders;
Assess if the coverage includes meaningful benefits (including a core treatment) for each covered MH/SUD condition in every classification in which M/S benefits (a core treatment) are offered;
Not use factors and evidentiary standards to design NQTLs that discriminate against MH conditions and SUDs;
Collect and evaluate relevant outcomes data and take reasonable action, as necessary, to address material differences in access to MH/SUD benefits as compared to M/S benefits; and
Include specific elements in documented comparative analyses and make them available to federal and state regulators and plan participants upon request.
If the plan is subject to ERISA (and almost all employer plans are) the analysis must include a certification that the plan sponsor uses prudent processes when administering their plan and monitors their service providers.

The final rules also eliminate the ability of a state or local government health plan to opt out of compliance with MHPAEA. It includes detailed examples of how to complete complaint NQTL analyses, and provides guidance and assistance to employer plan sponsors who need to obtain data to complete and maintain their analyses from plan service providers. The measure also notes the Departments will be updating the MHPAEA Self-Compliance Tool soon to assist employers and others in completing compliant NQTL Analyses.

For employers who either offer fully insured coverage through an issuer or sponsor a self-funded or level-funded group health plan, the new requirements generally take effect with the next plan year beginning on or after January 1, 2025. However, the provisions implementing the meaningful benefits standard, the prohibition on discriminatory factors and evidentiary standards, required use of outcomes data, and certain related comparative analysis requirements apply for plan years beginning on or after January 1, 2026. For individual health insurance coverage, the final rules apply for policy years beginning on or after January 1, 2026.

Federal “Affordability” Percentage Goes Back Up Over 9%

The Internal Revenue Service recently released the new Affordable Care Act (ACA) “affordability” percentage for 2025, and it is back up over nine percent. For the 2025 plan year, employers subject to the ACA’s employer shared responsibility provisions (employer mandate) can use the 9.02% of income rate to when calculating their “affordability” safe harbor. Since employers cannot know an employee’s overall household income, the ACA allows them to use a specified percentage of either the current federal poverty level, an employee’s monthly rate of pay, or their W-2 wages to determine if they’ve offered coverage that meets the employer mandate’s coverage affordability requirement. To meet it, an eligible employee’s single rate monthly premium contribution for the employer’s lowest cost plan option may be no more than a percentage of one of those three figures. If an applicable large employer (ALE) achieves this contribution rate and also offers coverage that meets the minimum value standard, then the employer mitigates their employer mandate penalty risk.

For the first several years of the employer mandate requirements, the federal “affordability” rate was over 9.5%. Then, it fell to 9.12% in 2023 and dipped all the way to 8.39% in 2024, due overall price inflation. Now that the rate is back over nine percent, ALEs will be able to raise the amount that employees pay in premium costs for the year ahead.

Check This Out!

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

The Census Bureau has released nationwide figures for poverty, income, and health insurance coverage in 2023, and the Center on Budget and Policy Priorities (CBPP) has their an\alysis available online.