Court Vacates Copay Accumulator Program Rule

ACA Cost-Sharing Limits Refresher

Under the ACA, non-grandfathered plans are required to pay the full cost of covered in-network services for the remainder of the year once a plan participant’s cost-sharing satisfies the annual maximum out-of-pocket limits^[2].

Generally, cost-sharing under the ACA includes deductibles, coinsurance, copayments, or similar charges, but it does not include premiums, balance billing amounts for non-network providers, or the cost of non-covered services.

Copay Accumulator Program Background

Copay accumulator programs arose in response to prescription drug manufacturers offering financial assistance (e.g., coupons) to help cover the high cost-sharing amounts for individuals on certain high-cost specialty drugs. Without the use of manufacturer financial assistance, many patients would not be able to afford these expensive drugs.

Under copay accumulator programs, the value of the drug manufacturer’s coupon does not count towards the individual’s annual out-of-pocket cost-sharing limits. This means that even if an individual uses financial assistance to cover their copay, the group health plan does not consider that payment when calculating how much the individual has personally contributed to their healthcare costs. By implementing a copay accumulator program, group health plans aim to reduce their financial burden and ensure plan participants meet their share of the healthcare costs.

Example

The table below illustrates how a copay accumulator program works for a group health plan with a:

1. $6,000 out-of-pocket maximum limit;
2. $6,000 of a drug manufacturer’s coupon; and
3. $2,000 monthly drug cost.

*With the copay accumulator program in place, the individual pays $6,000 (the value of the disregarded manufacturer drug coupon) to satisfy the $6,000 out-of-pocket cost-sharing maximum limit, which then triggers the group health plan to cover all costs for the remainder of the year.

**With no copay accumulator program in place, the value of the manufacturer drug coupon is used as a subsidy by the individual to satisfy the $6,000 out-of-pocket cost-sharing maximum limit. However, the true out-of-pocket payment incurred by the individual is $0. As a result, the group health plan is triggered to cover all costs for the remainder of the year earlier than expected, with no cost-share responsibility incurred by the individual.

Copay Accumulator Program Regulatory History

HHS’s first rule on copay accumulator programs (“2020 NBPP”) directed that drug manufacturers’ coupons for brand-name drugs were not required to be counted toward the annual out-of-pocket cost-sharing maximums if a medically appropriate generic equivalent was available. The 2020 NBPP rule essentially allowed copay accumulator programs for those brand-name drugs with a generic equivalent, if permitted by state law^[3].

Notably, the 2020 NBPP rule also created a potential conflict between the ACA cost-sharing requirement and IRS guidance related to health savings account (HSA)-compatible high deductible health plans (HDHPs), which requires that drug manufacturers’ coupons be disregarded for purposes of determining whether the HDHP minimum deductible has been satisfied.^[4] If the copay accumulator program within a plan resulted in a plan participant receiving a drug manufacturer’s coupon before satisfying the minimum deductible under the HDHP, the plan could arguably lose its status as an HSA-compatible HDHP. As a result, HHS^[5] issued subsequent guidance providing a non-enforcement safe harbor if a group health plan excludes the value of drug manufacturers’ coupons from a plan’s annual cost-sharing maximum limits, including in circumstances in which there is no medically appropriate generic equivalent available.

HHS issued regulations for 2021 plan years (“2021 NBPP”) affirmatively authorizing the use of copay accumulator programs. The 2021 NBPP rule provided that drug manufacturers' coupons toward brand-name drugs may be, but are not required to be, counted toward the annual out-of-pocket cost-sharing maximums. The 2021 NBPP rule allowed health plans to determine for themselves whether to include or exclude drug manufacturers’ financial assistance from the annual limitation on cost sharing, regardless of whether a medically appropriate generic equivalent drug is available.

2023 Court Ruling

The plaintiffs in the most recent 2023 court case were patient advocacy groups and individual patients challenging the 2021 NBPP rule on several legal and practical grounds. The court agreed with the plaintiffs stating that the 2021 NBPP rule is “arbitrary and capricious” and relies on contradictory interpretations of the law. As a result of the subjective nature of the 2021 NBPP rule, coupled with the variability in which group health plans could choose to apply the rule, the 2023 court ruling vacated key provisions in the 2021 NBPP rule that permitted copay accumulator programs, and directed HHS to interpret the statutory definition of cost-sharing.

Employer Takeaways

With this recent court ruling vacating the 2021 NBPP authorizing copay accumulator programs and until HHS issues further guidance here or appeals the ruling, employers sponsoring group health plans who have copay accumulator programs in place are advised to consult with their legal counsel regarding the operational questions that will inevitably arise with respect to these programs.

Risk Strategies is here to help. Reach out to your Risk Strategies account team members with any questions or contact us directly at benefits@risk-strategies.com.

[1] HHS refers to the Department of Health & Human Services.

[2] FAQs About Affordable Care Act Implementation Part XII, Q/A-2.

[3] Approximately 20 states have enacted laws banning copay accumulator programs. These laws require fully insured plans in those states to include the value of drug manufacturers’ coupons towards the plan’s annual out-of-pocket cost-sharing maximums.

[4] IRS Notice 2004-50 Q/A-9.

[5] Together with the Departments of Labor and the Treasury.