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Legislative Update

Legislative Update

by Christoper E. Condeluci, Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C.

Soooooo, the House Passed a Version of the “Soft Infrastructure” Package…

  • If you were to ask me, the House passage of the “Soft Infrastructure” Package is NOT as newsworthy as many are making it out to be. That’s because there are some noteworthy aspects of the House-passed version that WILL change – or be dropped altogether – in the Senate.
    • Analysis: They include, among other things:
      Paid Family Leave: Speaker Pelosi needed to include up to 4 weeks of paid family leave in the House version of the “Soft Infrastructure” Package in order to get progressive Democrats to vote YES. But, Sen. Manchin (D-WV) has been saying for 2 months now that he does NOT support the inclusion of paid family leave in the underlying “reconciliation” bill, soooooo, this aspect of the House-passed version will likely drop out.
      State and Local Tax Deduction: The 2017 Tax Reform Package limited the amount of State and Local taxes people can deduct on their year-end tax return to $10,000. This tax change had a BIG impact on high-income earners in high-tax States like New York, New Jersey, and California, effectively INCREASING the taxes for these high-income earners in these high-tax States, which did NOT make these high-tax State, high-income earners happy, soooooo, these high-tax State, high-income earners leaned on their respective members of Congress to repeal this tax increase. And soooooo, in order to get a group of moderate House Democrats to vote YES, the House version of the “Soft Infrastructure” Package needed to include at least an increase in the deduction limit. BUT, progressive Democrats like Sen. Sanders (I-VT) and Sen. Warren (D-MA) have criticized this change noting that Democrats believe that high-income earners should pay MORE in taxes, NOT less, and giving high-income earners a tax cut is inconsistent with their “messaging,” soooooo, expect this tax provision to change or be dropped altogether.
      Immigration Reform: To get both progressive and moderate votes, House Democratic Leadership added yet another iteration of immigration reform even though the Senate Parliamentarian has already bounced 2 other immigration reform proposals from earlier versions of the “Soft Infrastructure” Package because – as the Parliamentarian explained – making these types of policy changes through the a “reconciliation” bill violates the “reconciliation” rules.  Most observers – including me – think that the Senate Parliamentarian will once again say that the newest iteration of immigration reform violates the “reconciliation” rules, soooooo, these provisions will most likely be dropped.
      Adding Hearing Benefits to Traditional Medicare: Progressives in the House – along with Sen. Sanders – have demanded that dental, vision, and hearing benefits be added to traditional Medicare. BUT, due to the cost of adding these 3 benefits to Medicare – coupled with opposition from Sen. Manchin – the idea of adding any new benefits to traditional Medicare was limited to hearing benefits ONLY. Sen. Manchin continues to raise concerns over even adding hearing benefits to Medicare, soooooo, the future of this aspect of the House-passed version of the “Soft Infrastructure” Package is unclear.


HOWEVER, the Health Care Provisions Probably Will NOT Change

  • Notwithstanding the fact that the above stated provisions (and even others like some climate change-related provisions) will most likely be changed – or dropped – from whatever version the “Soft Infrastructure” Package the Senate may be voting on, I do NOT expect major changes to the health care provisions that I analyzed in my last update (see below for this update).
    • Analysis: These health care provisions – which underwent some minor tweaks (but nothing significant) after the legislative text was released at the end of October, and before House passage on Nov. 19th – include:
  • Extending the “enhanced premium subsidies” (i.e., the increased subsidy amounts AND the expanded eligibility for people over 400% of FPL) through 2025;
  • Allowing people in non-Medicaid expansion States who fall into the “coverage gap” (and thus currently have NO access to health coverage) to access a premium subsidy through 2025;
  • Extending access to $0 Exchange plans for unemployed individuals, but only through 2022;
  • Reducing the “affordability” test (from 9.61% of income (for 2022) to 8.5% of income), which would make it easier for employees to access a premium subsidy, through 2025; and
  • Eliminating the “employer firewall” for employees with income below 138% of FPL and fixing the “family glitch” for spouses and dependents of these low-income employees, through 2025 (the employer mandate penalty tax would also be temporarily “turned off” if these low-income employees access a premium subsidy).

Again, see below for a fuller analysis of the above-described provisions. Note, the following is a list of other health care provisions I did not talk about in my below update:

      • $10 billion in each year of 2023, 2024, and 2025 that States can access to (1) set up their own “individual” market reinsurance program or (2) use to lower out-of-pocket costs for Exchange planholders.
      • $50 million to help States pay for the costs associated with putting together a 1332 Waiver.
      • $100 million for Exchange enrollment and outreach.
      • Increased penalties for violating the Mental Health Parity Rules, including the No Surprises Act’s NQTL comparative analysis, applicable to insurance carriers, plan sponsors of a self-insured health plan, and plan administrators of self-insured plans.
      • Other Medicaid-related changes.
      • Plus, some additional health care provisions that I will talk about momentarily.

Prescription Drug Pricing Reforms Included In the House-Passed Version = Newsworthy

  • Maybe I am being too hard on the newsworthiness of the House-passed version. Of significant import, the House-passed version included prescription drug pricing reforms.
    • Analysis: Dating back January of this year (when the Democrats took the majority in the Senate and control of all of Washington, DC), I have continually suggested that prescription drug pricing reforms will likely become a reality in 2021. Throughout the first-half of this year, the prevailing reforms would have allowed HHS to negotiate the prices for at least 50 and up to 250 prescription drugs purchased by Medicare. In addition, an out-of-pocket maximum limit would be added to Medicare Part D, along with other Part D “re-designs.” And, if drug prices increased faster than inflation, drug makers would either have to lower their drug prices or pay the above-inflation amount back to the Treasury Department as a rebate. It was even suggested that BOTH the price negotiations and inflationary cap could be extended to “individual” and “group” market health plans. HOWEVER, back in September, these drug pricing reforms ran into a brick wall when 3 moderate Democrats on the House Energy & Commerce Committee opposed these above-described provisions. Sen. Sinema (D-AZ) also voiced opposition to these reforms. HOWEVER, at the beginning of November (Nov. 2nd to be exact), moderate and progressive Democrats struck a deal on what the prescription drug pricing reforms should entail, and it is generally this “compromise” – along with a couple of other drug-related provisions – that was included in the House-passed version of the “Soft Infrastructure” Package. Before I tell you about these newsworthy provisions, it is important to note that all 50 Democratic Senators were asked to “sign off” on this “compromise,” and reports indicate that all 50 “signed off” (sooooo, it would appear that there will NOT be significant changes to these reforms once they get to the Senate, but only time will tell…):
      • HHS Negotiating Drug Prices for Medicare: Among the 50 prescription drugs that Medicare Part B and Part D spend the most money on, HHS can negotiate the prices of up to 10 prescription drugs (starting in 2025), growing to up to 20 prescription drugs in 2028 and future years, that – in the opinion of the Secretary of HHS – lack price competition. There would be a limit placed on the negotiated price, but this limit IS NOT the same as the “Most Favored Nation” limit that was included in prior iterations of the Democrats drug pricing reforms.  Instead, this upper limit would be based on a complicated formula that takes into account the make-up of the drug and time periods after the drug’s FDA-approval or licensure date (i.e., the drug’s period of time on the market).  Also, prices for small-molecule drugs on the market for less than 9 years – and biologics on the market for less than 13 years – would be exempt from price negotiations. An excise tax would be imposed on drug makers that do NOT comply with this negotiation process.
      • Out-of-Pocket Limit In Medicare Part D and Other Part D “Re-Designs”: A $2,000 per beneficiary out-of-pocket maximum limit would be added to Medicare Part D, indexed each year to increases in Part D costs. There would also be additional cost-sharing protections for beneficiaries for insulin and for those who exceed the catastrophic coverage threshold. In addition, Part D plans would pay a MUCH higher amount of the costs when a beneficiary exceeds the catastrophic threshold (60% of the costs, up from the current 15%).
      • Inflationary Cap on Drug Prices that Increase Faster than Inflation: If the prices of drugs covered by Medicare Part B and Part D – along with the prices of drugs covered by “individual” AND “group” market health plans – increase faster than inflation, drug makers MUST pay the above-inflation amount back to Medicare’s Trust Fund or face steep penalties.


Extending the Inflationary Cap to “Private” Health Plans = Kind of a BIG Deal

  • As Roy Burgundy would say, extending the inflationary cap to “private” health plans is KIND OF A BIG DEAL.  Why?
    • Analysis: First, one of the main reasons employer groups support extending the inflationary cap to “private” health plans is that this should prevent drug makers from “cost-shifting” the reduction in Medicare prices to “individual” and “group” market plans, which most – including me – believe would occur if the inflationary cap was ONLY imposed on Medicare. I mean come on, if a drug maker’s bottom line takes a hit because of a price control in Medicare, drug makers are definitely going to try to make up for this revenue-loss by charging “private” health plans MORE money for their drugs. Again, extending the inflationary cap to “individual” and “group” market plans should prevent the “cost-shift,” at least in the case of this particular price control. Second, drug makers are required to pay any excess of (1) the price increases over (2) inflation increases the Medicare Trust Fund (instead of the Treasury Department). This would – at least on paper – strengthen the Medicare Trust Fund because more $$$ would be going into the Fund (and as you may know, the Medicare Trust Fund is currently projected to go insolvent by 2026). This is a SUPER important structural change from prior iterations because by requiring drug makers to send $$$ to the Medicare Trust Fund, this could WITHSTAND arguments that this particular provision violates the “reconciliation” rules. What I mean is this:
      • As I have told you, in most cases, a health care provision impacting “private” health plans does NOT directly impact (1) government spending or (2) tax revenue (which, as I have also told you, are the 2 key requirements that must be present for the provision to remain in a “reconciliation” bill). Soooooo, if we are just talking about an inflationary cap on drugs covered by “individual” and “group” market plans (where, for example, the excess $$$ is ONLY paid back to the carrier/plan sponsor), a strong argument can be made that this provision violates the “reconciliation” rules (i.e., because the provision does NOT directly impact (1) government spending or (2) tax revenue). HOWEVER, because the $$$ must be paid to the Medicare Trust Fund (which is a government-run Fund used to pay for government-run health coverage (i.e., Medicare)), a strong argument can be made that the structure of the above-described inflationary cap on “private” health plans does INDEED impact government spending because the Medicare Trust Fund is being infused with $$$, which should extend the Medicare Trust Fund’s solvency date, which means the Federal government would NOT be required to take action to (1) reduce government spending or (2) increase taxes to keep the Trust Fund solvent before 2026. Please note, I am NOT suggesting that by structuring the inflationary cap to send $$$ to the Medicare Trust Fund means that the Senate Parliamentarian is definitely going to say YES to this provision. What I am trying to say is that WITHOUT the $$$ going to the Medicare Trust Fund, I believe that this inflationary cap for “private” health plans would definitely get bounced. BUT NOW, there is definitely a reasonable argument to be made that this provision does indeed impact government spending, which means it would be reasonable for the Senate Parliamentarian to give this a green-light. BUT, only time will tell (because the Parliamentarian could indeed say NO).


A $35 Cap on Insulin Covered By “Private” Health Plans Will Probably Get Bounced

  • There is another health care provision included in the House-passed version of the “Soft Infrastructure” Package that says a person covered by an “individual” or “group” market plan would ONLY be required to pay $35 for insulin, and then the plan would pay the rest.
    • Analysis: Harkening back to my point above, this $35 cap on insulin is a health care provision that impacts “private” health plans. And, because there is NO “hook” to, for example, government spending  – like tying payments to Medicare’s Trust Fund – this provision does NOT directly impact (1) government spending or (2) tax revenue. As a result, I believe that this provision violates the “reconciliation” rules and should get bounced by the Senate Parliamentarian. I will certainly keep an eye out on this for you.


PBMs and Insurance Carrier-Owned PBMs Must Provide Prescription Drug-Related Information to “Private” Health Plans

  • The House-passed version of the “Soft Infrastructure” Package also includes a provision titled, “Oversight of Pharmacy Benefit Manager Services.”
    • Analysis: I am not sure if I would call this requirement “oversight” of PBMs, but I would definitely say that this provision does require the disclosure of some important prescription drug-related information by PBMs – and insurance carriers that own PBMs – to sponsors of a fully-insured or self-insured plan. Please note, I am NOT going to go into excruciating detail of this provision because – consistent with my comments above about how I believe a health care provision that impacts “private” health plans will get bounced from a “reconciliation” bill – I think this provision WILL get bounced by the Senate Parliamentarian. Having said that though, here is a high-level list of the required information that PBMs – and insurance carriers that own PBMs – must send to sponsors of a fully-insured or self-insured plan every 6 months:
      • Information about any co-payment assistance.
      • A list of each drug covered by the fully-insured/self-insured plan and dispensed during the 6-month reporting period, along with information on, among other things, the total number of prescriptions filled for the drug; the wholesale acquisition cost of the drug; the total out-of-pocket spending by participants on the drug; and certain information about drugs whose spending exceeded $10,000 during the 6-month reporting period.
      • A list of each therapeutic category or class of drugs that were dispensed during the 6-month reporting period, and related information.
      • The total gross spending on prescription drugs during 6-month reporting period, before any rebates or other fees.
      • The total amount received by the carrier/plan in rebates, discounts, and other compensation.
      • The total net spending on prescription drugs during 6-month reporting period.
      • Compensation paid to brokers, consultants, and other 3rd parties who make referrals.


Although I believe this provision will probably get bounced from the “Soft Infrastructure” Package, providing you this list is still important because we will definitely see this provision again in future legislation.


No Surprises Act Update

In My Next Update, I Will Discuss the IFR Implementing the No Surprises Act’s Requirement for Reporting of PBM-Related Information

  • Speaking of reporting information about prescription drugs covered by “private” health plans, the No Surprise Act requires insurance carriers and self-insured plans to report to the Federal government specific and detailed information about the cost of the prescription drugs covered by the carriers/plans, as well as rebates, discounts, and fees.
    • Analysis: On Nov. 17th, the Federal Departments issued an Interim Final Rule (IFR) implementing this new requirement. HOWEVER, due to the Thanksgiving holiday – and everything else that is going on – I unfortunately have NOT had a chance to fully read through the IFR. BUT, I have read the statutory requirements enacted at the end of 2020, so I can tell you the following: Any self-insured plan, along with an insurance carrier underwriting a “group” and/or “individual” market plan, must submit to HHS, DOL, and Treasury the following information:
      • Beginning and end dates of the plan year.
      • The number of enrollees.
      • Each State the coverage/plan is offered.
      • The 50 brand Rx drugs most frequently dispensed by pharmacies for claims paid by the carrier/plan and the total number of paid claims for each drug.
      • The 50 most costly Rx drugs with respect to the coverage/plan by total annual spending, and the annual amount spent by the coverage/plan for each particular drug.
      • The 50 Rx drugs with the greatest increase in plan expenditures over the prior plan year, along with the change in amounts expended for each drug in the current year vs. the prior year.
      • Total spending on hospital costs; costs of primary care and specialty care; costs for Rx drugs; costs of wellness programs; spending on Rx drugs by coverage/plan and enrollees; average monthly premiums paid by the employer and employee; any impact on premiums by rebates, fees, and other remuneration paid by the drug manufacturer to the carrier or plan or TPA with respect to the Rx drugs that were prescribed to enrollees, along with amounts paid for each therapeutic class of drugs and the amount paid for each of the 25 drugs that yielded the highest amount of rebates during the plan year
      • Any reduction in premiums and out-of-pocket costs associated with rebates, fees, or other remuneration during the plan year.


Originally, carriers/plans were required to submit the first report by Dec. 27, 2021, and then annually thereafter by June 1st of each year. HOWEVER, in guidance issued by the Federal Departments this Summer (on Aug. 20th to be exact), the Departments explained that they will NOT enforce this reporting requirement until at least Dec. 27, 2022 (one year after the statutory effective date). I – along with others – have interpreted this to mean that carriers/plans are NOT required to submit their first report on Dec. 27, 2021 (and the annual report on June 1, 2022), rather carriers/plans have until Dec. 27, 2022 (and June 1, 2023) to report their 2020 and 2021 data. I do know that the IFR maintains this “non-enforcement” period through Dec. 27, 2022. Again, I will circle back with more detail of the IFR in my next update.