Arkansas Share the Savings Legislation, ACT 333 of 2023

Hugh McDonald SECRETARY OF COMMERCE AID BULLETIN #19 -2023 DATE: NOVEMBER 30, 2023 Alan McClain COMMISSIONER, ARKANSAS INSURANCE DEPARTMENT TO: ALL LICENSED PHARMACY BENEFIT MANAGERS, HEALTH INSURERS, HEALTH MAINTENANCE ORGANIZATIONS, AND HOSPITAL AND MEDICAL SERVICES CORPORATIONS RE: ARKANSAS SHARE THE SAVINGS LEGISLATION, ACT 333 Of 2023 The Arkansas Insurance Commissioner ("Commissioner") issues the following advisory pertaining to recent legislation enacted by the Arkansas General Assembly in 2023. Act 333 of 2023 created both the Healthcare Insurer Share the Savings Act, codified at Ark. Code Ann. § 23-79-2501 et seq., and the Pharmacy Benefits Manager Share the Savings Act, codified at Ark. Code Ann. § 23-92-704 et seq. This Bulletin is issued to health insurers, health maintenance organizations ("HMOs"), hospital and medical services corporations, and pharmacy benefit managers ("PBMs"), subject to the legislation, transacting business in Arkansas in the fully insured or state-regulated health markets. The purpose of this bulletin is to provide various interpretations, notices, and a descriptions of the Arkansas Insurance Department's ("AID") enforcement policy on Act 333 of 2023 ("Act 333"). Act 333 went into effect on August 1, 2023. Act 333 is now codified in Chapter 79 of the Arkansas Insurance Code at §§ 23-79-2501 et seq. and then separately with other legislation related to PBMs in Chapter 92 at Ark. Code Ann. §§ 23-92-701 et seq. The core mandate in both sections is that subject health-insurers (including HMOs) and PBMs shall calculate a covered enrollee's cost-sharing for prescription drugs "based on a price that is reduced by an amount equal to "at least one hundred percent (100%) of all rebates received, or to be received, in connection with the dispensing or administration of the prescription drug." See Ark. Code Ann. §§ 23-79-2503(a) and 23-92-704(a). The purpose is to reduce out of pocket drug costs for consumers "at the counter," as these rebate reductions are to be done at the "point of sale." These reductions are to apply to the consumer or enrollee's deductible or co-insurance at the "point of sale." The reductions would therefore not apply to co-payments. See the definition of the term, "defined cost sharing" in Ark. Code Ann. §§ 23-79-2502(1) and 23-92-703(1). 1 The Act commonly defines "rebates," or negotiated price concessions in both sections, broadly. Please review Ark. Code Ann. §§ 23-79-2502(6) and 23-92-703(8). At this time, the Commissioner shall not in this bulletin set out the exact, detailed mechanism subject healthcare insurers or PBMs shall develop to apply rebates downstream to the point of sale for covered enrollees to effectuate compliance with Ark. Code Ann. §§ 23-79-2503(a) and 23-92-704(a). However, each insurer and PBM is expected to have reasonably developed a program for doing so on or after January 1, 2024. See the Enforcement section of this Bulletin. Jurisdiction and Applicability. On the health insurance side of the legislation, Act 333 applies to and excludes various health-benefit plans and healthcare insurers. Essentially, the Act excludes local and state governmental plans and applies to "healthcare insurers" that offer "health insurance coverage under 42 U.S.C. § 300gg-91." After discussing this citation with the drafter(s), the intent was to apply Act 333 to the general definition of health insurance coverage in 42 U.S.C. § 300gg-91(b)(1). The Commissioner therefore interprets the Act to apply on its health insurance side to the state-regulated and fully insured individual, small group, and large group markets. For its PBM application, the Act sets out similar health-benefit plan exclusions. As it applies to PBMs administering drug benefits and receiving "rebates" for prescription drugs, the Act appears to apply to the entire fully insured market (individual, small group and large group markets), at least for health-benefit plans issued or delivered in Arkansas and subject to Arkansas law regulating insurance. Neither section of Act 333 applies to ERISA self-funded health-benefit plans. Act 333 does not have an "effectivity" clause or retroactivity clause. In the absence of such a clause, the Commissioner shall apply his standard interpretation to avoid retroactivity impairment: the rebate pass-through mandate of the Act will apply to all affected health-benefit plans and pharmacy administration contracts issued or delivered on or after the effective date of the Act, which is August 1, 2023. For previously issued plans or contracts issued before August 1, 2023, the Act will apply upon renewal, reissuance, or modification of such contracts after August 1, 2023. Certification. Act 333 requires certifications from PBMs but not from healthcare insurers. The Act provides that "a pharmacy benefits manager shall submit a certification to the Insurance Commissioner by January 1 of each calendar year certifying that the pharmacy benefits manager has complied with the requirements of this section during the previous calendar year." Ark. Code Ann. § 23-79-704(c). The Commissioner takes the position that for this first year, the PBM would make this certification for the period of time from January 1, 2023, until the end of this calendar year. Given that this guidance is being issued late in the year of 2023, by way of this Bulletin, the Commissioner has decided to extend the deadline for submission of Act 333 certifications for 2023 data to 2 March 1, 2024, for this first year of certification. Thereafter, each certification will be due annually on or before January 1. In light of the extended deadline, any PBM that has previously submitted its certification for the 2023 data year may retract that submission and submit a new certification by March 1, 2024 if the availability of more time changes its previously submitted responses. Please see Bulletin No. 16-2023 for more instructions regarding compliance with certification requirements. Enforcement. AID's enforcement of Act 333 shall be on an investigation or limited scope examination basis by AID's PBM and market conduct divisions. Subject PBMs and healthcare insurers are hereby notified that AID expects all subject licensees to ensure that they are applying a mechanism that complies with the core mandates of Ark. Code Ann. §§ 23-79-503(a) and 23-92-704(a). AID intends to begin random investigations and limited scope examinations to review whether rebates were applied to reduce drug prescription claim out of pocket cost expenses to check compliance with Act 333 after the first quarter of 2024. However, given the complexities related to system changes and implementation, any investigations or examinations conducted during 2024 shall be for information gathering purposes only. AID intends to review all information from the affected industries, as to their developed mechanisms for complying with Act 333, and later issue an administrative rule to detail specific actions or features which must be in this program. AID may issue further clarifications on its implementation and enforcement of Act 333. For any questions related to this Bulletin, please contact Booth Rand, General Counsel, or Crystal Phelps, Managing Attorney, at 501-371-2820 or email insurance. legal@arkansas.gov or aid.pbmlicensing@arkansas.gov. tri*.d.1./1 November 30, 2023 00v60.00-k( 01)--2, ALAN MCCLAIN DATE ARKANSAS INSURANCE COMMISSIONER 3