Out-of-Pocket Maximum for Prescription Drugs

STATE OF VERMONT DEPARTMENT OF FINANCIAL REGULATION 89 Main Street Montpelier, VT 05620-3101 For consumer assistance: [Banking] 888-568-4547 [Insurance] 800-964- 1784 [Securities] 877-550-3907 dfr.vermont.gov Insurance Bulletin #171 Out-of-Pocket Maximum for Prescription Drugs December 10, 2025 [Revised: 2025 - Updated statutory references; substantive requirements unchanged] 8 V.S.A. § 4092 (formerly § 4089i), enacted as Section 32 of Act 171 of 2012, establishes an out-of-pocket maximum for prescription drugs under any insurance or other health benefit plan offered by a health insurer or a pharmacy benefit manager. This bulletin is intended to provide clarification to insurers regarding Section 4092. As a benchmark for the out-of-pocket maximum, the statute uses the dollar amounts specified in Internal Revenue Code Section 223(c)(2)(A)(i). Information about current minimum deductibles and out-of-pocket maximums under Section 223 may be found in IRS Publication 969 (https://www.irs.gov/publications/p969). This Bulletin consists of some questions submitted to the Department and the Department's answers to those questions. The Department has also received inquiries from insurers that are framed as questions about Section 4092 but in fact go to plan design or tax issues relating to Health Savings Accounts. Plan design is not addressed by Section 4092, and as long as insurers adhere to the guidance below and the out-of-pocket maximums, Section 4092 is not implicated. Some issues, particularly as to High-Deductible Health Plan (HDHP) design and the treatment of Health Savings Accounts (HSAs), are tax questions and insurers should be guided by the relevant provisions of the Internal Revenue Code (IRC) and guidance from the IRS. Frequently Asked Questions What is a prescription drug? Under 8 V.S.A. § 4091, the term “drug” has the same meaning as “prescription drug” in 26 V.S.A. § 2022 and includes: • biological products, as defined in 18 V.S.A. § 4601; • medications used to treat complex, chronic conditions, including medications that require administration, infusion, or injection by a health care professional; • medications for which the manufacturer or the U.S. Food and Drug Administration requires exclusive, restricted, or limited distribution; and Docusign Envelope ID: EA6E9DA5-0BFF-42DD-AF48-75E9C74C494A DFR Insurance Bulletin #171 Page 2 of 5 • medications with specialized handling, storage, or inventory reporting requirements. A “prescription drug” is any drug which is dispensed to the insured by prescription. Does the statute require that the prescription drug out-of-pocket maximum for all plans be no higher than the federal statutory annual minimum deductible for HDHP with HSA plans? Yes. The annual out-of-pocket maximum for prescription drugs uses as a benchmark the federal statutory annual minimum deductible set by 26 U.S.C. § 223 - Health savings accounts. This applies to “any insurance or other health benefit plan offered by a health insurer” including HDHPs with or without HSAs. 8 V.S.A. § 4092. Does the new law apply to all plans, including large group, small group, nongroup, and catamount? Yes, to the extent allowed by federal law. Does the out-of-pocket maximum apply to all drug plans administered by the health plan, including by its PBM? If the health plan does not provide prescription drug benefits and the employer buys a separate prescription drug plan, does the new law apply? Yes. Which expenses count toward the out-of-pocket maximum? An “out-of-pocket expenditure” is defined by statute to include deductibles, copays, coinsurance, and any other cost-sharing mechanism. 8 V.S.A. § 4091(5). By definition, all such expenses incurred by the insured for prescription drugs-those that are applicable to the deductible as well as all copays and coinsurance count toward the outof-pocket maximum. Which expenses count toward the deductible? The statute creates an out-of-pocket maximum for prescription drug expenses. The statute does not address deductibles, except to include deductible expenses for prescription drugs in the out­ of-pocket maximum. Are expenses for prescription drugs dispensed in a doctor's office, hospital, or clinic rather than a pharmacy included in the out-of-pocket maximum? Expenses for drugs administered in a doctor's office, hospital or clinic that are not obtained by prescription through a retail or mail-order pharmacy are not required to be counted toward the out-of-pocket maximum. Expenses for drugs that are dispensed from a retail or mail-order pharmacy by prescription but administered in a doctor's office, hospital, or clinic count toward the outof-pocket maximum. Health insurers and pharmacy benefit managers are prohibited from requiring that a drug be dispensed or administered in a doctor's office, hospital, or clinic when that drug would be available through prescription at a retail or mail-order pharmacy Docusign Envelope ID: EA6E9DA5-0BFF-42DD-AF48-75E9C74C494A DFR Insurance Bulletin #171 Page 3 of 5 Health insurers and pharmacy benefit managers are encouraged to educate insureds about drugs that may either be (1) dispensed directly by a provider or (2) obtained by prescription in a retail or mail-order pharmacy, so that the insured understands the cost implications of choosing one method of delivery over the other. Does Vermont law require a separate out-of-pocket maximum for prescription drugs, or can it accumulate to the overall plan out-of-pocket maximum? No. Section 4092 does not prevent an insurer from establishing one out-of-pocket maximum for the overall plan and applying prescription drug expenses to that out-ofpocket maximum, provided the insured's prescription drug costs are limited to the amount prescribed by statute. Section 4092 simply requires that all health insurance or other health benefit plans limit out-of-pocket expenses for prescription drugs. The limit is benchmarked to the federal statutory annual minimum deductible set by 26 U.S.C. 223. Does Vermont law require that the deductible for all HDHPs be no higher than the federal statutory annual minimum deductible set by 26 U.S.C. 223? No. Section 4092 simply sets an out-of-pocket maximum for prescription drugs that uses as a benchmark the federal statutory annual minimum deductible set by 26 U.S.C. 223 is met. Determination of a particular HDHP plan's deductible relates to plan design. When do prescription drug benefits begin under HDHPs? Prescription drug benefits begin when the insured has met the federal statutory annual minimum deductible set by 26 U.S.C. 223. The Vermont statute does not mandate that the deductible for all HDHPs be the equivalent of the federal statutory annual minimum deductible, however, once the federal statutory annual minimum deductible is met, the insurer must begin prescription drug coverage. For family HDHPs, the federal statutory minimum annual deductible in effect for family coverage under 26 U.S.C. 223 must be met before prescription drug coverage begins. Which expenses count toward HDHP deductibles for purposes of determining when prescription drug benefits must begin? Section 4092 requires only that as to an HDHP, prescription drug benefits begin when an insured has met the federal statutory minimum deductible set in 26 U.S.C. 223. The expenses that apply to this minimum deductible may depend on IRS requirements as to a particular plan design. An insurer is advised to consult the IRS on these matters. Is the HDHP subsection of section 4092 structured so that a health plan can use different deductibles for medical services and prescription drugs? Section 4092 does not prevent an insurer from establishing different deductibles for medical benefits and for prescription drug benefits nor does it prevent an HDHP from using a higher deductible for medical benefits than for prescription drug benefits provided the out-of-pocket maximum for prescription drug expenses is adhered to. As noted above, HDHP plan design may be impacted by other provisions of the IRC. An insurer is advised to consult the IRS on these matters. Docusign Envelope ID: EA6E9DA5-0BFF-42DD-AF48-75E9C74C494A DFR Insurance Bulletin #171 Page 4 of 5 In an HDHP, do out-of-pocket expenses for prescription drugs incurred before the deductible is met count toward the out-of-pocket maximum for prescription drugs? Yes. Do differentials incurred by a patient solely because they choose a branded drug where a generic would suffice count toward the out-of-pocket maximum? No. Do out-of-network prescription drug expenses count toward the out-of-pocket maximum? Yes. Deductibles, copays, or coinsurance applicable to out-of-network prescription drug purchases count toward the out-of-pocket maximum. If the insurer subjects the insured to a penalty for out-of-network purchases of prescription drugs in addition to the applicable cost­ sharing expense the penalty is not applied to the out-of-pocket maximum. What about prescription drugs as preventive medication? Deductibles, copays, or coinsurance applicable to drugs prescribed as preventive medication apply to the prescription drug out-of-pocket maximum. Do expenses for diabetic supplies or durable medical equipment count toward the out-of-pocket maximum? Section 4092 establishes an out-of-pocket maximum for prescription drugs. Diabetic supplies and durable medical equipment, even when dispensed by a pharmacy ·or covered under a pharmacy benefit, are not prescription drugs. Questions regarding this bulletin may be emailed to the DFR Insurance Division. Kaj Samsom, Commissioner Date Docusign Envelope ID: EA6E9DA5-0BFF-42DD-AF48-75E9C74C494A 12/12/2025 DFR Insurance Bulletin #171 Page 5 of 5 Exhibit A Bulletin Version History Version Date Description 1 October 26, 2012 Initial Bulletin Issued 2 March 12, 2018 Revised guidance. 3 December __, 2025 Updated statutory references to conform with Act 11 (2025) reorganization of 8 V.S.A. chapter 107. Section 4089i is now codified as section 4092. Substantive requirements unchanged. Docusign Envelope ID: EA6E9DA5-0BFF-42DD-AF48-75E9C74C494A