A recent federal court decision means that employers taking advantage of copay accumulator programs now face unexpected administrative complications.

In October, The District Court for the District of Columbia’s ruled in HIV and Hepatitis Policy Institute v. Department of Health and Human Services, striking down a federal rule that allowed health plans to use copay accumulator programs to exclude drug manufacturer copay assistance from a patient’s out-of-pocket costs.

The copay accumulator program is a common prescription drug benefit plan feature that allowed plans to disregard third-party subsidies for prescription drugs in determining when an individual would reach the out-of-pocket maximum under the plan. This would delay the date on which the plan would have to pay for prescription drugs without any participant cost-sharing.

Copay accumulator program role

Copay accumulator program refers to the practice of excluding manufacturer assistance from the plan enrollee’s out-of-pocket maximum. Copay accumulator programs help delay a participant’s progress toward the annual out-of-pocket maximum which, in turn, delays the date that their plans would become responsible for paying the full cost of in-network benefits.

For example, if an enrollee receives $1,000 in manufacturer assistance, that $1,000 would not count toward the enrollee’s out-of-pocket maximum for the year. The plan would not be required to start paying the full cost for medical expenses until the participant spends an additional $3,000 out-of-pocket toward their annual maximum limit.

Plan sponsors must now work with their pharmacy benefit managers to determine how to adjust their copay accumulator programs to comply with the court decision until the U.S. Department of Health and Human Services issues further guidance.

In addition, health plans and pharmacy benefit managers may need to reevaluate their formulary and benefit design to accommodate the new regulatory landscape while continuing to provide care to patients.

ACA guidelines

Under the Affordable Care Act, plans are required to pay the full cost of most covered in-network services for the remainder of the plan year after a participant’s cost-sharing reaches the annual out-of-pocket maximum. ACA defines cost-sharing to include deductibles, coinsurance, copayments and “any other expenditure required an insured individual which is a qualified medical expense … with respect to essential health benefits covered under the plan.”

Plan sponsors questioned this definition, which triggered concerns about plan participants who receive financial assistance from a third party to pay for their share of the cost of benefits. The questions centered on whether that assistance qualifies as participant cost-sharing under the ACA.

Third-party financial assistance is common in prescription drug plans, with many drug manufacturers offering coupons and other forms of financial assistance to help plan enrollees afford their medications. Some plans have designed their prescription drug plans to maximize the availability of manufacturer assistance.

In 2021, the Centers for Medicare and Medicaid Services issued guidance that allowed plans to disregard manufacturer assistance payments when calculating a participant’s cost-sharing when administering the annual out-of-pocket maximum. Prior guidance allowed this only if a medically appropriate generic equivalent of the drug was available.