In a significant legislative move, the U.S. House of Representatives voted 320-71 to pass the Lower Costs, More Transparency Act (“the Act”) on December 11, 2023. This bipartisan effort marks a progressive step towards increasing transparency in the healthcare market, with a primary aim to lower health care costs. This legislation brings several changes that would notably impact employers sponsoring group health plans.
Codification of Transparency in Coverage Regulations
One of the key provisions of the Act is the codification of existing transparency in coverage regulations. This includes the requirement for posting machine-readable files (MRF) and making certain cost information readily available. A notable change here is the specific timing for posting the MRF, which is now required by the 10th day of each month. This provision is set to apply from the first plan year starting on or after January 1, 2026.
Stringent Requirements for Pharmacy Benefit Managers
The Act places new obligations on Pharmacy Benefit Managers (PBMs), requiring them to provide detailed semi-annual reports to group health plans. These reports must include comprehensive data on prescription drug spending, covering aspects like drug acquisition costs, total out-of-pocket spending, formulary placement rationale, and aggregate rebate information. Non-compliance could result in substantial penalties of $10,000 per day. This requirement is expected to be enforced from the first plan year two years post-enactment.
Enhanced Transparency for Health Plan Fiduciaries
The legislation also enhances transparency requirements for health plan fiduciaries. It ensures they are not contractually restricted from accessing cost or quality of care information about their plan. Penalties for non-compliance with these provisions could also reach $10,000 per day and are set to be effective from the first plan year following the date of enactment.
Amendments to ERISA Compensation Disclosure
The Act amends ERISA (Employee Retirement Income Security Act) Section 408(b)(2), extending the compensation disclosure requirements to include PBMs and Third-Party Administrators (TPAs) as service providers. This change will apply to contracts entered into on or after January 1, 2025.
Prohibition of Gag Clauses in Pharmacy Contracts
A significant consumer-friendly provision is the prohibition of gag clauses in pharmacy contracts. These clauses previously restricted pharmacies from disclosing cost information related to drugs to covered participants or beneficiaries. The effective date for this provision remains uncertain.
The Road Ahead: Legislative Journey and Implications
While the House’s approval of the Act is a landmark decision, its future in the Senate remains uncertain. It is unlikely that the Senate will pass this bill as standalone legislation. However, as the House and Senate prepare to pass government funding bills in early 2024, elements of this Act might be incorporated into these spending bills and potentially enacted into law.
The Lower Costs, More Transparency Act represents a critical step towards making healthcare costs more transparent and manageable for both employers and employees. Its emphasis on clearer reporting, accountability, and access to information aligns with the broader goals of healthcare reform. As the legislative journey continues, employers and health plan sponsors should stay informed and prepared for the potential implications of these changes.
We will continue to monitor the developments surrounding this pivotal legislation and its impact on the healthcare landscape.
