RxDC Reporting Considerations for Employers
By Brian Gilmore | Published April 3, 2023
Question: Why do some medical plan insurance carriers and TPAs reach out to employers requesting a portion of the information used in the RxDC report?
Short Answer: Components of the RxDC report (P2 and D1) include information that the reporting entity often does not have access to on its own. Employers should promptly respond to these questionnaires to ensure the reporting entity can timely submit the RxDC report on behalf of the plan.
General Rule: RxDC Reporting Due Annually by June 1
All employer-sponsored medical plans, whether fully insured or self-insured (and regardless of size or grandfathered status), are subject to the new annual prescription drug and health care spending data submission requirements under Section 204 of the Consolidated Appropriations Act, 2021 (“CAA”). The new requirements are commonly referred to as the Prescription Drug Data Collection (RxDC) report.
The RxDC data submission includes information on the most frequently dispensed and costliest drugs, as well as prescription drug rebate information. One of the key uses of this information is for the government to compile biennial public reports (as required by the CAA) addressing prescription drug pricing trends and the impact of prescription drug costs on premiums and out-of-pocket expenses.
More broadly, CMS states that the RxDC reports “are expected to enhance transparency and shed light on how prescription drugs contribute to the growth of health care spending and the cost of health coverage.”
For more details: The CAA Prescription Drug Data Collection Requirements.
The first RxDC submission for the 2020 and 2021 calendar years has already been completed. After multiple extensions, that initial filing was due by January 31, 2023 (with a one-time good faith efforts standard).
Going forward, the CAA requires plans to submit the RxDC annually by June 1 to report on the prior calendar year. All plans use the calendar year as the “reference year” for reporting, regardless of ERISA plan year or insurance policy renewal date.
Accordingly, all group health plans must submit the RxDC report for calendar year 2022 by June 1, 2023. No good faith efforts standard or extensions apply for this round of filing.
Employers Rely Primarily on Insurance Carriers and TPAs for RxDC Reporting
For employers with fully insured medical plans, the insurance carrier is directly responsible for submitting this RxDC report. While there is no clear employer action item in the process, employers should nonetheless confirm with their insurance carriers that they will be timely processing the reporting. Furthermore, as discussed in more detail below, employers should assist their insurance carrier by providing any requested P2 and D1 information for the RxDC report that the carrier may not have access to on their own.
For employers with self-insured medical plans (including level funded plans), as with most compliance burdens the obligation technically lies with the employer. However, in nearly all situations employers will rely on their third-party administrator (TPA) or pharmacy benefit manager (PBM) to submit the RxDC report. This delegation through written agreement is expressly permitted in the RxDC regulations.
The RxDC reporting instructions confirm this approach:
3.2 Can a vendor submit information on my behalf? Yes. Plans, issuers, and carriers can contract with issuers, third-party administrators (TPAs), Administrative Services Only providers (ASOs), Pharmacy Benefit Managers (PBMs), or other third-party vendors to submit data on their behalf.
Employers with self-insured plans should confirm that their TPA or PBM will be completing the RxDC report as the “reporting entity” on behalf of the plan (and request documentation to confirm the filing).
The RxDC Information Reported
For employer-sponsored group health plans, there RxDC report will include the following information:
P2: Group Health Plan Name and Related Information*
D1: Average Monthly Premium*
D2: Spending by Category
D3: Top 50 Most Frequent Brand Drugs
D4: Top 50 Most Costly Drugs
D5: Top 50 Drugs by Spending Increase
D6: Rx Totals
D7: Rx Rebates by Therapeutic Class
D8: Rx Rebates for the Top 25 Drugs
*Carriers and TPAs frequently ask employers to provide and confirm information for the RxDC report.
The Employer’s Role: P2 and D1 Information Often Requested by Carrier/TPA
In most cases the employer will not be completing the RxDC report because it will be completed by their insurance carrier and/or TPA (also known as the “reporting entity”). Generally, the D2-D8 data elements fall squarely within the reporting entity’s domain to obtain and report. However, in some cases the reporting entity does not have access to the other information they need to complete the full filing.
The pieces that the reporting entity often will request from the employer are the P2 and D1 data elements. Oftentimes the carrier and/or TPA will reach out to the employer requesting that the employer respond with the information needed to complete those components. Employers should provide such assistance where needed because it appears that failures to comply with the RxDC reporting requirements would fall under the standard IRC §4980D penalty scheme, which is $100 per day per affected individual for noncompliance.
The P2 RxDC Data: Group Health Plan Name and Related Information
The P2 field includes some basic plan information that the insurance carrier or TPA (“reporting entity”) often will request from the employer. The following is the P2 information that reporting entities may request from employers:
P2 Column A: Group Health Plan Name
The instructions state to enter the “group health plan name” without further specification. The FAQ most directly addressing this issue simply directs the reporting entity to “identify the group health plan” for these purposes.
Best Practice: Absent additional guidance clarifying the element, employers should use the ERISA plan name from the wrap plan document/SPD and Form 5500.
P2 Column B: Group Health Plan Number
The instructions state to enter “a unique plan number,” and that you may use “the plan number from your accounting system, the Form 5500 Plan Number (if you file it), the plan sponsor EIN (if the plan sponsor only has one plan), or create a new identification number to enumerate the plans.”
Best Practice: Use the ERISA plan number that employers (regardless of plan size) should have in their wrap plan document/SPD and (where applicable) on the Form 5500. For most plans, this is “501”.
P2 Column D: Form 5500 Plan Number
For employers that submit a Form 5500, use the three-digit plan number reported on the Form 5500. For most plans, this is “501”. All health and welfare plans with at least 100 covered participants on the first day of the plan year must submit a Form 5500.
The instructions direct employers that do not complete the Form 5500 to leave this field blank—even though they should still have an ERISA plan number that is reflected in the wrap plan document/SPD.
P2 Column E: States in Which the Plan is Offered
The instructions state to use the two-character state postal code for each state in which the plan is offered. Supplemental guidance directs the plan to enter “National” if a person living or working in any state would be eligible to obtain coverage under the plan. This should be information the reporting entity has access to without the employer’s input.
P2 Column F: Market Segment
This should be information the reporting entity has access to without the employer’s input:
Small group market: Fully insured plans offered by employers with 50 or fewer employees
Large group market: Fully insured plans offered by employers with more than 50 employees
SF small employer plans: Self-insured plans offered by employers with 50 or fewer employees
SF large employer plans: Self-insured plans offered by employers with more than 50 employees
P2 Column G-H: Plan Year Beginning Date and Plan Year End Date
The instructions state the plan year may be “the year in the plan document of a group health plan, the deductible or limit year used under the plan, or the policy year.
Best Practice: Use the ERISA plan year from the wrap plan document/SPD and (where applicable) the Form 5500.
P2 Column I: Members as of 12/31 of the Reference Year
The instructions state to include all persons covered, including employees, spouses, domestic partners, children, and any other category of covered dependents. This should be information the reporting entity has access to without the employer’s input.
P2 Column J: Plan Sponsor Name
This is the employer for standard plans. If the employer is a controlled group of entities that participate in the same plan, the entry here will be the entity sponsoring the plan, as listed in the ERISA wrap plan document/SPD.
P2 Column K: Plan Sponsor EIN
This is the employer’s EIN for standard plans. This will be listed in the ERISA wrap plan document/SPD and (where applicable) Form 5500.
The D1 RxDC Data: Average Monthly Premium
The D1 field includes a number of data elements, but the ones that reporting entities generally will request for employers to determine relate to the average monthly premiums. The following is the D1 information that reporting entities may request from employers:
D1 Column E-F: Average Monthly Premium Paid by Members and Employers
For the average member premium amount, the instructions state to report the average monthly premium (or premium equivalents) per member per month (PMPM) paid by members for the medical plan in the reference year (calendar year). This is based on the amount members actually paid, not on premium rates charged to the member. “Members” include all persons covered by the plan (e.g., employees, spouses, domestic partners, children). Amounts paid by the employer are excluded for this purpose.
For the average employer premium amount, the instructions state to report the average monthly premium PMPM paid by employers on behalf of members for the medical plan in the reference year (calendar year). This is based on the amount employers actually paid, not on average premium rates. Amounts paid by members are excluded for this purpose.
In the plan is self-insured, the total premium paid by employers is the total premium equivalents (total plan cost) minus the premium paid by members. Premium equivalents include claims costs, admin fees, stop-loss premium, network access fees, and payments made under capitation contracts. They do not include stop-loss reimbursements, prescription drug rebates, or amounts related to FSA/HSA/HRA contributions.
The instructions and supplemental guidance provide a useful table employers can use to calculate the average monthly premium paid by members and employers. It demonstrates that the average monthly premium paid by members is the total premium paid by members for each month of the year divided by the total member count (including dependents and members that paid zero premium) for each month of the year.
The average monthly premium paid by employers is the total premium paid by employers for each month of the year divided by the total member count (including dependents and members that paid zero premium) for each month of the year. For self-insured plans, this is total plan costs minus premium paid by members.
Useful RxDC Reporting Resources
CMS maintains a useful library of materials to assist in the reporting process:
Reminder: CAA Price Transparency Provisions are Nearly Fully Implemented
These new RxDC reporting requirements are part of the broader price transparency provisions of the CAA, which also include the patient protections against surprise billing, prescription drug cost reporting, machine-readable file cost disclosures, mental health parity comparative analysis disclosures, and participant-level cost-sharing disclosures. These provisions have been incrementally implemented over a multiple-year timeframe since the CAA’s enactment at the end of 2020.
For more details:
Disclaimer: The intent of this analysis is to provide the recipient with general information regarding the status of, and/or potential concerns related to, the recipient’s current employee benefits issues. This analysis does not necessarily fully address the recipient’s specific issue, and it should not be construed as, nor is it intended to provide, legal advice. Furthermore, this message does not establish an attorney-client relationship. Questions regarding specific issues should be addressed to the person(s) who provide legal advice to the recipient regarding employee benefits issues (e.g., the recipient’s general counsel or an attorney hired by the recipient who specializes in employee benefits law).
Lead Benefits Counsel, VP, Newfront
Brian Gilmore is the Lead Benefits Counsel at Newfront. He assists clients on a wide variety of employee benefits compliance issues. The primary areas of his practice include ERISA, ACA, COBRA, HIPAA, Section 125 Cafeteria Plans, and 401(k) plans. Brian also presents regularly at trade events and in webinars on current hot topics in employee benefits law.Connect on LinkedIn