By: HUB’s EB Compliance Team
While most benefits regulations come from federal law, states can and do have their say too. Not wanting to be left out of the many states and localities issuing rules, Oklahoma has recently issued regulations related to benefits too.
Prescription Drug Assistance and Plan Accumulators
Oklahoma HB 2678 says that, effective November 1, 2021, “failing to include any amount paid by an enrollee or on behalf of an enrollee by another person when calculating the enrollee’s total contribution to an out-of-pocket maximum, deductible, copayment, coinsurance or other cost sharing arrangement” is an unfair claim settlement practice. In practice, this means that plans must count amounts paid on behalf of an enrollee, such as by a manufacturer assistance program, as being paid by the enrollee for purposes of their deductible, coinsurance and out of pocket maximum, even if the enrollee didn’t pay the amount themselves.
This can significantly impact health plans as often times the assistance program picks up the bulk of the cost. For example, a medication may cost $750 under the plan, while the assistance program may limit the individual’s cost to $50. This law requires plans to treat the entire $750 towards the deductible, coinsurance and out of pocket maximum, although the employee has only spent $50 out of pocket.
If the plan is a PPO, there’s no compliance issue with this requirement; however, this law poses significant challenges for High Deductible Health Plans (HDHPs). To be a qualified HDHP and allow eligible plan participants to make Health Savings Account (HSA) contributions, participants must be responsible for claims until the statutory minimum deductible is met. The IRS previously approved (and recently reiterated) of manufacturer assistance that takes the form of a discount program, however only the amount actually paid by the individual may accumulate towards the deductible. Thus, under federal law, qualified HDHPs are prohibited from counting manufacturer assistance towards deductibles, coinsurance and out of pocket maximums, which is the exact practice Oklahoma requires. The Oklahoma Insurance Department is currently working with the Oklahoma legislature to resolve the conflict between federal and state laws on this issue.
Insulin Cost Sharing
Oklahoma HB 1019, also effective November 1, 2021, sets cost sharing limits for insulin prescriptions under health plans. The bill limits cost sharing to $30.00 per thirty-day supply or $90.00 per ninety-day supply. The goal of this bill is ultimately to ensure cost is not a barrier for obtaining insulin for those who need it. In practice, this is a price control, however the price is controlled at the plan level, not at the retail or wholesale level. Thus, while the cost for consumers is limited, the plan itself is responsible for the difference between the consumer cost and price paid by the plan.
The mechanism by which Oklahoma achieves this result plays an important role. Oklahoma may have difficulty enacting price controls at the wholesale level; however, they are clearly able to regulate insurance issued within the state (as discussed in detail below). Therefore, even though this bill results in cost control, it achieves this result by shifting cost responsibility from the individual to the health plan.
To Preempt, or Not to Preempt
The Employee Retirement Income Security Act of 1974, (“ERISA”) is the main body of federal law governing benefits and it has a broad preemption provision that says it supersedes any state laws that “relate to” ERISA plans (with certain narrow exceptions). If a state law is determined to “relate to” ERISA plans, it is invalid. However, ERISA has a special carve-out that allows states to regulate fully-insured plans issued in their state.
At least as far as fully-insured plans written in Oklahoma, the two bills discussed here clearly apply to those plans. However, a genuine question remains regarding the applicability to self-insured plans. At least as to the insulin cost cap, the Oklahoma Insurance Department takes the position that it is not preempted by ERISA (although they misstated the E as standing for “Employment” rather than “Employee”). The OID claims that the Rutledge Supreme Court case that HUB covered here gives it the state the authority to require this for self-funded plans. That conclusion remains to be tested in courts.
Additionally, with regard to the prescription drug assistance issue (the first issue covered above), the federal rule in conflict is not in ERISA, but in the tax code, so preemption does not apply. Anyone covered by a plan applying the Oklahoma law will not be able to contribute to a health savings account. Therefore, while that rule is likely pre-empted for self-funded plans (the OID takes no position on the issue that we have seen), for Oklahomans covered by fully-insured high-deductible health plans issued in Oklahoma, the legislature has effectively prohibited them from contributing to HSAs until this conflict is resolved.
Conclusion
These bills show two of the many potential ways states can impact insurance and employee benefits, and highlight that in addition to federal regulation, plan sponsors must be aware of state regulations that impact your plan. Plan sponsors with plan participants in Oklahoma should consult with their ERISA counsel for specific guidance on how to move forward given Oklahoma’s positions on these issues.
If you have any questions, please contact your HUB Advisor. View more compliance articles in our Compliance Directory.
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Neither Hub International Limited nor any of its affiliated companies is a law or accounting firm, and therefore they cannot provide legal or tax advice. The information herein is provided for general information only, and is not intended to constitute legal or tax advice as to an organization’s or individual's specific circumstances. It is based on Hub International's understanding of the law as it exists on the date of this publication. Subsequent developments may result in this information becoming outdated or incorrect and Hub International does not have an obligation to update this information. You should consult an attorney, accountant, or other legal or tax professional regarding the application of the general information provided here to your organization’s specific situation in light of your or your organization’s particular needs.