By: HUB’s EB Compliance Team

We previously told you about a new rule that would have allowed plans to exclude drug manufacturer coupons and discounts from accumulating toward deductibles and out-of-pocket maximums, if a generic medication was available. Well, at the end of August, the three agencies overseeing Affordable Care Act (“ACA”) guidance released an FAQ stating they would not enforce this new rule.


Sometimes, drug manufacturers will give individuals coupons or other discounts to help them pay for brand name prescription drugs, effectively decreasing the individual’s out-of-pocket spend. The U.S. Department of Health and Human Services (“HHS”) was concerned that these programs increase the drug spend for employers as patients are encouraged to select expensive brand drugs (because of the manufacturer coupon) over generic medications, when equally-appropriate generic medications are available.

To address this issue, HHS said that, starting in 2020, plans would not be required to count amounts that an individual didn’t pay, because of manufacturer coupon, against the plan’s cost sharing if a medically-appropriate generic was available. This made some sense: the individual didn’t have to pay the amount, so why count it toward the deductible or out of pocket maximum?

Words Matter

However, several observers pointed out a concern with the wording. The rules said a plan didn’t have to count the coupon amount if a generic was available.

What if a generic wasn’t available? The rules did not say. However, to many, they implied that if a generic wasn’t available, then the plan wasn’t allowed to exclude the coupon amount from the deductible or out-of-pocket maximum. In other words, by saying a plan wasn’t required to count the coupon amount if a generic was available, the rule made it seem like plan was required to count it as an amount the participant paid if a generic wasn’t available.

Potential HSA Conflict

This interpretation raised a potential conflict with rules governing health savings accounts (HSAs). To contribute to an HSA, an individual must be in a high deductible health plan (HDHP). The plan generally cannot pay medical expenses (other than certain items like preventive care) before the individual has met the plan’s deductible. If the HDHP pays for expenses prior to the deductible being met, the participant is ineligible to contribute to an HSA (or if they do contribute, they will be subject to excise taxes).

However, IRS guidance says that discount cards for prescription drugs can be offered to participants enrolled in a HDHP and they can still contribute to the HSAs. The IRS says these discount cards are fine, as long as only the amount the individual actually pays for the drug is counted toward the deductible. While the manufacturer coupon is not a discount card, some observers believed it should be treated like one.

This is where the issue comes in: if HHS requires that these manufacturer coupons count toward the deductible if no generic is available, but IRS rules treat them like discount cards so that the coupons cannot count toward the deductible, then the IRS and HHS rules conflict.

Think of it this way. Roddy is in a high deductible health plan with a $3,000 deductible. Roddy gets a $1,000 manufacturer coupon to help pay for a brand named drug where no generic is available. Under the HHS rules, the plan would have to treat Roddy as having paid the $1,000 because no generic was available, so now he has only $2,000 of deductible left. But to allow Roddy to contribute to an HSA, the plan would have to exclude the coupon like a discount card, so he would still have $3,000 of deductible left. This would be administratively impossible.

Taking a Mulligan

To avoid this unintended consequence, HHS is now saying it will not enforce its original rule or impose penalties on employers that choose not to allow manufacturer coupons to count towards the deductible and out-of-pocket limits when a generic is not available. HHS says it will clarify and update how these discounts should be treated when it releases its next Notice of Benefit and Payment Parameters rule next year. The new rule will not take effect until 2021.

Some employers were being approached by their pharmacy benefit managers to decide how to treat these coupons for 2020. Many employers had excluded all coupons from the deductible/out-of-pocket maximum under their plans. In some cases, it was because of the IRS guidance around HSAs and high-deductible health plans. In other cases, it was simply because this was not an amount the individual actually had to pay. For now, this guidance allows employers to leave these programs in place and wait to make changes until 2021.

If you have any questions, please contact your HUB Advisor. View more compliance articles in our Compliance Directory.


The information herein is intended to be educational only and is based on information that is generally available. HUB International makes no representation or warranty as to its accuracy and is not obligated to update the information should it change in the future. The information is not intended to be legal or tax advice. Consult your attorney and/or professional advisor as to your organization’s specific circumstances and legal, tax or other requirements.