A note from AgentSync: The Commissioners’ Corner is an ongoing series where the AgentSync blog team invites state insurance commissioners to share their unique perspectives on industry regulation. While we often speak about a nationwide insurance perspective, each state has a culture of regulation specific to their state’s politics, attitudes, and demographics.
This blog aims to provide insight into state-level insurance concerns; it isn’t legal advice, a crystal ball on regulation, or an editorial endorsement by the AgentSync team.
This week’s Commissioners’ Corner is brought to you by Virginia’s Commissioner of Insurance, Scott White.
As state policymakers continue to pursue opportunities to control healthcare costs and make health insurance more affordable, their attention is increasingly turning to the management of pharmacy benefits. Over the past several years, this has led to a wave of new state regulations and heightened government scrutiny of pharmacy benefits managers (PBMs).
According to the National Academy for State Health Policy, from 2017 through 2020, 46 states approved 95 new PBM-related laws. This trend accelerated into 2021, with 127 PBM-related bills filed in 43 states.
Most states have enacted some combination of PBM licensure or registration, rebate reporting, and prohibited business practices.
In the midst of this flurry of activity by individual states, the National Association of Insurance Commissioners (NAIC) has also been actively engaged on these issues. In 2019, it established the PBM Regulatory Issues (B) Subgroup to develop a model licensure law for NAIC adoption. While the subgroup approved it, the NAIC Executive Committee did not. The Regulatory Framework (B) Task Force also adopted a charge for the subgroup to draft a whitepaper:
“to analyze the role of PBMs and Pharmacy Services Administrative Organizations play in the provision of prescription drug benefits, examine state regulatory approaches to PBM business practices, including the implications of the Rutledge vs. Pharmaceutical Care Management Association (PCMA), 141 S.Ct. 474 (2020), decision on such business practices, and discuss any challenges states have encountered in implementing laws and/or regulations.”
The subgroup is now receiving background and informational presentations from stakeholders and is expected to complete the white paper by the end of the year. Finally, the ERISA (B) Working Group is currently drafting a summary of the Rutledge decision for inclusion in its ERISA Handbook.
Let’s now look at the specific regulatory approach in Virginia as an example of the way in which some states are responding to this important health care cost driver. Virginia’s PBM law took effect in 2020.
First, PBM licensure and registration. According to the NAIC, nearly all states (46) impose a licensure, registration, or certification requirement on PBMs. Virginia takes the licensure route for those organizations that provide pharmacy benefits management services. These services include the “administration or management of prescription drug benefits provided by a carrier for the benefit of covered individuals – that is, an individual receiving prescription medication coverage or reimbursement provided by a pharmacy benefits manager or a carrier under a health benefit plan. Currently, we have 40 licensed PBMs in Virginia.
Second, rebate reporting. Virginia is like other states in requiring some form of reporting. In the case of Virginia, carriers, either directly or contractually through their pharmacy benefits managers, must file a quarterly rebate report with the Virginia insurance commissioner. This report details the amount of rebates received and whether, and to what extent, they are retained by PBMs or disbursed to the health plans or plan enrollees. The Virginia General Assembly changed the reporting frequency from quarterly to annually starting with the 2023 calendar year. To help carriers and pharmacy benefits managers complete the reporting form, the State Corporation Commission’s Bureau of Insurance (Bureau) has published guidance, along with a set of instructions.
Third, prohibited business practices. Virginia’s pharmacy benefits management law prohibits certain business practices. These relate to advertisements, claims adjudication fees, reimbursements for services, network restrictions or adequacy determinations, retaliation for exercising rights and spread pricing, a practice most states have now banned. The NAIC has posted a compilation of state PBM business practice laws on its website, current through March of this year.
As a complement to Virginia’s new regulatory approach, the Bureau has developed a new complaint form specifically for use by consumers, pharmacists and others with issues involving one or more PBMs. Fortunately, there have been very few complaints involving commercial health benefit plans. The overwhelming number of complaints we have received involve claims under Medicare Part D and Medicaid, and are therefore outside of our regulatory jurisdiction. The complaint form is available on our website.
While Virginia’s PBM law contains some combination of the various regulatory provisions found in most states, it only applies to those PBMs servicing commercial health benefit plans. It does not apply to ERISA plans, although legislation was introduced this past session to do so, or to Medicare Part D and Medicaid plans. In response to the U.S. Supreme Court decision in Rutledge, I expect to see continuing attempts by states to bring these PBMs under state regulation, as I do legal challenges that test the scope of this decision.