Tri-agencies provide good faith reliance relief and grace period for CMS RxDC reporting obligations

Executive summary

Coming in at the 11th hour in the midst of the holidays, the United States Departments of Labor, Health and Human Services, and Treasury (the Departments), have released guidance providing a good faith reliance standard as well as a grace period through Jan. 31, 2023, for the prescription drug and healthcare cost reporting (RxDC reporting) due Dec. 27, 2022. The FAQ also includes some helpful flexibilities for reporting entities.

Lockton comment: The Consolidated Appropriations Act of 2021 (CAA), required reporting of 2020 plan data on or before Dec. 27, 2021, but that deadline was deferred to Dec. 27, 2022. The Dec. 27, 2022, reporting deadline includes reporting of both 2020 and 2021 plan data. Going forward, reporting for subsequent years will be due June 1.


The CAA requires group medical plans (including grandfathered and non-grandfathered plans, state and local government plans and church plans) to report a variety of plan-related costs, with a focus on prescription drug spending. Information to be reported includes the following:

  • The beginning and end dates of the plan year.

  • The number of participants and beneficiaries covered by the plan.

  • Each state in which the plan or coverage is offered.

  • Premium costs.

  • Prescription drug costs including the following information:

    • The top 50 most frequently dispensed brand-name prescription drugs and the number of claims paid for each drug within this list.

    • The top 50 most costly prescription drugs with respect to the plan for the year and total amount spent by the plan for each drug on this list.

    • The top 50 prescription drugs with the greatest increase in plan expenditures over the current plan year compared to the previous plan year. This year-over-year cost comparison must be reported aggregately as well as individually for each drug on this list.

  • Total prescription drug spending: costs must be broken down by amounts paid by the health plan and amounts paid by plan participants.

  • Amounts paid for therapeutic classes of drugs, and amounts paid for each of the 25 drugs that yielded the highest amounts of rebates or other remuneration from drug manufacturers for the plan year.

  • Any impact on premiums or out-of-pocket costs because of drug manufacturer rebates, fees or any other remuneration paid by drug manufacturers to the plan or its administrators or service providers.

  • Total spending on healthcare services by the plan broken down by the following types:

    • Hospital costs

    • Healthcare provider and clinical services costs separated into primary care and specialty care

    • The average monthly premium paid by the employer on behalf of all plan participants

    • Other medical costs including wellness services, fees paid for third-party administrative services, and stop loss premiums paid.

The data is required to be reported in various files transmitted to the Centers for Medicare and Medicaid Services (CMS) through the Health Insurance Oversight System (HIOS).

Most carriers, third-party administrators (TPAs) and pharmacy benefit managers (PBMs) have agreed to file most, if not all, of the required information on behalf of the group health plan. However, in some circumstances, the employer plan sponsor will have to file certain data elements on behalf of the plan. For example, some self-funded employer plan sponsors must file a D1 file to report only the stop loss premium amounts along with an accompanying P2 file reflecting plan level details.

Lockton comment: The obligation to report this information is on the group health plan itself. However, insured plans may satisfy the reporting requirements by entering into a written agreement requiring the carrier to report the required information. If the carrier fails to report, the carrier, not the plan, violates the reporting requirements. For self-insured plans, however, if the plan enters into a written agreement with a third-party reporting entity, such as a pharmacy benefit manager (PBM) or third-party administrator (TPA), and the third-party reporting entity fails to report the required information, the plan is ultimately responsible for the failure.

11th hour relief provided

FAQ 56 (opens a new window) provides welcome relief for employer plan sponsors, speaking to the operational challenges facing plans and issuers with regard to the reporting requirements and acknowledging the likelihood of errors in submissions despite the good faith efforts of plans and issuers in complying.

As a result, the Departments will not take enforcement action against those who use good faith and reasonable interpretations of the requirements in making their submissions. The Departments are also providing a grace period for submitting information, giving plans and issuers until Jan. 31, 2023, to report the information in HIOS.

The Departments provided additional guidance and flexibility for employer plan sponsors as well, some of which clarifies prior guidance.

  • Where a group health plan or its reporting entity is submitting only the plan list, premium and life-years data, and narrative response the information may be submitted by email to instead of submitting through HIOS.

This guidance is somewhat ambiguous, but the language provides a good faith interpretation that the relief applies to any reporting included in the “D1 Premium and Life Years" data file. We would interpret this to mean if an employer is only filing a D1 to report information like stop loss premium amounts, they could avoid setting up a HIOS account and instead merely email the files to the CMS email address provided. Note, if the employer has already established a HIOS account, we would recommend still uploading the data through the HIOS account, but the relief is helpful for employer plan sponsors who continue to struggle establishing a HIOS account.

Lockton comment: For employer plan sponsors to report any data on behalf of the plan, the employer must establish a HIOS account. To do so, the employer must go through a rather extensive HIOS setup process. Some might say the HIOS account setup is a more difficult undertaking than completing and uploading the data files, so this flexibility is helpful for those employers struggling with establishing a HIOS account or submitting the required data files.

  • Multiple entities may submit the same data file type on behalf of the same plan or issuer, instead of plans having to consolidate all the data into a single plan data file.

Lockton comment: This guidance is not necessarily new information. Original guidance regarding the RxDC reporting was clear that reporting should not include any unnecessary duplication, meaning group health plan data needed to be consolidated into a single submission. Subsequent CMS FAQs and reporting instructions included guidance allowing multiple entities to file multiple data files on behalf of the plan for various reasons. This was welcome relief as it was difficult for plans with various vendor partners to consolidate all of the data into one filing.

Some other key flexibilities, which are more applicable to carriers and PBMs reporting on behalf of multiple plans, include the following:

  • For 2020 and 2021 filings, a reporting entity can aggregate at a less granular level than the level used by the reporting entity that is submitting the total annual spending data.

  • When a reporting entity submits on behalf of more than one plan or issuer for a reference year, they may create more than one submission for that reference year, instead of including the data of all clients within a single set of plan lists and data files for the year.

  • Reporting on vaccines is optional. National Drug Codes approved by CMS were updated with the applicable codes related to vaccines in October 2022, but including the information related to vaccines is optional.

  • Reporting entities do not have to report a value for “Amounts not applied to the deductible or out-of-pocket maximum” and the “Rx Amounts not applied to the deductible or out-of-pocket maximum.”

In light of this relief, employer plan sponsors will want to work with their partners to ensure filings are completed by Jan. 31, 2023. Once reporting for 2020 and 2021 are complete, employer plan sponsors can turn their eyes toward 2022 filing obligations, due on June 1, 2023.

Read more (opens a new window)Not legal advice: Nothing in this alert should be construed as legal advice. Lockton may not be considered your legal counsel, and communications with Lockton's Compliance Consulting group are not privileged under the attorney-client privilege.