Arkansas Rule 128 Compliance Guide: Pharmacy Compensation Reporting for Group Health Plans

The Arkansas Insurance Department (AID) recently created a new reporting obligation that requires group benefit plans to submit certain pharmacy compensation information that may then be used to confirm whether the payment to Arkansas pharmacies and pharmacists are “fair and reasonable.” In conjunction with Rule 128, the AID also issued Bulletin #18-2024 (“Bulletin”) to provide supporting detail as to the type of data to be provided as well as the reporting deadlines. The Rule expressly states that it applies to (i) fully-insured group health plans issued in Arkansas, (ii) fully-insured group health plans issued outside of Arkansas that cover Arkansas residents, and (iii) self-funded group health plans (including government plans) that provide benefits to Arkansas residents. A group health plan or insurance carrier subject to Rule 128 must file an annual written report to the AID that describes each pharmacy compensation data for the then applicable plan year.

The Bulletin applies a two (2)-year phased approach for the report filing deadlines. For plan year 2025, the requested data must be provided between November 30, 2024, and February 17, 2025. For plan year 2026, the data should be reported on or before July 1, 2025. The deadline transitions to March 1st for each subsequent plan year.

Self-funded group health plans may request a deadline extension. To do so, a formal extension request must be sent via email to amy.seale@arkansas.gov. The request must include a reason for the request and the information or calculations that are not reasonable available or in the possession of the health plan.

BACKGROUND ON RULE 128

Initially passed in September 2024 as a temporary emergency rule, Rule 128 focuses on the reimbursement rates by pharmacy benefit managers (PBMs) to pharmacists and pharmacies in Arkansas to make sure it is a “fair and reasonable.” Rule 128 was made permanent in December 2024. The Rule changes pharmacy reimbursement standards to ensure that Arkansas pharmacists and pharmacies will be paid at least the National Average Acquisition Cost (“NADAC”) minimums for both prescription reimbursement and the dispensing cost adjustment. Prior to Rule 128, Arkansas AID required minimums for prescription reimbursements did not address professional dispensing fees.

An enforcement component of Rule 128 is to extend the Commissioner’s authority to review and approve or deny a health benefit plan’s compensation program (offered through the PBM). If the Commissioner determines that the group health plan’s pharmacy compensation program by a PBM is not fair and reasonable, the Commissioner can decide whether the plan should be required to pay an additional pharmacy dispensing cost to improve such reimbursement. If the Commissioner determines that the data provided by the health plan is “fair and reasonable,” then no further action or adjustment is needed.

WHO MUST SUBMIT THE DATA?

The Bulletin permits a third-party administrator or PBM of a self-funded group health plan to file the data or report on behalf of the group health plan. AssuredPartners sought comment from several PBMs, and the general response was that the PBMs are hesitant to submit the data on behalf of the group health plan. Some PBMs indicated that they will impose a fee for such a service.

ERISA PREEMPTION

The Bulletin expressly states that the Rule applies to self-funded employer health plans and self-funded government health plans. However, there is at least an argument that the Rule is preempted by ERISA. Furthering a preemption argument is that the “Applicability” section of the Rule (Section III) carves out “federally regulated heath benefit plans restricted from state regulation under federal law or those health benefit plans which are exempted from state regulation under state law.” Because of this, AssuredPartners strongly encourages that plan sponsors of a self-funded group health plan seek outside counsel to determine whether the plan should comply with Rule 128.

PLAN SPONSOR ACTION REQUIRED

If you sponsor a group health plan that is either sitused in Arkansas or covers Arkansas residents, AssuredPartners strongly encourages you to seek outside counsel to determine whether you must comply with this Rule.

Fully-Insured Group Health Plans: If you seek to comply with the Rule and the group health plan is fully-insured, please consult with your broker and medical insurance carrier to learn whether the carrier is submitting the required information on the group health plan’s behalf. If not, submit a request for the necessary information as noted above and submit directly to the AID as per the instructions provided in the Bulletin.

Self-Funded Group Health Plans with Arkansas Residents:

if you seek to comply with the Rule and the group health plan is self-funded, please consult with your broker or reach out directly to your contracted PBM to learn whether the PBM will file the data or report to AID on behalf of the health benefit plan. If not, then request the required data for you to submit directly to the AID.

NOTED EXCEPTION:

Self-funded plans (including government plans) with less than 5,000 plan participants that are Arkansas residents are exempt from all but one (1) data reporting requirement and the Rule’s two-year phase in obligation. So, if you sponsor a self-funded group health plan that covers less than 5,000 Arkansas residents and outside counsel assists with the determination that you must comply with Rule 128, the group health plan is only required to provide the information noted in the bullet below:

Potential Consequences of Non-Compliance

Interestingly, the potential penalty imposed when a group health plan subject to the Rule does not comply, appears to be levied against the PBM rather than the group health plan. Rule 128 provides that violations shall subject to the fines or penalties established under Ark. Code Ann. §23-92-508, which allows the Commissioner to impose a penalty of up to $5,000 per violation against a PBM, or, if the PBM has committed a pattern of violations, a revocation or suspension of the PBM’s license.

For questions regarding this topic, please contact your benefit consultant. If you need legal advice on compliance related to Arkansas Rule 128, or any other related issue, you should consult your legal counsel.