March 20, 2024

On March 7, 2024, President Biden addressed a Joint Session of Congress at the U.S. Capitol for the annual State of the Union. Shortly after, on March 11, 2024, his administration released its annual budget request for fiscal year (FY) 2025, which would start on October 1, 2024. In practical terms, neither of these pronouncements are binding or self-executing with respect to employer health plans. This means all of the proposals would require additional legislation by Congress, Executive/agency action, or both in order to change the legal and regulatory framework, including requirements and permissions, that apply to plans. That notwithstanding, they provide a look into how the Biden Administration would potentially approach health care for both public programs like Medicare and Medicaid, and employer-sponsored health coverage if they win a second Presidential term.

First, to put the President’s FY 2025 budget proposals in context, the recent protracted budget and government funding dispute between the parties, which may finally be resolved by the end of March, relates to the FY 2024 budget for the FY that started on October 1, 2023 and runs through September 30, 2024. Any substantive action on the FY 2025 budget will likely not begin until after the 2024 Presidential and general election on Tuesday, November 5, 2024, which will determine control of both chambers of Congress as well as the White House. In the case of narrow majorities or if one party does not control both Chambers and the Presidency, i.e., if the government is not “unified,” the FY 2025 budget and government funding may also have protracted disputes well into the 2025 calendar year. Additionally, it may go without saying, but the outcome of the election will guide the policy priorities and proposals pursued through the budget and otherwise in 2025 and beyond.

A Word About Budget-Related Legislation Impacting Policy Matters and Employer Plans

There are detailed federal and congressional rules, standards and limitations on how budgetary efforts may be or are typically used to impact policies and requirements for employer-sponsored plans. Because of Senate rules, we have seen instances in recent years where a party with unified government uses or attempts to use a “reconciliation bill” to enact certain policy changes. Generally, this type of legislation requires proposals to have a fairly direct impact on the federal budget and is subject to item-by-item review by the Senate Parliamentarian. For the Biden Administration’s prerogatives embedded in its budget proposal, their path forward may depend on able positioning within the reconciliation bill framework.

Proposed Expansion of Medicare Drug Price Negotiations and Out-of-Pocket Limits

Both during the State of the Union and in the Budget, President Biden proposed to greatly expand The Department of Health and Human Services (HHS) Centers for Medicare & Medicaid Services (CMS) authority to negotiate additional drugs purchased through the Medicare program. Currently, HHS/CMS have implemented and begun negotiations of 10 drugs authorized under the Inflation Reduction Act (IRA). The President proposes to expand that to 50 drugs per year which in the State of the Union address he cited as “500 drugs over the next decade.” The IRA also limited Medicare’s out-of-pocket maximums for drugs to $2,000/year and monthly cost-sharing for insulin to $35 per month. According to the President’s proposals, his Administration would seek to have these mandated limits applied to employer plans as well.

If these potential impacts sound familiar, they have been proposed in various forms previously. The original IRA proposals for Medicare drug negotiation first included high-level provisions regarding the possibility of employer plans purchasing drugs at the Medicare negotiated rates. There were many unknown implications of that proposal and the Business Group expressed concern about unintended consequences and highlighted our broader drug pricing policy reforms which would make more systemic improvements for all stakeholders. To attempt to satisfy the reconciliation bill rules for relating to the federal budget, the original proposal was changed to instead apply an excise tax to pharmaceutical company revenue earned from employer plans that exceeded a certain inflation-related threshold. The Business Group opposed this proposal as it had a misaligned and potentially outsized financial impact on employer plans and did not align with our market-based reform agenda. Neither of these proposals ultimately were included in the IRA, but it appears that in some form either or both would be back in consideration and at the center of Biden’s proposed health care agenda for 2025. While the details of any legislative proposals remain to be seen, we do not at this time generally expect them to meet the terms or objectives of our more holistic, sustainable, and preferred drug pricing policy reforms. The Business Group’s proposed drug pricing policy reforms are based on the work of its Pharmaceutical Supply Chain Leadership Forum (PSCLF) – a multi-year effort to organize key stakeholders who participate in the delivery of, and payment for, prescription drugs from the point of inception to patient delivery – which developed consensus driven solutions to address prescription drug pricing.

President Biden also proposes, in broad terms, to require all health coverage, including employer provided coverage, follow the IRA’s Medicare changes and cap out-of-pocket costs for drugs at $2,000 per year and the monthly cost-sharing for insulin at $35/month. Business Group on Health would generally express concern and resist this type of mandated design at it curtails flexibility for employer plan sponsors, does not address the underlying drug and insulin cost-drivers, and exacerbates coverage affordability issues by mandating cost-shifting to the plan which may show up as higher monthly premiums for employees and families.

Proposals Impacting Mental Health and Substance Use Disorder Benefits (MH/SUD)

Mental health and substance use disorder requirements and programs have been top priorities across the political spectrum in recent years. Employer plans have also been working to build and continue meaningful benefit programs to support employees and families while meeting evolving compliance requirements under the Mental Health Parity and Addition Equity Act (MHPAEA) and other standards. President Biden’s State of the Union and budget includes proposals that would, if enacted, have direct impacts on employer plan sponsors’ MH/SUD programs.

• Providing the Department of Labor (DOL) with authority to impose civil monetary penalties (CMPs) for ERISA plan findings of noncompliance. This would permit a significant change in enforcement tactics and could cause focus to shift from compliance assistance to a more punitive approach. We believe this could drive more spending away from substantive programs and into more unnecessary administrative and defensive efforts.
• Require coverage of three behavioral health visits per year without cost-sharing. While most large employers provide some level of engagement with behavioral health providers for low or no cost, e.g., through an EAP, this requirement appears to be aimed at group health plans, which would reduce plan design flexibility and may impact the already challenging market dynamics and access to providers.

Other Health Proposals

• Require coverage of three primary care visits per year without cost-sharing. Many large employers have identified primary care as an area for investment to help ensure better engagement with health care for their employees and families. The Business Group supports employers’ desire to invest in primary care through a variety of plan design and provider arrangements. For multiple years, we have called for permitting primary care before the deductible for HSA-qualified high-deductible health plans (HDHP). We’re concerned about a one-size-fits-all requirement that may not align with the needs of the employers’ population and may disrupt an employer’s current efforts to build meaningful primary care engagement. Additionally, policymakers should consider more ways to increase the supply and engagement of primary care providers and encourage them to work with employer plans in innovative and holistic arrangements like advanced primary care.
• Continue enhanced ACA subsidies and expanded access to coverage in states that have not expanded access to Medicaid. Business Group generally supports meaningful access and improvements to coverages other than employer plans undertaken with appropriate care to not drive market disparities, increase costs or negatively impact employer plan offerings.
• Extend surprise billing protections to ground ambulances. Since enactment of the No Surprises Act protections, we have been engaged and encouraged further development of appropriate standards and protections to apply to potential surprises bills from ground ambulances.

These highlights from President Biden’s health care agenda and budget proposals reflect a willingness and interest of the Biden Administration to directly and indirectly impact employer health plan offerings. The future of these proposals will heavily depend on the outcome of the 2024 election and will not be known for several months. But as they develop into potential legislative text or further discussions, we will continue to monitor, engage with policymakers, and provide member updates.

We provide this material for informational purposes only; it is not a substitute for legal advice.

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