SB 420 / HB 870 (Tennessee) — Pharmacy Benefits and Health Plan Coverage Protections
Session: 114 | Jurisdiction: Tennessee | Title: Insurance, Health, Accident
Overview
- Purpose: Prohibit insurers, pharmacy benefits managers (PBMs), and third-party administrators (TPAs) from altering or conditioning health plan terms based on the availability or amount of financial or other product assistance for a prescription drug. Establish how enrollees’ cost-sharing contributions must be calculated, with special provisions for high-deductible health plans (HDHPs) and health savings accounts (HSAs).
- Effective date and scope: Applies to health plans entered into, amended, extended, or renewed on or after January 1, 2026. State regulation is limited to the extent permissible under law.
Key Provisions
1) Definitions (Section 1)
- Health plan: Policies or contracts offered or issued by an insurer to provide or reimburse healthcare services.
- Healthcare service: Items or services for preventing, diagnosing, alleviating, curing, or healing illness or disability.
- Insurer: Entity subject to Tennessee insurance laws that contracts to provide or reimburse healthcare costs under a health plan.
- Third-party administrator: Defined per existing statute.
2) Prohibition on discount/assistance conditioning (Section 2(d))
- Prohibits direct or indirect actions to set, alter, implement, or condition health plan terms (including benefit design) based on information about the availability or amount of financial or product assistance for a prescription drug.
3) Cost-sharing calculation requirements (Section 2)
- (a) When calculating an enrollee’s cost-sharing contribution, include amounts paid by the enrollee or by another person on the enrollee’s behalf. If applying this would render an HSA ineligible under 26 U.S.C. § 223, the rule applies to HDHPs only after the enrollee has met the minimum deductible, except for preventive services under federal law (pursuant to § 223(c)(2)(C)).
- (b) The above does not apply to a prescription drug with a generic alternative unless the enrollee obtained access to the brand-name drug through prior authorization, step therapy, the insurer’s exceptions/appeals, or prescriber determination.
- (c) The annual out-of-pocket maximum (per 42 U.S.C. § 18022(c)(1)) applies to all healthcare services under a plan in the state.
- (e) The state will regulate insurers, PBMs, and TPAs only to the extent permissible under applicable law.
4) Applicability (Section 3)
- Timeline: Applicable to plans renewed or entered on/after January 1, 2026.
Fiscal and Policy Impact
- Fiscal impact: Estimated to be not significant for state programs or regulatory agencies.
- Commerce impact: Not significant; monitoring can be done with existing resources.
Who is Affected
- Insurers, PBMs, and TPAs operating in Tennessee.
- Enrollees in health plans, particularly those with HDHPs and HSAs.
- Individuals seeking brand-name meds with access restrictions (e.g., prior authorization or step therapy).
Notes
- The bill explicitly clarifies that cost-sharing calculations must reflect certain third-party payments unless doing so would disrupt HSA eligibility (with specific exceptions for preventive services).
- It emphasizes consumer protections against plan design changes tied to drug assistance programs.
Effective Date
- Becomes law upon enactment and applies to actions on/after January 1, 2026.
