Illinois Insurance Bulletin Clarifies PDAA Applicability and PBM Reports

Springfield Of fice 320 W. Washington Str eet Springfield, Illinois 62767 (217) 782 - 4515 Chicago Offi ce 1 15 S. LaS al le St ree t, 13 th Flo or Chicago, Illinois 60603 (312) 814 - 242 0 Illinois Departme nt of Insurance JB PRITZKER Governor ANN GILLESPIE Direc tor TO: All Pharmacy B enefit M anag ers Regi ste red in Illin ois, All Health In surers Transacti ng Business in Illinois, and Certain Plan Sponsors Providing Health Benefit Plans in Illinois FROM: Ann Gillesp ie, Dire ctor DATE: November 26, 2025 RE: Company Bulletin 2025-20 – Clarification of PDAA Applicability and PBM Covered Individual Reports and Fees Intro duction Under the Prescription Drug Affordability Act (“PDAA”), 1 each pharm acy b enefit m anag er (“ PBM ”) must file with the I llinois D epartme nt of Insura nce (“Departme nt”) annua l reports that inc lude the number of covered individuals in health benefit plans they administer as outlined under Sectio ns 513b2(f) and 513b1.1 of the Illinois Insurance Code (“Code”) (215 ILCS 5/513b2(f) and 5/513b1.1). The fir st filing was a limited re port due August 1, 2025, and PBMs were required to send a payment to the Depart ment calculat e d at a rate o f $15 per covered individual by Septe mber 1, 2025. 2 The PDAA does not require a covered individual or their plan sponsor or insurer to pay the fee. When an alyzing how to comply with the requirements in this first year, PBMs raised questions about whether the PDAA in general, and the reporting and fee requirements in particular, applied in re lation to specifi c types o f heal th -related coverage, plan sponsors, or covered individuals. On October 30, 2025, the Illinois General Assembly passed HB 767 to clarify how the PDAA i s intended to apply. 3 To that end, if a PBM faile d to submit a pa yment in an amount that conform ed with the PDAA’ s intended applicability, HB 76 7 states tha t the PBM must f ile a revised rep ort with a corrected number of covered individuals by December 1, 2025. If the revised report indicates that the PBM previously undercounted the number of covered individuals who we re within the intended scope of Sectio n 513b2(f) of the Code, then HB 767 would require the PBM to pay the difference to the Prescription Drug Affordability Fund by January 2, 2026. If the revised report indicates that the PBM overcounted the number of covered individuals, then HB 767 would allow the PBM to receive either a credit toward a future payment or a cash refund, subject to funds availability, if the PBM includes the reque st with the submission of its revise d report. 1 Public A ct 104 - 002 7 (eff. Jul y 1, 2025). https://ilga.gov /Documents/Le gislation/Pu blicActs/10 4/PDF/104 - 0027.pdf. 2 Labor Day occurred on Septe mber 1, 2025, s o the Departm ent al lowed pay ments to be su bmitt ed on Sept ember 2. 3 104th Ge neral As sembly, HB 767. Enrolled b ill: https: //il ga.gov/Legi slat ion/B illS tatus /FullTe xt?LegDoc Id=1962 11&DocName =104 00HB 0767enr&Doc Num=767&D ocType ID=HB &LegID=1564 45&GA ID=18&Ses sionID =114&Spe cSes s=&Sess ion=.

Springfield Of fice 320 W. Washington Str eet Springfield, Illinois 62767 (217) 782 - 4515 Chicago Offi ce 1 15 S. LaS al le St ree t, 1 3 th Flo or Chicago, Illinois 60603 (312) 814 - 242 0 As of November 26, 2025, HB 767 has not yet been signed into law, so its provisions for revi sed covered individual reports and fee adju stmen ts are not curren tly in for ce. However, the Department is issuing this bul letin to pre pare PBMs for implementa tion and to decl are a li mi ted exerci se of enforcement discretion on the deadlines for the revised report and related f ee adjus tment s. Enforcem ent Di screti on on Deadl ines It is pos sible that HB 76 7 will not be signed into law until December 1, 202 5 or a lat er dat e, which would preclude compliance with the legislation’s stated d eadline f or revi sed report s. The D epa rtment recogniz es th at each P BM will need time to review th e legislatio n’s clar ifications ag ainst the PBM ’s previous interpretations of applicability to health benefit plans and covered individuals, as well as to identify a ll health be nefit plans tha t were subject to Artic le XXXIIB of the Code and a ll Illinois residents who were covered individuals under those plans as of th e date o f th eir initial report or reporting deadline. Therefore, the Dep artm ent wi ll n ot take enforcement action against any PBM for filing an otherwise compliant, revised report after December 1, 2025, as long as the PBM files the report within 30 business days of the date HB 767 is signed into law. Relatedly, the Department will not take enforcement action against a PBM that submits payment for any and all difference it owes to the Prescription Drug Affordability Fund within 1 calendar month of this bulletin’s deferred enforcement date for filing the revised re port. The Department will pu blish the deferred enfo rce ment dates on its website on the page named “Company Tax Forms, Deposits, Fees and Online ePay for Taxes and Invoices” once HB 767 is signed into law. If the revi sed rep ort indi cates that a PBM overcounted the number of covered individuals in its initia l report, the Department will enforce HB 767’s addition of Section 513b2(f)(2) of the Code except for the phrase “on or before December 1, 2025.” Clarific ation of Applica bility HB 767 clarifies that, notwithstanding the fact that the PDAA’s substantive requirements in Section 513b1 of the Code take effect January 1, 2026, the PDAA’s amendments to the de finitions in Section 513b1 apply to the covered individual report and fee payme nts that were due in 2025. HB 767 also clarifies that the 2025 covered individual report and the related fee are based on the number of Illinois residents who are covered individuals. Beginning in 2026, the annual report in Section 513b1.1 of the Code will be re quired to include data on both the total number of covered individuals in Illinois - domiciled health benefit plans and the number of Illinois residents who are covered individuals. The annual covered individual fee will continue to be based only on Illinois residents. HB 767 further revises and expands the PDAA’s definitions in Section 513b1(a) and (a- 5), explain s th e method to de termine a pplicability to se lf -funded nonfederal governmental plans in Section 513b1(m), and explains the method to determine applicability to a plan or covered individual outside Illinois in Section 513b1(n). A PBM must take t hese definit ions and methods into acc ount whe n asce rtaining whet her and ho w HB 767 would re quire it to s ubmit a r evis ed cov ered indiv idual r epor t and f ee adjustment for 2025. Th is bulletin’s lac k of mention of any particul ar definition or method must not be co nstrued as a waive r of the requirement for a PBM t o apply the definition or method under the PDAA and HB 767.

Springfield Of fice 320 W. Washington Str eet Springfield, Illinois 62767 (217) 782 - 4515 Chicago Offi ce 1 15 S. LaS al le St ree t, 1 3 th Flo or Chicago, Illinois 60603 (312) 814 - 242 0 A. Revised and Expanded D efinitions HB 767 expressly adopts federal definitions of “empl oyee welfa re ben efit plan,” “plan sponsor, ” “multiemployer plan,” “federa l governmental plan,” and “nonfederal governmental plan” contained in the Emp loyee R etiremen t In come Secu rit y Act of 1974 (“ERISA”) and t he P ublic H ealth S ervice A ct. The bil l also replaces citations to 29 U.S.C. 1144 with 29 U.S.C. 1003. The bill al so remo ves a redundant sentence from the definition of “health benefit plan.” Among other things, the changes clarify: • A plan sponsor is not the same as an insurer. Article XXXIIB of the Code distinguishes when its requirements apply to a PBM in relation to an insurer versus a plan sponsor, or both. Article XXXIIB also places some substantive requirements directly on insurers, but not plan sponsors. • An ERISA plan does not technical ly include nonfederal governmental plans or church plans, but the PDA A uses t he ER IS A term s “plan sponsor” and “employee welfare benefit plan” to include an employer that sponsors nonfederal governmental plans and church plans. • The definition of “health benefit plan” includ es ERISA plans that are not self -funded multiemployer plans. 4 Some, but n ot all, requirem ents o f Articl e XXX IIB apply to PB Ms in relation to ERISA plans they administer. The covered individual report and fee provisions do apply to PBMs in relatio n to ERI SA plans that are not self -funded multiemployer plans. B. Self-Funded Nonfederal Governmental Plans; Pharmacy Services for Persons in Custody For sel f -funded nonfeder al governmental plans, HB 767 cl arifies that Art icl e XXXIIB o f the C ode applies “only when a State law organizing the governmental unit incorporates this Article by reference.” The same p rincipl e app lies t o any PBM that “administers coverage of, payment for, or formulary design for drugs necessary to safeguard the life or health of any person in custody ” of the State o r a local government. The PDAA treats the governmental unit as a plan sponsor for purposes of Article XXXIIB of the Code. To date, Arti cle XXX IIB has b een in corporat ed into the following State laws for nonfederal governmental plans and for governmental units holding persons in custody: • Nonfederal governmental plans cover ing employees and their dependents: o The State Employees Group Insurance Act of 1971 (5 ILCS 375/6.11) o The School Code (105 ILCS 5/10-22.3f) • P harmacy s ervi ces for pe rsons in custody: o The Juvenile Court Act of 1987 (705 ILCS 405/5-515) o The Unified Code of Corrections (730 ILCS 5/3-2-2) o The County Jail Act (730 ILCS 125/17) C. Applicability to plans and individuals outside Illinois HB 767 clarifies that Sections 121-2.03, 121-2.04, 121-2.05, 121- 3(a), (c), and (e), and 352(c) of the Code dete rmine the applicability of Article X XXIIB regar dless of wheth er the hea lth benefit pla n is insurance. Thus, Article XXXIIB generally does not apply to ERISA plans or church plans with a domicile or a bona fide situs outside Illinois. Please c onsult the c ited statutes for more inf ormation. However, except for the covered individual fee under Section 513b2(f), when Article XXXIIB applies to a health benefit plan, statutory references to a “covered individual” include all individuals covered under the plan regardless of whether they reside in Illinois. 4 A “multiemployer plan” is different from a “multiple employer welfare arrangement.” Compare 29 U.S.C. § 1 002(37) with 29 U.S.C. § 1002(40).

Springfield Of fice 320 W. Washington Str eet Springfield, Illinois 62767 (217) 782 - 4515 Chicago Offi ce 1 15 S. LaS al le St ree t, 1 3 th Flo or Chicago, Illinois 60603 (312) 814 - 242 0 D. Implications for Covered Individual Report and Fee The reporting and fees required under Section 513b2(f) of the Code rela te to Illinois residen ts who are covered individuals under each health benefit plan the PBM administers. The definition of “health benefit plan” in clud es: • Any policy, contract, certificate, or agreement entered into, offered, or issued by an “insurer” a s defined in Section 513b1(a-5) • Any self- funded em ploye e welfa re ben efit pl an, ex cept for a self - funded multiemployer plan that is not a nonfederal government plan. Taking into consideration all principles previously discussed in this bulletin, under the PDAA as clarified by HB 767, t he Section 513b2(f) reporting and fee provisions do apply to PBMs in rela tion to: • Policies of f ully -insured health insurance coverage that are sitused in Illinois • Except as further provided, s elf - fund ed emp loyee welfar e benefi t plan s that are si tused i n Illinois. This include s: o Sel f -funded ERISA-covered plans, other than ERISA- cover ed self - funded multiemployer plans o Sel f -funded “church plans” as defined at 29 U.S.C. § 1002(33), unless the church plan also qu alifies as an ER ISA - co vered s elf -funded mul tiemployer plan o Sel f -funded plans established under the State Employees Group Insurance Act of 1971 (5 ILCS 375) o Sel f -funded plans established under the School Code (105 ILCS 5), including any intergove rnmenta l pools in relation to their sch ool district me mbers • Illinois M edicaid a nd All - Kids • Any contracts or arrangements for drugs needed by persons in custody as described in 705 ILCS 405/5-515(b), 730 ILCS 5/3-2-2(3.5), or 730 ILCS 125/17, as amended by the PDAA. The Section 513b2(f) reporting and fee requirements do n ot apply to PBM s in relation to: • Self -funded multiemployer plans that are covered by ERISA under 29 U.S.C. § 1003. • Self -funded plans established under the Counties Code (55 ILCS 5) • Self -funded plans established under the Illinois Municipal Code (65 ILCS 5) • Self -funded plans established by any other State or local governmental unit not previously mentioned • Medicar e Advant age, M edi care Part D, a Medi car e demons trati on progr am, or any program for dually eligib le Medica re - Medicai d bene ficiari es u nder which Medicare pays for most or all of the covered drugs • Tricar e • Federal E mploy ee Healt h B enefits Program • Any group or blanket policy or plan sitused o utside Illinois to the exte nt m eets all c riteria in 215 ILCS 5/121-2.05. If a PBM also is a plan sponsor of a health benefit plan, it is only subject to 215 ILCS 5/513b2(f) in its capacit y as a PB M. Instr uctions for R evised R epor ts and Fe e Adj ustment s

Springfield Of fice 320 W. Washington Str eet Springfield, Illinois 62767 (217) 782 - 4515 Chicago Offi ce 1 15 S. LaS al le St ree t, 1 3 th Flo or Chicago, Illinois 60603 (312) 814 - 242 0 When HB 767 is signed into law, e ach PB M regis tered with or required to report to the De partment under Art icle XXXIIB o f t he Code as clar i fied by HB 767 shall submit to th e Departme nt, using the Excel sp readsh eet n amed “PB M Covered Individual Reporting Template”, the following columns of information as of the date of its initial repor t or, if the PBM submit ted no initial re port, the information that should have been submitted as of August 1, 2025: • Colum n A. The nam e of every he alth benefit plan the PB M administer ed on that date base d on the clar ified applic ability from HB 767, as well as a ll additional health benefit plans the PBM erroneously included in its initial report. Do not lim it th e revised report to o nly th ose h ealth benef it plans t hat hav e bee n added or remov ed versus th e initi al rep ort. Th at w ill caus e a misca lculati on of the fee ad justm ent. If the PBM did not submi t an initial re port but HB 767 indicate s that one or more of the plan s it administer ed on August 1, 2025, wa s a he alth ben efit plan subject to Article XXXIIB of the Code, the PBM must file the report and include all such plans in this column. • Column B. The total number of covered individuals that the PBM previously reported for ea ch health benefit plan identified in the initial report. For each health benefit plan on the revised report that the PBM erroneo usly omitted fr om its initial repor t, or if the PBM erroneously did not file an in itial repor t, write “N/A” in this column for that plan. • Colum n C. The total number of Illinois residents who were covered individuals for each health benefit plan that the PBM administer ed on the date of the initia l report, based on the maximum scope of health benefit plans subject to the PDAA as clarified by HB 767. If a health benefit plan was included in the initial report that should not have been included based on HB 767, write “N/A” in this column for that plan. Write “0 ” if the P BM was contract ed t o admin ister t he plan, but the plan had no covered individuals on the initial reporting date or deadline. • Colum n D. An explanation of any changes between the initial and revised reports for each heal th benefit plan. If th e initial repor t correctly spe cified the nu mber of I llinois residents w ho were covered individuals for a par ticular healt h bene fit pl an actual ly sub ject to th e PDAA, wri te “N o change” in this column. If the initial report inc orrectly omitted or include d the plan in th e initial report because the PBM did not understand that the plan, respectively, was or was not subject to the reporting and fee requirements, identify the type of plan the PBM previously believed to have been subject or not subject to the requirements. For examp le, if t he PBM bel ieved th at the reporting and fee requirements did not apply to any ERISA plan whatsoever until January 1, 2026, the PBM could write something to the effect that, in its initial report, it erroneously omitted ERI SA plans that we re not E RISA -covered multiemployer plans. As ano ther ex ample, if the PBM believed that the reporting and fee requirements applied to municipal employee welfare benef it plans, the PBM could w rite some thing to the ef fect that, in its initial rep ort, it err oneously included such plans. If the PBM did no t misinter pret the statute but accidentall y included or excluded the wrong healt h benefi t plan, or if the PBM miscounted the number of Illinois residents who were covered individuals under the plan, write “ miscount” in this c olumn. You may download the PBM Covered Individual Reporting Template from the Department’s website at the page n amed “Compa ny Tax Forms, Deposits, Fees and Online ePay for Taxes and Invoices”. Within 1 calendar month of the Depa rtmen t's d efer red enfo rcemen t date fo r filing the covered individual report, a P BM must remit to the De partment, via the “P harma cy Ben efit M anager Cov ered Individual Fee For m ” downloadable from the s ame w ebpage, an amount equal to $15 multiplied by the d ifferen ce

Springfield Of fice 320 W. Washington Str eet Springfield, Illinois 62767 (217) 782 - 4515 Chicago Offi ce 1 15 S. LaS al le St ree t, 1 3 th Flo or Chicago, Illinois 60603 (312) 814 - 242 0 in covered individuals reported. If HB 767 is signed into law, the De partment will publish the resulting fee paym ent deadl ine on the webpage near the PBM template an d form. An officer’s signature attesting to the reported exposure count is required. Submit the reporting template as described above to DOI.TaxAudit@illinois.gov. Submit the fee form and payment as described above payable to the I llinois Department of Insuranc e, Attn.: Tax Admin. Unit, P.O. Box 7087, Springfield, Illinois 62791. If HB 767 is signed into law, for requests for credit or a cash refund, please file th e Pharmacy Benef it Manager Covered Individual Fee Form. Consult 215 ILCS 5/513b2(h)(3) and 50 Ill. Adm. Code 2500 for more info rmati on. To confirm receipt of payment or ask other questions about this b ulletin, contact DOI.TaxAudit@illinois.gov.