KY| The Kentucky Department of Insurance (DOI) issued Bulletin 2025-03 to clarify its regulatory and enforcement approach regarding Senate Bill 188 (SB 188), which regulates pharmacy benefit contracts effective January 1, 2025. The bulletin addresses three main areas: (1) the impact of federal ERISA preemption on SB 188’s provisions, (2) the DOI’s extraterritorial jurisdiction in handling PBM-related complaints for Kentucky residents, and (3) the circumstances under which DOI may order reimbursement for violations of minimum pharmacy dispensing fees. Notably, while certain provisions of SB 188—such as cost regulation—are not preempted by ERISA, others—including “anti-steering” rules—are preempted because they interfere with nationally uniform plan administration. The DOI also explains its limited enforcement powers for agreements that do not meet Kentucky’s legal baseline, stressing that reimbursement will only be ordered for clear nonpayment of contractually specified fees, not for knowingly deficient agreements.
Main Points:
- Ordered Reimbursement: The DOI may order reimbursement for violations of minimum dispensing fee requirements only when fees are contractually specified but not paid; parties knowingly entering noncompliant contracts will generally be referred to the courts rather than receive agency-ordered reimbursement.
- ERISA Preemption: SB 188 provisions imposing cost regulation (e.g., minimum reimbursement rates for pharmacies) are not preempted by ERISA, while provisions dictating pharmacy network structures and anti-steering rules (e.g., prohibiting incentives for certain pharmacies) are preempted for ERISA-governed plans.
- Extraterritorial Enforcement: The DOI will assert jurisdiction to address PBM complaints involving out-of-state plans that affect Kentucky residents, but enforcement is primarily limited to complaints directly related to SB 188’s requirements.