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 The introduction of Medicare Part D in 2006 represented a shift in how plan sponsors could administer their retiree prescription benefits. In the past, employers that chose to provide coverage for retirees were responsible for bearing 100% of the cost outside of retiree contributions. With Medicare Part D, the federal government not only created a plan available to uninsured Medicare-eligible individuals, but also allowed for a variety of options for plan sponsors that decided to continue to provide group drug coverage for their retirees.
Options available to plan sponsors include: |
- Preserve the current benefit and file for the 28% tax-free retiree drug subsidy (RDS) form the government.
- The majority of plans that provided coverage prior to the introduction of Part D have remained in this strategy. Offer a combined medical/pharmacy solution for retirees, such as a Medicare Advantage Prescription Drug (MA-PD) plan.
- Provide an employer group waiver plan (EGWP). Some benefit managers refer to this as an enhanced or series 800 plan. These can be offered in one of two ways. An employer can act to become a Medicare Part D and enter a contract directly with the Centers for Medicare and Medicaid Services (CMS). Or an employer can enter a contract with a Medicare Part D sponsor to offer group coverage for retiree's.
- Transition to a preferred prescription drug plan (PDP) with a secondary wrap, where a plan sponsor group enrolls members into a preferred PDP and provides secondary coverage. A variation of this approach is to make a defined contribution toward retirees premiums.
With these options, employers have to examine their financial situation, administrative capabilities, desire for plan control and their philosophy to determine which approach is right for their needs.
CF-Health can provide employers with an insurance model designed specifically for the group retiree's marketplace.
The advantages of CF-Health’s model include:
- National coverage area capable of serving all retiree's in a group
- Comprehensive national provider network
- Customized enrollment and customer services
- Comprehensive care coordination
- Maximization of Part D drug benefits
- Risk minimization through reinsurance
- Reduced current and future medical cost trends
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 Financial Considerations
In cases where plan sponsors may be concerned about their ongoing ability to meet actuarial equivalence standards under RDS, an EGWP could provide plan sponsors an option that offers flexibility – both financially and in benefit design. Specifically, CMS guidelines dictate that, unlike RDS actuarial equivalence standards. Under EGWP, since the member’s premium is not counted, a plan sponsor may have more ability to shift additional cost sharing to retirees and still be able to meet actuarial equivalence.
Government agencies and not-for-profit organizations have unique considerations that make RDS a limited approach for their benefit needs. In these cases, an EGWP can provide a robust benefit and also alleviate certain concerns and yield greater cost savings. |
| Impact of Accounting
An EGWP presents a different approach for receiving a subsidy and how it is accounted for, which can help to offset costs PMPM. Unlike RDS, whose subsidy must be recorded as revenue in the year it is received, the federal subsidies under an EGWP can be used to offset plan sponsors long-term liability for retiree benefits. |
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