Retiree Drug Subsidy
DESCRIPTION
Group offers Medicare Part D-equivalent coverage and receives 28% subsidy
for costs between $250 and $5,000. The net value of the benefit must equal
the value of the Part D benefit.
QUESTIONS TO CONSIDER
- Are you concerned with Retiree disruption?
- Are you willing to consider alternative funding options (e.g., letting Medicare become primary payor)?
- Is your contribution toward Retiree drug benefits decreasing for future Retirees?
RETIREE DISRUPTION
- Minimizes disruption by keeping existing benefit
- Retirees do not enroll in
Part D
COST SAVINGS
- Subsidy estimated 2006 value:$668
- Subsidy is exempt from Federal taxes
- 25% tax bracket --> $891 value (on average)
- 35% tax bracket --> $1,028 value (on average)
- Subsidy paid net of rebates
- Time lag with subsidy payment
- States are considering taxing subsidy payments
ADMINISTRATIVE BURDEN
- Annual requirements
- Apply for RDS through CMS
- Certification of actuarialequivalence
- Reconcile rebate payments with CMS
- Send Creditable Coverage notice
- Potential CMS audits
- Submit list of Retirees to CMS
- Identify eligible drug expenses
- Submit claims to CMS
- Monthly requirements
- Submit list of Retirees to CMS
- Identify eligible drug expenses
- Project rebate payment
- Submit claims data to CMS
GROUP SPONSOR SHOULD CONSIDER IF:
- Current benefit is equivalent to Part D benefit
- Group is unable or unwilling to migrate Retirees to the Part D benefit
- Minimizing retiree disruption is the primary objective
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