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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