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Beginning Jan.1, 2006, employers that provide prescription drug coverage for their retirees can begin to take advantage of federal subsidies created by the Medicare Prescription Drug, Improvement and Modernization Act. Firms that provide coverage at least as generous as that available through Medicare will be eligible for tax-free subsidies equal to 28 percent of drug costs between $250 and $5,000 per retiree in 2006. Employers must apply by Sept.30, 2005 to receive the subsidy. Congress passed the legislation to help ensure prescription drug coverage for Medicare enrollees amid rising health-care costs — particularly against catastrophic illnesses. The new law gives private companies maximum flexibility to design their own customized plans and premiums but also increases regulatory burdens, including approval of lists of covered drugs, scheduled disclosure of information to beneficiaries and 10-year record-keeping for the Centers for Medicare and Medicaid Services. Employers have four options:
Initial enrollment for the new Part D drug benefit begins Nov.15, 2005 and ends May 15, 2006. Medicare-eligible retirees can enroll in the new prescription drug plan and get all other benefits from the traditional fee-for-service program. Or they can enroll in Medicare Advantage plans such as HMOs or regional Preferred Provider Organizations that cover drugs and all other Medicare benefits. While Medicare Part D is optional, Medicare beneficiaries who enroll after the initial enrollment period will pay a 1 percent lifetime penalty for each month enrollment is delayed after age 65. The penalty is waived if they have comparable coverage from another plan such as private or group health coverage. Medicare drug plan enrollees will pay a monthly Part D premium in addition to their monthly Part B premium. To be eligible for Part D, individuals must be entitled to Part A and Part B coverage. How Medicare Part D Works
Who Will Participate? The U.S. Department of Health and Human Services estimates that 29.3 million of the estimated 43.1 million Medicare beneficiaries will enroll in Part D plans in 2006 and another 10.9 million will receive low-income subsidies for deductibles and premiums. Another 9.8 million are expected to receive drug coverage comparable to Part D under employer plans. Retirees with Medigap policies that include prescription drug benefits can elect to continue receiving prescription benefits under their existing coverage. Or they can sign up for Part D coverage and keep Medigap without the prescription benefit. However, they cannot maintain Medigap and Medicare Part D prescription benefits simultaneously. Most Medigap benefits won't be considered as good as Medicare's but may still be preferable because they cover drugs that are not on the Medicare Part D list. According to a Kaiser Family Foundation study of 333 companies, 58 percent will continue to offer prescription drug benefits and accept the tax-free subsidy in 2006; 17 percent will offer prescription drug coverage as a supplement to the Medicare plan; 8 percent will discontinue prescription drug coverage; and the remainder are undecided. Source: Kaiser Family Foundation
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What
Employers Need to Know About Medicare Part D
