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E-News ~ 2nd Qtr 2005 |
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From the office of Tim Olson, CEBS, CMFC Medicare Part D What does it mean to you and your Group Health Insurance Program? Bottom Line: Medicare Part D will affect every employer offering group health insurance whether they cover retirees or not. The Basics: Medicare Part D is the new prescription drug program overseen by The Centers for Medicare and Medicaid Services (CMS), and is for the benefit of Medicare eligible individuals effective January 1, 2006. This legislation affects employers offering group health insurance who have employees participating in their group health insurance program that are Medicare eligible, but have not made their initial election for Medicare Part A and Part B. Therefore, the law says we have to provide "comparable" drug benefits under the group health insurance program that meet or exceed Medicare Part D benefits. Furthermore, these Medicare eligible individuals will incur a permanent 1% per month surcharge on Medicare Part D premiums if they can’t prove they have "creditable coverage" under their employer’s plan. What must we do? First, determine if the prescription drug benefit under your group health insurance plan is comparable using the "gross value" test. Once the test is completed, a notice must be given to all Part D eligible individuals stating whether or not the coverage is creditable. CMS is to provide a model notice, and November 15, 2005 is the due date for the notices to be distributed. What if we offer coverage to retirees? The employer may decide to discontinue providing prescription benefits under their health insurance plan since that coverage is now available under Part D. The employer may pay all or part of the Medicare Part D premiums for retirees. We recommend all employers providing retiree benefits should consult with legal counsel regarding collective bargaining agreements and discrimination issues. In addition, employers providing retiree coverage can look into a "tie in" prescription program which pays secondary to Medicare. This option could be appealing because employers can qualify for a 28% subsidy from Medicare. However, actuarial and “net value” testing would be required which will increase administrative expenses. Summary: We are still learning more about Medicare Part D, and further guidance is expected this summer from CMS. At this point, we do know creditable notice must be given to all Medicare Part D eligibles participating on the employer’s health insurance program, and comparability must be proven to avoid the 1% surcharge. We have asked our pharmacy benefit managers (PBM’s) to find out what extent they will assist our employers. Our goal is to have them perform the gross value test to determine comparability, and help us with other Medicare Part D requirements. As we get the responses, we will keep everyone informed. Page 3 and 4 of this newsletter goes into more detail, and if you have additional questions, please do not hesitate to call us. Have You Heard? The Olson Group has an exclusive Accidental Death and Dismemberment (AD&D) plan underwritten by CIGNA and available only to our healthcare clients. This plan is offered on a voluntary basis. Employees may purchase up to $500,000 of AD&D coverage for only $5.00 per pay (24 pays) on a guarantee issue basis. Other highlights include:
Medicare Modernization Act of 2003 Medicare Part D The Medicare Modernization Act (MMA) added a new prescription drug benefit beginning in 2006. Individuals who are entitled to Medicare benefits under Part A or who are enrolled for Part B will be eligible to enroll in Part D of the Medicare program. Enrollment Beginning January 1, 2006, beneficiaries will have access to two or more plans that contract with Medicare to provide the new drug benefit. Beneficiaries enrolled in fee-for-service Medicare coverage may enroll in a stand-alone prescription drug plan (PDP), and beneficiaries enrolled in Medicare Advantage (MA) plans will receive their Part D benefits as part of their MA coverage. For eligible individuals, there will be a 6-month open enrollment period beginning on November 15, 2005. For individuals who become eligible after November 15, 2005, an initial open enrollment period will apply. Beneficiaries who fail to maintain coverage that is equal to or greater than Part D coverage for a period of 63 days or more will face a late enrollment penalty. Beneficiaries will be permitted to change plans on an annual basis, provide they maintain continuous coverage. Covered Drugs The Part D drug benefit includes all drugs covered by Medicaid and excludes all drugs for which payment is available under Medicare Part A and B. The MMA does allow the use of formularies, or lists of drugs approved for coverage. Benefit Beneficiaries will pay an estimated monthly premium of $35 - $40 for Part D drug coverage in 2006. This premium is in addition to the premium that currently applies to the Part B benefit ($66.60 in 2004). The standard benefit includes:
Notice Requirements Health plans that provide prescription drug coverage to individuals eligible for Part D must deliver notices of creditable coverage to the Medicare eligible individuals by November 15, 2005, and annually thereafter. This notice obligation will apply to retiree health plans and will also apply to many employer health plans that do not provide retiree coverage. Many active employees work beyond age 65 but do not enroll for Medicare Part B because they have better coverage, and many active employees have spouses or children who are eligible for Medicare due to age or disability. The Notice of Creditable Coverage must be supplied to all of these individuals as well as to former (COBRA) or those seeking coverage and who are also enrolled in Medicare Part A or B. Medicaid agencies will send notices to dual eligibles that they will be losing their Medicaid prescription drug coverage and will be enrolled in a Medicare Part D plan. Creditable Coverage The plan sponsor of a plan providing coverage to a Part D eligible individual must advise the individual of whether the coverage meets the definition of “creditable coverage”, i.e., provides a drug benefit that is “actuarially equivalent” to the Part D benefit. If the drug benefit meets the definition of creditable coverage, then the individual may choose not to enroll in a Part D plan, and will not be charged a late penalty for delayed enrollment if he or she decides later to enroll in Part D. If the coverage is found not to be creditable coverage, then an individual will be penalized for delayed Part D enrollment. The late enrollment penalty is a permanent premium penalty equal to 1% surcharge (per month) for every month the individual was eligible for Part D but did not enroll.
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Medicare Part D (continued) Determination of Creditable Coverage The employer can self determine that its prescription drug plan’s coverage is creditable if the plan design meets all four of the following standards:
April 18, 2005 - Deadline for Part D Plans to submit waiver requests. September 30, 2005 - Employers Intending to apply for the 28% subsidy must apply by this date. October 15, 2005 - CMS will send information to all Medicare beneficiaries. November 15, 2005 - Deadline for employers to provide first notice of their plan’s creditable coverage to their Part D eligible enrollees. November 15, 2005 - Medicare Part D open enrollment begins. January 1, 2006 - Medicare Part D takes effect. May 15, 2006 - Penalty starts for late enrollment unless existing beneficiary can show he had creditable drug coverage under another drug plan. More Time To Spend Flexible Spending Account (FSA) Funds The Treasury Department and the IRS issued Notice 2005-42 on May 18, 2005, that will allow employers to modify Flexible Spending Accounts (FSAs) to extend the deadline for reimbursement of health and dependent care expenses up to 2-1/2 months after the end of the plan year. Previously, employees were required to "use-or-lose" FSA funds by the end of the year. This new rule is optional. This change will make it easier for employees to take advantage of their FSA, a tax-free employer-sponsored benefit plan that reimburses a participant for qualified medical expenditures. FSAs allow employees to put aside pretax dollars to pay for uncovered or unreimbursed medical expenses and dependent care expenses. However, under the current law, employees are unable to rollover any unused portion of their FSA to the next year, forfeiting whatever money is unused to their employer. Nearly 37 million private-section employees have access to FSAs, however, less than seven million take advantage of them today. Approximately 76% of FSA participants will take advantage of the rollover option each year, according to the Joint Committee on Taxation. "The new rule will give workers with FSAs more time to pay for medical and dependent care expenses and will ease the year-end spending rush prompted by the prior rule,” stated Treasury Secretary John Snow. “Putting people back in charge of their own care is one of the most important things we can do to strengthen our health care system." American Funds Online American Funds announced enhancements to their shareholder website, www.americanfunds.com. The redesigned web pages will make it easier to access and update your account information, and includes a new login and security features.
"There is a destiny that makes us brothers; None goes his way alone; All that we send into the lives of others Comes back into our own." Edwin Markham "To achieve all that is possible, we must attempt the impossible. To be as much as we can be, we must dream of being more." Karen Ravn "Life shrinks or expands in proportion to one’s courage." Anais Nin "If you judge people, you have no time to love them." Mother Theresa Excellence "We are what we repeatedly do. Excellence, then, is not an act, but a habit." Aristotle "To do the useful thing, To say the courageous thing, To contemplate the beautiful thing; That is enough for one man’s life. T. S. Eliot
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The Olson Group 20214 Veterans Drive Suite 200 P.O. Box 543 Elkhorn, NE 68022 PHONE: (402) 289-1046 TOLL FREE: 1-866-289-1046 FAX: (402) 289-1012 EMAIL: tolson@theolsongroup.net |
Watko Benefit Group 7201 West 129th Street Suite 120 Overland Park, KS 66213 PHONE: (877) 685-0006 FAX: (913) 685-0068 EMAIL: gwatkins@watkobenefit.com |
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