The Olson Group - News - Special Edition 2005

E-News ~ Special Edition 2005

Volume 2, Number 3

From the office of Tim Olson, CEBS, CMFC

Important Medicare Part D Update

Recap of Medicare Part D Requirements

As you know from our last newsletter, Medicare Part D was created to provide prescription drug benefits for Medicare eligible individuals effective January 1, 2006. It is overseen by The Centers for Medicare and Medicaid Services (CMS), and if you offer group health insurance, compliance with Medicare Part D is required. An individual is eligible for Part D if they are entitled to Medicare Part A and/or are enrolled in Part B.

If the gross value test is not passed, Medicare eligible individuals will incur a 1% surcharge each month for Medicare Part D premiums (estimated to be $37 per month). This test determines if your health insurance plan provides "creditable coverage" as defined by Medicare Part D. A 1% surcharge each month applies to eligible individuals who go without creditable coverage for a period of 63 days or longer after the end of their initial enrollment period. Whether your plan is creditable or not, a disclosure notice must be sent to eligible employees.

Gross Value Test Recap: Under Medicare Part D, the gross value test has 4 basic criteria your health insurance plan must pass to have "creditable coverage". An actuary is not required, but your plan must:

Provide coverage for brand name and generic prescriptions;
Provide reasonable access to retail providers, and optionally, for mail order coverage;
On average, pay at least 60% of the participants prescription drug expenses; and
Satisfy at least one of the following:
- No annual maximum benefit for the prescription drug coverage, or at least $25,000 per year, or
- The actuarial expectation of the plan is to pay at least $2,000 per Medicare eligible individual in 2006, or
- For integrated health coverage, (i.e., all Rx goes toward the deductible) no more than a $250 calendar year deductible, $1,000,000 lifetime maximum or more, and at least $25,000 or more yearly maximum for the prescription drug coverage.

Disclosure Notice Requirements

A Disclosure Notice must be provided to all active employees, those who are retired, and Medicare beneficiaries who are covered as spouses under active or retiree coverage. We recommend you send the notice to every employee because you may not know who all the Medicare beneficiaries are, or those participating because of disability.
Whether your plan is creditable or non-creditable, a disclosure notice must be made to CMS annually.
The first notice is due November 15, 2005.
Mail delivery is acceptable, and if delivered to the employee, that is deemed delivery to his or her dependents as well.
Disclosure Notice must also be done:
- Annually, between November 15th through December 31st each year;
- Prior to an individual’s enrollment period for Part D (within the previous 12 months);
- Whenever the prescription drug coverage is no longer creditable or becomes creditable;
- Prior to the effective date of coverage for any Medicare eligible individual that joins the plan; and
- Upon a beneficiaries request.

Securities offered through
Sunset Financial Services, Inc.
3520 Broadway
Kansas City, MO 64111
(816) 753-7000 (OSJ)
Member NASD/SIPC

Sunset Financial is not affiliated with The Olson Group.

Medicare Part D Update (continued)

What are some options if we do not pass the gross value test?

Medicare eligible individuals can opt for Medicare Part D, pay the $37 per month, and the employer’s health plan will coordinate with Part D. The health plan will be primary, and Part D secondary.
Another option is to not opt for Medicare Part D, incur the 1% surcharge each month, and pick up Part D sometime in the future. Depending upon the contribution policy for the employer sponsored health program, this could be a viable option.
Change your plan design to be creditable.
Eliminate prescription drug coverage altogether.

Another option to keep in mind is the Section 125 unreimbursed flexible spending account (FSA). Employees could offset some of the prescription drug expenses by participating in FSA. Furthermore, if a Health Savings Account (HSA) is offered, employees can be encouraged to set aside monies tax free in the years prior to Medicare, and then use the money tax free to pay Part D premiums later. (Remember, those eligible for Medicare are not eligible for HSA’s.)

If you offer retiree coverage, you should get the details on the "net value" test to qualify for the 28% tax-advantage subsidy. You could recommend retirees enroll in Medicare Part D, and stop offering employer drug coverage.

Summary

We recommend you should meet with your health insurance carrier representative, broker, and/or TPA, to discuss the options which best fit for your organization. Once your decision has been made, hold employee meetings for everyone nearing Medicare age and older.

If you have your own pharmacy, and operate a separate prescription drug program outside of the health insurance plan, satisfying the Medicare Part D rules is required. Should you have any questions, please do not hesitate to call The Olson Group.

If you need assistance with any of your benefit questions or problems, please call our toll free number 1-(866) 289-1046. If a carrier does not respond to your inquiries, please call us. We are here to make things easier for you.

"A strong positive mental attitude will create more miracles tan any wonder drug."

Patricia Neal

"Obstacles are those frightful things you see when you take your eyes off your goal."

Henry Ford

"Laughter is the shortest distance between two people."

Victor Borge

"We tire of those pleasures we take, but never of those we give."

John Petit-Senn

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