New Medicare Rx Dollars
GRAND RAPIDS — Employers should get a move on if they intend to take advantage of federal subsidies that will become available when the new Medicare Part D prescription drug benefit takes effect Jan. 1.
A health benefits expert from Ada and three other benefits experts from around Michigan have formed Part D Advisors Inc. to help employers do just that. Their goal is to help employers comply with Medicare's new prescription drug regulations and guide them in the prep work necessary to meet the Sept. 30 subsidy application deadline.
The new Medicare Part D guidelines apply to sponsors of employer and union health plans that offer prescription drug coverage for Medicare-eligible employees and retirees.
There will be about $6 billion in subsidies available to employers whose retiree prescription drug benefit is at least equal to the Medicare Part D standard drug benefit and whose retirees elect not to switch to Medicare Part D.
According to Part D Advisors, the subsidy approximates 28 percent of drug costs paid for Medicare-eligible retirees that elect not to enroll in Medicare Part D. The average subsidy per retiree will be about $668 tax free, which translates to $1,028 per retiree for companies in the 35 percent tax bracket, said Patrick Coleman, president of Ada-based Coleman & Dugan LLC and a principal in Part D Advisors.
"Up to this point, everything we've seen indicates that most employers are going to take the subsidy, but the problem is that many executives and managers don't realize what they have to do or even that the subsidies are there," Coleman said.
"This whole Part D is really below the radar screen. Deadlines are sneaking up fast, and if they don't file their applications, they'll miss their prescription drug subsidy in 2006."
Everybody has heard about the new Medicare plan for drugs, he said, but most don't realize the impact it's going to have and how to prepare for it.
Part D Advisors partner Bruce Liebowitz, former president of a pharmacy benefits manager known as Claimspro and current president of Encore Commercial Products Inc. of Southfield, said the firm already knows it won't be able to meet all the health plan sponsor demand "for obtaining a piece of the $6 billion subsidy pie."
The two other principals in Part D Advisors are Attorney John Eggertsen of Eggertsen & Associates PC of Ann Arbor and Si Nahra, Ph.D., president and founder of Health Decisions Inc. in Plymouth.
Drugs for Medicare-eligible retirees constitute a large share of retiree health costs, according to the U.S. Government Accountability Office, but up until now Medicare hasn't covered prescriptions.
The federal subsidy is a government incentive to encourage employers to maintain their existing prescription drug benefits coverage for their Medicare-eligible retirees as opposed to moving them into government programs and increasing Medicare's costs by several billions of dollars.
To be eligible for the Part D subsidy, Coleman pointed out, employer and union health sponsors have to complete a prescription drug claims analysis, actuarial review and certification by the Sept. 30 application deadline.
Prior to the September deadline, every employer has to evaluate their retiree plan and notify their Medicare-eligible retirees whether they have "credible" or "non-credible" coverage.
An employer's coverage is considered "credible coverage" if it's as good or better than the Part D prescription benefit, he explained. It's "non-credible coverage" if it's valued less than the Part D benefit.
Coleman said applying for the subsidy wouldn't be worth it for an employer with just one Medicare-eligible employee or retiree. But for a company that had 1,000 of them, the subsidy would add up to almost $1 million annually.
"Whether you have 100 or 1,000, you still have to do the same prep work. The work you have to do is very precise and then you have to have it attested to by actuaries.
"Clients hire us to do the credible notification, the actuarial valuation of each drug benefit option, the subsidy application and the monitoring of the subsidy. That's why there are four of us in different areas of expertise involved in this."
Sponsors of employee and union health plans will have to repeat the same steps in that process every year to receive the subsidy and will be required to maintain records of their actuarial analysis for a minimum of six years, Coleman said.