On Nov. 15, 2005, all Americans who are enrolled in Medicare will have the option to purchase prescription drug coverage under the new Medicare Part D.
The Part D services and benefits will be delivered by private insurance companies and pharmacy benefit managers that contract with the Centers for Medicare & Medicaid Services (CMS). The government then pays the provider a preset amount for each senior or recipient enrolled. CMS has reviewed plans to be offered under Part D and issued approvals for plans to compete to provide this coverage. The plans go into effect January 2006.
Seniors who enroll are expected to reap substantial savings. According to a 2004 report from the Congressional Budget Office, Part D participants will spend an average of $792 for out-of-pocket prescription drug expenses. This is a 37% savings from the $1,257 that they would have spent without the new law.
Because of the attractiveness of Part D plans, all seniors should consider this coverage, even it they don’t currently have prescription drug coverage. Considering that some 70 million baby boomers will turn 65 in the next 20 years, that’s going to mean private health insurers have a big job ahead of them.
Entirely voluntary, the program allows Medicare recipients to shop for the best coverage available in their area.
CMS reports there will be between 11 and 23 providers from which seniors can choose in each of 34 regions. Benefits and advantages will be similar to those enjoyed by most American workers, since CMS requires that plans be designed to look and act like prescription drug coverage included in personal provider organizations, health maintenance organizations and fee-for-service plans.
The initial open enrollment period–from Nov. 15, 2005, through May 15, 2006–is expected to be very busy for insurers. Potential customers range from the very educated to the uninformed, so insurers have an important role in helping this widely diversified public understand the coverage.
Many insurers have chosen to start by educating agents about Part D. Carriers are providing certification courses on the Medicare Modernization Act (MMA) and Part D, along with a range of marketing and point of sale materials.
Agents can use this training and materials to communicate the changes in Medicare coverage options.
All insurers (and unions) are required under the MMA to send notices to policyholders who have Medicare Supplement insurance with prescription drug benefits. These CMS-approved notifications will explain how their coverage compares to the minimum coverage under Part D and what options the Medicare Supplement policyholders have.
Those providing roughly the same or greater benefits than the Medicare plan will be considered creditable. But insurers generally believe that most in-force individual coverage won’t qualify as creditable coverage.
Agents should view the MMA and Part D as an opportunity to connect with clients and maintain the business. By contacting current clients early, agents can present themselves as knowledgeable experts to policyholders likely to be overwhelmed with Part D marketing messages.
The preparation around the transition period, during which the country’s seniors will get acquainted with the concepts of Part D, has been intense for all insurers. Still, the effort to keep clients and potential clients abreast of the changes and future developments must be ongoing.
John Scheil, CLU, ChFC, CASL, CSA, CLTC, is senior vice president and national sales manager at Bankers Life and Casualty Company, Chicago, Ill. His e-mail address is J.Scheil@banklife.com.