Retiree Rx Plan Market Opening Wide: Study

As the first year of Medicare Part D under their belts, fewer employers seem enthusiastic about taking the federal subsidy for retiree drug benefits, finds a new study by the International Society of Certified Employee Benefit Specialists, Brookfield, Wis.

Coming at a time of great uncertainty about the future of retiree benefits by major companies, the survey found most employers unsure of what they will do about the subsidy in 2007.

At the beginning of 2006, an earlier survey showed that employers sponsoring post-65 retiree medical programs were committed to maintaining the status quo with Medicare subsidies for the time being. However, 63% had not decided what they will do about Medicare Part D after 2006. The remaining 37% said they had made up their minds.

As for this year, 65% of respondents chose to continue their prescription drug plans and collect the federal subsidy in 2006.

Of those that had decided on a Part D strategy for 2007, 42% said they plan to maintain current benefits and collect the federal subsidy. The remainder indicated that they are considering a variety of alternative approaches–including 12% who said they plan to eliminate all retiree medical coverage or eliminate prescription drug coverage only.

In addition, 15% of companies said they planned to offer a supplemental prescription plan coordinated with Part D plans available in the market or to arrange to offer a specific Part D plan.

The survey also found the following:

82% of employers used their Part D subsidies last year solely to reduce their own health care costs, while 8% shared the cost savings with retirees and 6% used the subsidies solely to reduce retiree costs. The remainder used subsidies for other purposes.

In general, employers liked the response of insurers, pharmacy benefit managers and other vendors that allied to market Part D plans.

Most employers did not allow their participants to enroll in both a Medicare prescription drug plan (PDP) or a Medicare Advantage plan with prescription drugs and their company-sponsored drug benefit.

In the future, most respondents show major uncertainties and concerns about prescription drug coverage for their Medicare-eligible population. The survey found 16% though Part D would be repealed.

The well-known confusion of many beneficiaries about the profusion of plans showed the introduction of Part D did not go entirely smoothly, ISCEBS notes.

“Many retirees struggled with or were unable to use the Web tools made available by the government and insurers,” ISCEBS said in a report on the study. “In addition, most large employer PBMs [pharmacy benefit managers] appeared unprepared and reluctant to provide employer-arranged prescription drug plans.”