Benefit Plan Blog

The Center for Medicare & Medicaid Services (CMS) has extended the deadline for employers to submit applications to receive the retiree drug subsidy from Sept. 30 to October 31. CMS has decided to grant the one-time extension for all plan sponsors, and no action is required on the part of employers.

The subsidy, part of the 2003 Medicare Modernization Act that adds a drug benefit to the Medicare program, is available to employers who retain retiree prescription drug coverage at least equal to what Medicare will provide. Employers eligible for the subsidy will receive a tax-free payment from the government equal to 28% of their retiree prescription drug claim costs between $250 and $5,000.

In addition to applying for the subsidy, employers have two other options. They may:

• Provide coverage that supplements Part D. Employers may provide prescription drug coverage that is secondary to Part D coverage. This coverage would assume that Medicare-eligible retirees enroll in Part D coverage and reimburse only certain expenses not covered by Part D. Employers who choose this option may consider whether to subsidize some or all of the Part D premium.
• Provide coverage through an approved plan. Some employers with large retiree populations have determined that they might generate more savings by establishing their own Medicare-qualified prescription drug plan. However, timing considerations, the status of existing guidance, and the need for further analysis have convinced a number of interested employers to delay implementation until at least 2007. Employers may also consider purchasing federally approved prescription drug coverage for Medicare-eligible individuals that certain vendors may make available.

Further information on the Part D subsidy can be found on the CMS website.