Sheet for Employer & Union Plan Sponsors:
Beneficiaries Who Will Be
Automatically Enrolled in a Medicare Drug Plan and How Their Retiree
Coverage Will Be Affected
Employers, Unions and Other Plan Sponsors Are Responding to the Medicare
On January 1, 2006, the new Medicare prescription
drug benefit goes into effect. Some employer and union retiree drug
plans are designed to take the place of Medicare drug coverage, while
other plans are designed to supplement Medicare drug coverage. Many
employer/union retiree drug plans designed to take the place of Medicare
drug coverage do not provide coverage to retirees that enroll in a
Medicare drug plan. If a retiree covered by one of these plans signs up
for a Medicare drug plan, they may lose their retiree prescription drug
coverage, they may also lose their retiree medical coverage, and their
spouse and dependents may lose their retiree medical and drug coverage.
Beneficiaries Who are Eligible for Medicare’s Low Income Subsidy Face
For most retirees, choosing between continuing
employer/union drug coverage and enrolling in a Medicare drug plan is
not difficult to make because their current retiree coverage is more
generous than Medicare drug coverage. However, retirees who are
eligible for Medicare’s low income subsidy benefit - which provides drug
coverage with significantly reduced cost-sharing - will often receive
substantially better drug coverage from Medicare than their retiree
Retirees Will Be Automatically Enrolled in a Medicare Drug Plan, Which
Could Adversely Affect their Employer/Union Coverage
Who are the Medicare drug plan auto-enrollees?
Prior to January 1, 2006, about 6 million Medicare beneficiaries
received their medical and prescription drug coverage through their
State Medicaid programs. The Medicare Modernization Act requires that
these beneficiaries be automatically enrolled in a Medicare drug plan
effective January 1, 2006, unless they elect to opt out and disenroll.
These beneficiaries received letters from Medicare explaining which
Medicare drug plan they would be auto-enrolled in. Many of these
beneficiaries may be incapable of performing their activities of daily
living, so nursing home administrators, state pharmacy assistance
programs or other persons or entities may act as their representative.
Who are the Medicare drug plan facilitated
enrollees? For the first five months of 2006, beneficiaries who are
eligible for the Low Income Subsidy benefits provided by Medicare will
be assisted to enroll in a Part D plan.
These beneficiaries are “facilitated enrollees” and their Medicare drug
coverage will be effective June 1, 2006 or later unless they elect to
opt out and disenroll.
Some of these auto-enrollees and facilitated
enrollees are also retirees receiving prescription drug coverage from an
employer or union that does not provide drug coverage to retirees that
enroll in a Medicare drug plan. These retirees can opt out of
Medicare drug coverage, in order to keep their employer/union coverage,
by simply calling 1-800-Medicare or by contacting the Medicare drug plan
in which they were enrolled. Be aware that retirees who find themselves
in this situation may be confused and worried about losing retiree
and/or Medicare coverage, and may need help and extra time to decide
which plan is best for them.
Sponsors Should Be Especially Concerned About Auto-enrollees and
The auto-enrollment and facilitated enrollment of
these beneficiaries in Medicare drug plans can affect retiree plans in
several ways. Some employers/unions have advised retirees that if they
enroll in a Medicare drug plan they will lose their employer/union
prescription drug coverage, and in some cases retiree medical coverage
as well. If a plan has retirees who have also been auto- or
facilitated-enrolled, some of those retirees may wish to opt out of
Medicare drug coverage to keep their retiree coverage but experience
difficulty doing so in a timely manner.
In addition, some auto-enrolled and facilitated
enrolled retirees will face difficult personal decisions. When retirees
have to choose between retiree drug coverage and Medicare drug coverage,
determining which provides the best drug coverage is not their only
consideration. They need to consider whether signing up for a Medicare
drug plan will cause them or a family member to lose retiree drug
coverage and possibly medical coverage that they can not afford to
lose. If they or a covered family member is in a nursing home and
Medicaid pays for part of all of the nursing home expenses, they need to
consider whether enrolling in a Medicare drug plan is a requirement for
Medicaid to continue paying for the nursing home care.
Employer & Union Retiree Plan Sponsors Do to Help?
Employer and union plan sponsors can take one or
more of the following steps to reduce or eliminate the risks and adverse
consequences facing retirees and their families.
Flexible transition/correction period:
Many plan sponsors realize that retirees who wish to opt out of Medicare
drug coverage in order to retain their employer coverage may not be able
to do so in a timely manner. In recognition of this fact, they are:
- Deferring any permanent changes in retirees’
plan eligibility, enrollment or covered benefits for a period of
time to allow extra time for retirees to opt out of their
autoenrolled Medicare drug plan;
- Providing a special enrollment period for
retirees to re-enroll in the employer/union plan; and/or
- Coordinating benefits with Medicare drug plans
for a period of time until retirees can opt out of the Medicare drug
Split retiree/family enrollment:
Many plan sponsors are allowing spouses and dependents to continue
receiving coverage from the employer/union plan even when the retiree
enrolls in a Medicare drug plan.
Adding a supplemental coverage option:
Although they did not initially intend to provide a supplemental
coverage option to retirees, a number of employer and union plan
sponsors have added one in order to address these types of situations.
Assisting retirees to opt out of a Medicare
drug plan if that is what they choose to do: Plan sponsors are
an important source of information, and many have provided educational
materials to retirees that explain how to disenroll from a Medicare drug
plan by calling 1-800-Medicare or by contacting the Medicare drug plan
in which they are enrolled.
If You Need More Information….
Visit the CMS website at
http://www.cms.hhs.gov or contact the Employer Policy and Operations
Group’s Division of Outreach.