The Influence of the IRA on Group Medicare Part D Plans




Reimagining the <a href="https://www.irs.gov/inflation-reduction-act-of-2022">Inflation Reduction Act</a> Impact on Part D

The Evolution of Part D and the Impact of the Inflation Reduction Act

The History of Part D

The original Part D design, established in 2006, marked a significant milestone by providing prescription drug benefits to senior citizens. However, the plan included complexities such as the coverage gap and unlimited retiree out-of-pocket costs. These limitations were partially addressed by the Affordable Care Act in 2010.

The Shift in Group Part D Plan Sponsorship

Employers sponsoring group prescription drug benefits for Medicare retirees had the option to apply for Retiree Drug Subsidy payments or adopt an Employer Group Waiver Plan (EGWP). The EGWP approach provided financial advantages over the RDS program, leading many employers to choose this path.

Changes in Part D for 2025

With the Inflation Reduction Act, Part D in 2025 will feature a simplified structure, including a $2,000 cap on annual out-of-pocket costs. The federal government will also begin capping prescription drug cost inflation and negotiating prices with pharmaceutical companies for the first time.

Impact on Group Part D Plan Sponsors

The changes under the IRA may pose financial challenges for EGWP sponsors. Richer benefits will increase plan costs, while funding sources like reinsurance payments and direct subsidies are expected to decline starting in 2025.

Options for Plan Sponsors

Plan sponsors facing cost increases can choose to absorb the additional expenses, pass them on to retirees, or transition retirees to individual Part D coverage through a marketplace exchange with employer funding via a Health Reimbursement Arrangement (HRA).

Strengthening Individual Medicare Market

With the IRA enhancements, individual Part D plans will offer comprehensive coverage, potentially surpassing benefits provided to active employees. The individual market, combined with Medicare Advantage and Supplement plans, provides universal access to popular health care options.

Next Steps for Plan Sponsors

Employers are advised to conduct a financial assessment of the IRA’s impact on EGWP costs and explore options for managing the increase. They should also reassess the rationale for maintaining group Medicare plans in light of the evolving individual market.

This article first appeared in the May/June issue of Public Eye, a publication of The Public Sector HR Association (PSHRA).


Read More of this Story at www.wtwco.com – 2024-06-14 18:14:45

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