Employer Group Waiver Plans
Benefits of an EGWP
Once all EGWP subsidies are received, your organization could realize an additional annual cash savings of $500- $700 per Medicare-eligible retiree or covered dependent per year compared to RDS. If you are a plan sponsor with a large Medicare-eligible population, this additional cash savings can amount to hundreds of thousands or even millions of dollars per year. In addition, EGWP subsidies are generally paid more frequently than RDS subsidies.
For government entities subject to GASB accounting, an EGWP offers accounting advantages over RDS. EGWP savings can be reflected in the current year liability calculation under GASB accounting where future projected RDS reimbursements cannot. These cash savings and accounting advantages can be achieved without reducing benefits.
The Retiree Drug Subsidy (RDS) program has been the approach of choice for most employers since Medicare began prescription drug coverage. With RDS, employers can provide retirees with the same prescription drug benefits that they currently have.
The RDS program was offered as the costeffective alternative to qualified employer plans providing a prescription drug benefit to Medicare-eligible retirees. RDS has significantly reduced drug expenses for employers, by 20% on average, and RDS payments have been taxexempt. This has now changed. As a result of the Patient Protection and Affordable Care Act of 2010, RDS payments are no longer tax-exempt as of January 1, 2013. For taxable employer plans, this means that the value of the subsidy has been reduced by one-third. Coupled with recent changes to health care laws, the effectiveness of RDS breaks down. Now is the time to consider
alternative solutions for providing retiree prescription drug benefits.
Employer Group Waiver Plans (EGWPs) are well-positioned solutions to help you keep costs down and offer valuable retiree benefits. An EGWP has financial benefits that significantly exceed current RDS payments.
You should consider an EGWP if you are:
• An employer currently participating in theRDS program
• A non-taxable entity
• A taxable entity with little or no tax liability
• An employer offering prescription drugs to Medicare-eligible retirees
• A plan sponsor with a drug plan that does not pass the actuarially equivalence test for RDS
• A government entity that wishes to reflect Medicare Part D impact in its GASB 43/45 accounting
• A plan with at least 100 Medicare-eligible retirees and covered dependents (available funding options will vary based on PBM)
• A plan contemplating an end to post-65 retiree benefits due to the cost
• A plan looking for strategies to better manage retiree premiums
How an EGWP works
An EGWP is a Medicare Part D prescription drug plan (PDP). Employers partner with a Pharmacy Benefit Manager (PBM) that has contracted directly with Medicare to be a Part D provider. The EGWP provides the standard Medicare Part D prescription drug coverage only to the Medicare-eligible retirees and covered Medicare-eligible dependents of the sponsoring employer. An EGWP is not open to the individual market. It is a specific plan only available to employer plans.
The Medicare Part D portion of the EGWP has the same stages as the standard Medicare Part D plan:
• Stage 1: Annual deductible ($310 in 2014)
• Stage 2: Initial coverage period when retiree pays 25% and plan pays 75%
• Stage 3: Coverage gap where retiree pays most of the cost
• Stage 4: Catastrophic coverage where the plan pays most of the cost (but is reimbursed 80% of the cost by Medicare)
In addition, Medicare Part D excludes certain classes of drugs, including prescription drugs for treatment of coughs and colds, erectile dysfunction, etc.
To mirror your current prescription drug benefit, you can contract separately with your PBM to supplement, or wrap, your EGWP.
• Covers drugs not included on the PBM’s Medicare Part D formulary, as well as drugs excluded by Medicare
• Allows you to offer the same plan design available through your commercial plan, including copayments, coinsurance, and maximum out-of-pocket, if applicable
In the example below, the chart compares the value of an employer’s current plan to an EGWP with a wrap. In both scenarios, the retiree is in the coverage gap and pays the same 20% coinsurance for a brand-name drug. However, with the EGWP+wrap, the plan saves $100 due to the manufacturer’s discount
Medicare Modernization Act of 2003
CMS can waive select Medicare Advantage (MA) program requirements to create MA-EGWPs:
•Employers can offer Part D prescription drug coverage
•Service areas can be tailored to serve retirees living in widespread areas
•Network benefits can be adjusted to allow for in- and out-of-network similar coverage
•Premiums can be modified to meet the needs of employers and retirees
•C MS waives prior review of materials and communications
•Bidsdo not have to be submitted
EGWPs Offer Viable Solutions Employers
•Flexibility to maintain consistent retiree coverage, while lowering their immediate costs and long-term liability
•Varied plan and risk formats to include a single or multi-carrier exchange and self-funded to full-insured plans
•Pa rticipate in Medicare risk adjustment payments
•EGWPs generally achieve strong stars performance due to employers partnering with health plan to increase member engagement
•Additional benefits such as dental and vision and alternative solution for future changes in Medigap plans due to MACRA Retirees
•Care management provided through MA-EGWPs can lead to better health outcomes and higher quality of care
•Retirees experience less out-of-pocket expense and access to health and wellness programs above traditional Medicare coverage
•Most retirees report higher satisfaction and better navigation of the health care system
Policy Changes that Could Impact EGWP
• Future payment structure tied to individual market payment rate
• Health Insurer Tax and its effect on premiums
• Volatility in future accounting costs due to premium and tax changes
• Network access for rural or low-income areas
• Enabling more flexibility to coordinate care
• Expanding definition of plan sponsors
Overview of MA-EGWPs
The Medicare Modernization Act (MMA) of 2003 provided additional flexibilities for employers offering health benefits to their retirees by allowing the Centers for Medicare & Medicaid (CMS) to waive select MA program requirements to create a new type of MA plan, MA-EGWPs. Unlike other types of MA plans, MA-EGWPs can offer benefits only to the retirees of a particular employer or union and offer different premiums to beneficiaries living in different regions while providing the same benefit design nationwide.
Currently, just under 58% of MA-EGWP enrollees are enrolled in combined MA-PD plans, compared to nearly 100% of non-EGWP MA enrollees.6 In some cases, employers choose to use the Retiree Drugs Subsidy (RDS) option or a separate EGWP Prescription Drug Plan (PDP) in combination with a separate MA-EGWP that provides only medical benefits, particularly if they provided separate medical and drug coverage prior to switching to MA-EGWP coverage. Like other types of MA plans, MA-EGWPs can
be either local or regional preferred provider organization (PPOs) or Health Maintenance Organizations (HMOs). However, the vast majority, approximately 71%, of MA-EGWPs are local PPOs.7 Employers interviewed noted that using extended service area PPOs allow them to provide coverage for retirees living in widespread geographies and to give retires access to in- and out-of-network providers at the same cost.
Employer Group Waiver Plan (EGWP) FAQs
EGWP: An opportunity for Alaska to maintain existing pharmacy benefits for Medicare-eligible retirees and achieve cost savings for years to come. An Employer Group Waiver Plan, known as an EGWP or “Egg Whip,” is program offered by the federal government that will increase federal subsidies for prescription drugs for the retiree health trust. This is an administrative change to how pharmacy benefits are managed for Medicare-eligible retirees and dependents. The pharmacy benefit for AlaskaCare retirees remains that same.
AlaskaCare currently receives a federal subsidy for the retiree health prescription drug benefit. Using an enhanced EGWP plan instead, the retiree health trust would receive significantly higher subsidies than we do today, saving the trust up to $20 million annually and providing $40-$60 million each year in additional State savings through a reduction in the unfunded liability. The Division must manage the health plan to ensure retirees can access their earned benefits throughout the entire course of their life, and an AlaskaCare EGWP allows the State to keep existing pharmacy benefits for Medicare eligible retirees and beneficiaries, while increasing federal reimbursement of existing costs, reducing the State’s direct costs for these benefits in the long term.
Thirty-three other states have already implemented EGWPs and have already begun to realize cost savings. At the same time, both employers and retirees have reported high satisfaction: a 2014 survey conducted by Avalere of retirees in EGWP plans found that over 92% were satisfied with the quality of their coverage. As Alaska, along with the rest of the U.S., faces rising health care costs, EGWPs are a proven win-win for maintaining high quality coverage for today’s and tomorrow’s Alaska retirees.
An AlaskaCare EGWP is just one way the Division is looking to reduce the cost of health care while maintaining or improving benefits for retirees. As part of the ongoing retiree health plan modernization project, the Division is evaluating adding benefits like preventive care, enhanced travel, and removing the lifetime maximum. Our goal is to improve, protect, and sustain the health plan as it continues to offer high quality benefits for current and future generations of retirees. For more information about the modernization project, please go to: http://doa.alaska.gov/drb/alaskaCare/retiree/advisory.html .
1) Why is the State considering a change to an EGWP?
Moving to an EGWP will have minimal impact to the membership and existing plan and make providing pharmacy benefits more affordable for the health trust and the State. EGWP can save the health plan approximately $20 million per year, and between $40 to $60 million more annually to the State with no diminishment and minimal impact to the membership and existing plan.
EGWP is one method offered by the federal government to provide subsidies to the State of Alaska retiree health trusts. The subsidies help the State to keep the health plan funding healthy without impacting most members. We already have a federal reimbursement plan in place today. It’s called a Retiree Drug Subsidy program (RDS), but EGWP provides greater returns.
Many large employers have made the move from RDS to EGWP because of the significant cost savings and the ability to match existing benefits. Implementing an EGWP means that retirees and beneficiaries who are eligible for Medicare will have the same level and access to pharmacy benefits as they do now, while making
more federal funds available to cover those costs. The savings helps the State fulfill its promise to provide retirement benefits to our AlaskaCare retirees.
2) What is an “enhanced” EGWP?
An enhanced EGWP, like the AlaskaCare EGWP, is a plan that includes drugs not typically covered under Medicare. This ensures that prescriptions drugs which are covered under the AlaskaCare plan today will be covered under the AlaskaCare EGWP. This enhanced coverage is also called a “wrap
3) How does an EGWP work?
Much the same way it works today. When a member goes to the pharmacy they will present their AlaskaCare pharmacy ID card. The pharmacy will submit the claim. If the prescription is covered by Medicare, it will be covered by EGWP. Members will pay their normal copay ($0 mail order, $4 generic, $8 brand) and collect their
medication. If the prescription is not covered by Medicare, it will automatically bill to the “wrap” plan. The member will pay their same copay and collect their medication. Either way, the member shouldn’t notice a difference.
In the beginning, members may need to get prior authorizations for certain medications. A list of those medications will be available closer to the implementation date. If you are taking a medication that requires prior authorization, you will be contacted with information on what forms you or your doctor need to complete.
4) How am I enrolled in EGWP?
If you are eligible for Medicare, you will be automatically enrolled in the AlaskaCare EGWP plan.
5) Who is the Pharmacy Benefit Manager for AlaskaCare plans?
Aetna, with their subcontractor CVS/Caremark, is currently the Pharmacy Benefit Manager (PBM) for the AlaskaCare plans. Beginning January 1, 2019, OptumRx will become the AlaskaCare pharmacy benefits manager. The Division and the PBM will send out a welcome kit with information including ID cards later in the year.
6) Why is this changing?
Periodically the Division competitively bids these contracts through a Request for Proposal (RFP). This gives the Division an opportunity to seek better service at lower cost for members and the plan. The current procurement process has resulted in OptumRx being selected to provide Pharmacy Benefit Management (PBM) services beginning January 1, 2019. Aetna, with their subcontractor CVS/Caremark, will remain the PBM for the AlaskaCare plans in the interim period.
7) Will there be a separate Pharmacy Benefit Manager for the AlaskaCare EGWP?
No. There will still be one Pharmacy Benefit Manager (PBM) for all AlaskaCare prescription drug plans, including the AlaskaCare EGWP.
8) Why would the State consider changing pharmacy benefits for Medicare-eligible retirees?
Alaska law already requires that for Alaska retirees and beneficiaries, Medicare become the primary coverage for major benefits once they are Medicare eligible. As a Medicare Part D plan, an EGWP would follow this same statutory requirement. By implementing an enhanced EGWP, like the proposed AlaskaCare EGWP (which covers some medications that are not currently covered under Medicare Part D), the benefits will remain the same as those in place today.
9) I heard EGWP isn’t constitutionally protected? Does that mean this plan isn’t protected either?
No! As an AlaskaCare member, your health benefits are protected, and it’s the Division’s job to ensure those benefits remain protected and sustained. Although the EGWP is not protected under Alaska’s constitution, your retiree benefits are. Using an enhanced EGWP and covering additional medications that are not covered
by a standalone EGWP, will ensure that you continue to receive the same level of benefits consistent with the protections in the Alaska Constitution.
10) Can the State leave EGWP if it is not performing as expected?
Yes. The Division will be closely monitoring the program and will evaluate whether it is in Alaska’s best interest to continue using this type of program. If the Division determines that it is not meeting the needs of our members or the State, the Division can disenroll.
11) What information can I expect to receive about a change to an AlaskaCare EGWP for Medicare eligible retirees?
AlaskaCare will send a letter to all retirees and beneficiaries providing detailed plan information, as well as other important transition information from OptumRx as the new Pharmacy Benefit Manager (PBM) vendor. You will receive a welcome kit including a new ID card, and how to find a network pharmacy in your area.
12) If I am enrolled in an AlaskaCare EGWP will this reduce my prescription drug coverage?
No, the prescription drugs covered under the current plan and the AlaskaCare EGWP will be the same.
13) Will my prescriptions cost more because of this change?
No. There will be no change in pharmacy copays.
14) Will this change require me to use a different pharmacy or doctor?
No. There will be minimal, if any, impact for our members. Just like today, an AlaskaCare EGWP uses a pharmacy network, which most of Alaska’s pharmacies participate in. The Division estimates that there are less than 20 individual pharmacies that do not participate in an EGWP network, and Optum RX will be working directly with these pharmacies to bring them into the network. If your preferred pharmacy declines to join this network, you will be provided information about other options.
15) Will my co-pays be higher under the enhanced EGWP?
No. Pharmacy co-payments will not change.
16) What are the Coverage Gap Stage and the Catastrophic Coverage Stage?
Although these are terms you may hear associated with an EGWP, these stages will not impact your benefits. These are different stages defined by Medicare based on your total drug costs. AlaskaCare retiree plans have extra coverage, so your out of pocket costs for drugs will not change.
Eligibility and Enrollment Questions
1) What if I become eligible for Medicare after January 1, 2019?
You can expect to receive information from Medicare three month prior to turning age 65, and though you should enroll in Medicare Part A and B, you do not need to enroll in an individual Medicare Part D plan. You will be automatically enrolled in the AlaskaCare EGWP by the State.
2) Will I be charged a Medicare Part D premium when enrolled in an enhanced EGWP?
In most cases, no. The AlaskaCare retiree plan, through Optum Rx, will enroll eligible retirees into the AlaskaCare EGWP. AlaskaCare will pay a monthly administrative cost to the PBM for each enrolled member, and most retirees and their Medicare eligible dependents will not be required to pay a premium to Medicare.
CMS does require a premium payment of high income individuals who are eligible for Medicare. See Question #1 of the high income earners section below for more
information about this situation and whether it may impact your household.
3) I am not Medicare eligible, but my spouse is. Will he/she be enrolled in the enhanced EGWP plan?
Yes. If your spouse is eligible for Medicare and you are not, he/she will be enrolled in the AlaskaCare EGWP plan, while your coverage will continue to be provided the same way it is today.
4) What if I am eligible for Medicare, but my spouse or other dependents are not yet Medicare eligible?
If your dependents are not currently Medicare eligible, they will continue to receive prescription drug benefits the same way they do today. If one of your dependents
becomes eligible for Medicare in the future, he or she would be enrolled in the AlaskaCare EGWP at that time.
5) I have more than one AlaskaCare coverage and don’t have a co-pay because my prescription costs are covered at 100 percent. Will this change?
No. If you are covered under two or more AlaskaCare plans and are not required to pay a co-pay today there will be no change under the AlaskaCare EGWP.
6) What if I or my spouse are currently enrolled in an EGWP through another employer?
We anticipate that this situation will be rare, and the Division will provide more information to impacted members.
7) Will I receive a new ID card?
Yes. The Division will work closely with the new PBM to make the transition as smooth as possible for all members. This will include a welcome kit containing ID cards, plan information and other resources to help members. Members should expect to receive new ID cards before the transition January 1, 2019.
8) What if I don’t want to be enrolled in the enhanced EGWP plan; can I opt out of this coverage?
You can opt-out, but this is highly discouraged and will result in higher costs for both you and the health plan. Centers for Medicare and Medicaid Services (CMS) requires that you be given the opportunity to opt-out of EGWP. Retirees that opt-out of the AlaskaCare EGWP will be placed in a prescription drug program that is much different than the plan prescription drug benefits offered today. This will result in increased out-of-pocket expenses for you or your Medicare eligible dependents.
Pre-Authorization and Appeals Questions
1) What differences could I expect in the AlaskaCare EGWP?
Here’s what won’t change:
• Copayments will remain the same at $0 mail order, $4 generic, $8 brand
• Covered medications will remain the same
• Filling prescriptions at the pharmacy will remain the same
• The value of your benefit will remain the same Here’s what will be different:
• You will receive a number of mandatory mailings from the OptumRx.
• You will receive a separate monthly explanation of benefits of your prescription claims.
• Medicare limits filling of prescriptions to a 90-day supply. While the current plan allows filling a prescription for 90 days or up to 100 units, CMS regulations only allow coverage of 90-day supply. The Alaska plan will be amended to match this requirement.
• The pharmacy network will change. We don’t believe these changes will substantially impact members, but you will want to check to be sure your preferred pharmacy is in network.