Fewer Public Sector Health Plans to Take Medicare Subsidy Next Year

July 12, 2006 (PLANSPONSOR.com) - More than three-fourths (79%) of public sector plans took the Medicare Part D Retiree Drug Subsidy for 2006, but only about half (54%) said they will take the subsidy for 2007.

According to a report on the Segal Company’s survey of public sector health care plans, 21% have decided not to take the subsidy next year and 26% are undecided.

Segal found that almost half of plans taking the subsidy decided to terminate either prescription drug coverage or prescription plus medical coverage of retirees who also enroll in a Medicare plan on their own.

In 2006, 6% of public sector plans contracted with a Medicare Prescription Drug Plan (PDP) or Medicare Advantage Prescription Drug Plan to provide coverage more generous than the standard Part D benefit. More respondents plan to do so in 2007 (14%), according to the Segal report.

Only one of the 82 plans surveyed said it applied to become a Medicare PDP in 2006, and the plan said it would likely continue as a PDP in 2007.

In spite of concerns about coordinating two prescription drug benefits, 4% of plans provided “wrap-around,” or supplemental, coverage to employees in 2006. Seven percent of plans surveyed indicated their intention to provide this coverage in 2007.

None of the public plans chose to completely eliminate retiree drug coverage in 2006, but one plan indicated it was likely to do so in 2007.

According to the report, statutory or regulatory obligations affect the ability to change retiree health care coverage for two-thirds of the plans.

The Segal report is here .