Multiemployer Health Funds Opt for Medicare Drug Subsidy in 2006

April 7, 2006 ( - A study from The Segal Company found that most multiemployer health funds that provided prescription drug coverage to Medicare-eligible retirees opted for the Medicare Retiree Drug Subsidy in response to the launch of Medicare Part D in 2006.

According to the Segal data, 71% of the 273 funds in the survey chose this option. The subsidy was available to sponsors of group health plans whose retiree prescription drug coverage was “actuarially equivalent” to Medicare’s coverage.

The funds’ responses to the other options provided for by Medicare Part D were as follows:

  • Contract with a Medicare Plan – Only 7% of multiemployer funds surveyed contracted with a Medicare Prescription Drug Plan (PDP) or a Medicare Advantage-Prescription Drug Plan to provide coverage in 2006 that is more generous than the standard coverage under Part D.
  • Becoming a PDP – None of the surveyed funds chose to become a PDP which involves contracting directly with the centers for Medicare & Medicaid Services to offer a PDP.
  • Eliminate Retiree Drug Coverage – Five percent of the multiemployer funds chose this option for 2006.

Of the Segal clients surveyed, 14% were not eligible for the Retiree Drug Subsidy because their benefits were not actuarially equivalent to the Part D benefits. In addition, 3% of the funds did nothing in response to the initial availability of Part D coverage because they have such a small number of retirees.

Among the multiemployer funds that are taking the subsidy for 2006, 60% decided to cut off plan coverage for those participants who sign up for Medicare Part D coverage on their own. Twenty-six percent decided to continue coverage for those participants by coordinating their plan coverage with Part D coverage.

Responses could be different in 2007 as 32% of funds said they will reevaluate their options this year. Only 2%, however, said they are considering eliminating retiree drug coverage in 2007.