Medicare Drug Coverage for People with Retiree Coverage
Does your current retiree health plan help pay for prescription drugs? Are you Medicare-eligible? If you answer 'yes' to both, you need answers from your former employer or union to these two key questions:
Question 1. Does your retiree health plan work with a Medicare drug
plan?
Employers and unions have a range of options for working with Medicare. It is
important for you to understand how your retiree health plan works—or
does not work—with Medicare. Following are some of the ways your retiree
health plan can work with Medicare drug coverage:
- Retiree plans can offer drug coverage outside of Medicare. If your former employer's drug coverage is at least as good as Medicare's prescription drug coverage, you usually will have to choose one or the other—because generally you can't have both. If it is not as good as Medicare's drug coverage, you may pay a penalty if you enroll in a Medicare drug plan after you are first eligible. It's important for you to find out if your retiree drug coverage is as good as Medicare prescription drug coverage. To find out, contact your retiree plan sponsor.
- Retiree plans may decide to offer their retiree drug coverage through a Medicare drug plan. If your retiree plan chooses this option and you want to continue your retiree plan drug coverage, you will need to sign up with a Medicare drug plan offered through your former employer or union retiree plan. Retiree plan drug coverage offered through a Medicare drug plan may not be the same as the coverage the plan sells to other people with Medicare.
- Retiree plans may decide to supplement Medicare's drug coverage by helping to pay the deductible, coinsurance, or costs above Medicare's initial coverage limit. If your retiree plan chooses this option, you need to sign up with a Medicare drug plan because your retiree plan will only pay after Medicare pays—much the way it now helps pay for medical and hospital expenses covered by Medicare.
- Retiree plans may decide to stop offering drug coverage since it is now offered by Medicare. Surveys indicate that a small share of retiree plans are expected to take this option. Some expect to help pay the Medicare drug premium; others do not. If your retiree plan chooses this option and you want drug coverage, you will have to sign up for Medicare drug coverage.
Question 2. If your retiree plan offers drug coverage outside of Medicare, is the retiree drug coverage that you have, on average, at least as good as Medicare drug coverage? (This is also known as "creditable coverage.")
- If your retiree plan is, on average, as good as Medicare drug coverage and you want to keep this coverage, there will be no penalty if you decide in the future that you want to sign up for Medicare drug coverage. When you receive the notice that your coverage is creditable, keep this notice in a safe place so that you will be able to prove that you have other creditable drug coverage. Retiree plans must tell you, at least annually or when they make changes to their coverage, whether the drug coverage they currently provide is creditable.
- If your current drug coverage is not as good as Medicare's, on average, and you keep your retiree coverage and do not join a Medicare drug plan when you are first eligible, you will have to pay a penalty if you decide in the future that you want to switch to a Medicare drug plan. You will pay the penalty for as long as you have Medicare drug coverage.
Understanding Your Options
Once you know the answer to the key questions about your retiree health plan drug coverage, talk with your retiree benefits office to make sure that you understand your options.
- If your retiree plan is going to continue to offer drug coverage outside of Medicare and you are thinking of enrolling in a Medicare drug plan, you may not be able to drop just your retiree drug coverage. If your retiree plan has hospital, medical, drug and other coverage in the same plan, find out whether you can drop only the drug coverage. If you are not permitted to drop just the drug coverage, think about whether you want to switch to a Medicare drug plan if it means that you will lose your other retiree health plan benefits too. You will also want to be sure that you can keep any coverage for dependents on your plan.
- Although it helps lower your out-of-pocket drug spending, the drug costs paid by your retiree plan offered outside of Medicare do not count as out-of-pocket spending to qualify for Medicare's catastrophic drug coverage.
- If your retiree plan works together with Medicare drug coverage, find out whether your retiree health plan will work with any Medicare drug plan that you choose or only certain ones.
- If you have limited income (less than $14,700 a year for a single person or $19,800 for a married couple living together in 2006) and your assets are below $11,500 (or $23,000 if you are married), talk with your benefits office about the Extra Help available through Medicare. (Not all of your assets are counted, such as your home.) This help is only available if you join a Medicare drug plan. Be aware that enrolling in a Medicare drug plan with Extra Help could mean that you lose retiree benefits you rely on to help you and any dependents you may have pay for other health services.
- Remember that once you drop retiree health coverage, it may be difficult or even impossible to get it back again. So, take the time to carefully consider what you, your spouse or dependents would lose as well as what you would gain before deciding to drop retiree health coverage.
Things to Think About, Consider, and Compare
- How do your retiree health coverage premiums compare with the premiums for Medicare drug plans in your area?
- How does your retiree drug coverage compare with coverage of Medicare prescription drug plans in your area? Do both provide coverage if your drug expenses are very high?
- Do the Medicare drug plans and your retiree drug plan cover the drugs that you use? If your drugs are covered, is there a difference in what you have to pay for them? If your drugs are not covered, are you willing to ask your doctor to change your prescription? Or, are you willing to ask for an exception to the drug plan's preferred drug?
- How convenient are the pharmacies that you can use in your retiree plan and the Medicare drug plans in your area? Are there differences between your retiree plan and the Medicare drug plans in what you pay for drug purchases if you travel out of the area?
Now it's time for a decision: Do you keep your current coverage or switch to a Medicare-approved drug plan?
Option One: Keep your current
coverage.
Is the coverage you have at least as good as Medicare drug coverage? In other words, has your employer told you it is "creditable coverage"?
Option Two: Switch to Medicare drug coverage and drop your current coverage.
If you think you want to switch, first ask your employer or union whether the other health care coverage you have may be affected. You should also find out how your covered spouse or dependents would be affected.
Is the coverage you have at least as good as Medicare drug coverage? In other words, has your employer told you it is "creditable coverage"?
Yes - You will not face a late enrollment penalty if you stay with your current coverage. However, you should still think about whether a Medicare drug plan will give you better coverage than your current plan.
No - You will face a late enrollment penalty if you enroll in a Medicare drug plan after you are first eligible. Consider whether you want to enroll in Medicare drug coverage.
No - You will face a late enrollment penalty if you enroll in a Medicare drug plan after you are first eligible. Consider whether you want to enroll in Medicare drug coverage.
Option Two: Switch to Medicare drug coverage and drop your current coverage.
If you think you want to switch, first ask your employer or union whether the other health care coverage you have may be affected. You should also find out how your covered spouse or dependents would be affected.
More Things to Think About
- If you decide to give up your retiree prescription drug plan, will that affect the other health care coverage (such as hospital and medical) offered by your employer? Remember that once you give up your retiree coverage, you may not be able to get it back.
- If you qualify for additional help due to your limited income, you will not be able to get this additional help if you stay with the coverage offered through your former employer.
- Your employer or union may decide to offer prescription drug coverage that adds onto the Medicare drug coverage. Contact them to find out how their coverage works with Medicare.
- Compare the costs you pay under your retiree coverage to the costs under a Medicare drug plan.
- Compare your retiree drug coverage to that offered under Medicare drug plans in terms of the drugs it covers, pharmacies you can use, your premium and cost for drugs under the plan.
