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Retirees, check mail for Medicare advice

Expect a letter from former employers this month with key information regarding Medicare Part D drug coverage.

By KRIS HUNDLEY
Published October 16, 2005

Rita Hren, a Homosassa retiree, probably won't pay much attention to all the marketing and direct mail pieces from companies trying to get her to enroll under the new Medicare Part D drug benefit.

And since Hren, 65, already has prescription coverage through her husband's former employer, General Motors, she is probably right to ignore the hoopla.

"We expect to be hearing from the company, so we're in a wait-and-see situation," said Hren, who is secretary of the GM Club of Citrus County. "Right now we're covered pretty well."

When Congress passed legislation in 2003 authorizing the Medicare drug coverage that will begin next year, there was fear that employers offering retiree health benefits would eliminate these plans, dropping more than 11-million beneficiaries into Medicare's new program.

To reduce the chance of a mass exit by employers from the retiree benefit market, Congress agreed to offer a variety of financial incentives for companies to continue their coverage. Early indications are that the incentives are working.

"There are not that many private employers who even offer retiree health benefits anymore, because the costs have gotten so high over the past 10 to 12 years," said Larry Smart, an actuary with Aon Consulting in Tampa. "But those companies that do still offer benefits don't seem to want to disrupt them. Many employers will be taking the subsidy and thus the retirees' plans should stay the same."

Retirees should expect to get a letter from their former employer by the end of October, telling them whether their company-sponsored plan is "creditable."

That's Medicare-speak that means the company's benefit is equal to or better than the coverage the individual would get under a Medicare plan. In that case, the retiree doesn't have to do a thing. Nor will the retiree pay a penalty if he decides to enroll in a Medicare drug option in the future.

People who are told their company's plan is not creditable - and not many benefit packages are expected to fall into this category - will have to switch to a Medicare-approved plan before May 15 or pay a penalty for later enrollment.

Smart said that while most retirees will be better off sticking with a creditable company plan, there may be exceptions.

"If somebody is really sick, the government's catastrophic plan, which pays 95 percent of the cost of drugs after the retiree has paid $3,600 out of pocket, might be better," he said. "And if the retiree qualifies for a low-income subsidy, they may pay little or nothing for the government's plan. But one thing retirees have to realize is that sometimes when you drop out of an employer's plan, you can't get back in."

Smart's Aon Consulting is one of the many firms nationwide that have spent the past several months helping companies sort through their federal incentive options. One of Aon's local clients has been the Hillsborough County School System, which learned that both of its existing retiree options, a commercial group policy and an HMO, will meet Medicare specifications, meaning no disruption of coverage for their members.

Deborah Henry, the school district's manager of employee benefits, said that means the transition should be seamless for employees.

"We're going to be doing a major communications push because we know they depend on us to keep them informed," Henry said. "But I think retirees will be happy with the results, whether they take the group plan or an HMO."

If a company's pension benefits are proven to be actuarially equivalent to Medicare's, the government will give the employer a subsidy that will average about $600 per person each year for continuing the benefit.

Companies will receive the subsidy retroactively after filing monthly reports with the government listing qualified retirees and their drug expenses.

Wendy McCoy, manager of group health benefits at TECO Energy Inc. in Tampa, whose retiree plans are better than Medicare's, said the utility is happy to provide uninterrupted drug coverage to its retirees. But she said the government subsidy, which will help reduce the company's costs, entails so much paperwork and delay it may not be worth the effort.

"I suspect we won't see a check for a year," McCoy said. "I haven't even thought about how much we're going to be spending to get the subsidy. It would be too depressing."

Kris Hundley can be reached at 727 892-2996 or hundley@sptimes.com

What retirees with employer-sponsored drug coverage should do about Medicare Part D:

- Expect a letter by the end of October from your former employer regarding your existing company-sponsored drug benefit.

- If the letter says the company's plan is "creditable," that is, equivalent or better than Medicare drug plans, you can continue with your current coverage. There will be no penalty if you decide to move to a Medicare drug plan in the future.

- If the letter says the company's plan is not as good as Medicare's, or "not creditable," you must choose a Medicare plan by May 15 or pay a penalty to enroll in the future.

- If you are a heavy prescription drug user or qualify for low-income assistance, a Medicare plan may offer better coverage than your company's plan. Call your employer or Medicare (toll-free 1-800-633-4227).

[Last modified October 19, 2005, 16:39:49]