This is the second of two columns discussing the new Medicare Advantage and Medicare Part D (Prescription Drug insurance) plan options for federal annuitants enrolled in Medicare and also enrolled in the Federal Employee Health Benefits (FEHB) program.
The first column discussed the new Medicare Advantage plans that include Medicare Part D (Prescription Drug plan) enrollment options. This column discusses separate supplement Medicare Part D prescription drug plans sometimes called the Prescription Drug Plan (PDP) Employee Group Waiver Plans (EGWPs) offered by several health insurance carriers in the FEHB program. Among these insurance carriers are Aetna, Blue Cross Blue Shield, and Government Employees Hospital Association. Many annuitants have received notices from these insurance carriers explaining their PDP EGWPs.
PDP EGWPs are relatively new prescription drug plans available to federal annuitants. These plans can offer potential savings to annuitants who incur above average prescription drug expenses but with insufficient prescription drug coverage in their FEHB health insurance plans.
To be eligible for enrollment in one of these Medicare Part D prescription drug plans, an annuitant must be enrolled in Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance) or only Medicare Part A. A federal employee who is aged 65 or older and enrolled in a FEHB program health plan is not required to enroll in Medicare Part B until he or she retires from federal service.
Many federal retirees and annuitants are currently receiving notices from their FEHB program insurance carriers about enrolling in a PDP EGWP. These annuitants are enrolled in Medicare Part A and Medicare Part and in FEHB program sponsored fee-for-service, preferred provider organization (PPO) consumer driven health plan (CDHP) or high deductible health plan (HDHP).
Why Would a Federal Retiree Enroll?
Given the amount of their (and spouse’s) prescription drug expenses and their current FEHB program plan coverage for prescription drug expenses, why would an annuitant want to consider enrolling in a PDP EGWP?
One example is a federal retiree enrolled in a CDHP or an HDHP associated with a health reimbursement account (HRA). By being enrolled in a PDP EGWP, the annuitant can avoid using HRA for routine drug expenses thereby improving the chances there will CDHP or HDHP contributions (“credits”) that can be rolled over into the following year.
Unfortunately, over the last two years there has not been much information and guidance from OPM regarding the PDP EGWPs. OPM has explained (since Medicare Part D started in 2007) that a federal annuitant is not required to enroll in Medicare Part D due to the fact that the FEHB program plans offer “creditable” prescription drug coverage.
Furthermore, and this is most important – a federal annuitant who incurs catastrophic prescription drug expenses at some time during their retirement can enroll in Medicare Part D without being subject to a Medicare Part D late enrollment penalty.
Moreover, OPM has not fully explained to federal annuitants the purpose of these PDP EGWPs. Many annuitants are currently receiving notices from their FEHB program insurance carrier about enrollment in the carrier-sponsored PDP EGWP without explaining the prescription benefit to the annuitant.
As noted in the previous column on this topic, OPM issued a carrier letter at the end of January 2023 highlighting the changes in Medicare Part D resulting from the Inflation Reduction Act (IRA) in August 2022. OPM encouraged FEHB program carriers to offer more “Federal-friendly” Medicare Advantage plans that benefit from the IRA reforms.
Part of the OPM’s carrier letter was guidance regarding PDP EGWPs. One aspect of OPM’s guidance is that OPM will allow FEHB program carriers to offer PDP EGWP plans that feature automatic enrollment for FEHB program participants enrolled in Medicare.
This automatic enrollment feature is alarming because:
(1) It may reduce an FEHB program participant’s prescription drug plan choices (see below on a PDP’s “formulary”); and
(2) It could enroll a federal annuitant in a PDP EGWP that my not be the right prescription drug plan given the participant’s medication needs An OPM spokesperson stated that auto-enrollment in PDP EGWPs is possible.
However, under Medicare rules, “auto-enrollment” requires consumer protections. Consumer protections include transparency notifying potential enrollees if they will be auto enrolled in a PDP EGWP and provide a straightforward way to opt out of the enhanced Medicare Part D product, if they choose to do so. This opting out option of the PDP EGWP needs to be in accordance with the Center for Medicare and Medicaid Services (CMS) requirements as described in CMS’ PDP Enrollment and Disenrollment Guidance.
It is important for potential enrollees in a PDP to understand how particular prescription drugs are placed in a particular PDP. The brand and generic medications that are available is called a PDP’s formulary.
PDP companies use a panel of professionals to evaluate the medications in each therapeutic category. Also, PDP companies often develop their “Tiers” in different ways. Usually, they have Tier 1,2,3 and 4 and the medications are listed based on cost. Tier 1 is often the companies’ Preferred Generics. Tier 2 is other Generics, etc. Plans have created special Tiers for their no cost vaccines and for the $35 co-payment for insulin. The higher the Tier, the more the cost to the PDP enrollee.
Individuals enrolling in a PDP should enroll in a PDP which covers their medication needs as cheaply as possible. However, the best option for an individual still may not cover some or all of their medication needs. When a PDP does not cover an enrollee’s medication or does not cover the medication at a higher Tier, the enrollee’s doctor can request a formulary exception. This could occur for example when a doctor prescribes a brand when a generic is also available.
Federal annuitants who enroll in a PDP EWGP and who have higher adjusted gross incomes may be paying more for their Medicare Part D monthly as a result of being subject to Income-Related Monthly Adjustment (IRMAA). As is the case with Medicare Part B, Medicare Part D monthly premiums are subject to IRMAA.
Considerations for Federal Retirees and Annuitants
At this time when several FEHB program carriers are sending information about their PDP EGWP’s to federal annuitants who are enrolled in Medicare (and also enrolled in a FEHB program plan that provides prescription drug coverage), the following are some considerations for federal annuitants:
(1) If they are happy with the prescription drug coverage provided as part of their FEHB program insurance plan, then they should formerly opt out (call or write their FEHB program before the deadline which is November 13,2023) of any PDP EGWP being offered to them;
(2) If during 2023 and in previous years they have paid out-of-pocket (co-payment) for their medications less than $2,000, then they should formerly opt out of any PDP EGWP being offered. This is because effective January 1,2025, under Medicare Part D, the catastrophic spending limit on prescription drugs will be capped at $2,000; and
(3) Those federal annuitants who are considering enrolling in PDP EGWP should make sure that if they have a need for any specific medications, then to make sure these medications are included in the PDP’s formulary.
If a federal annuitant is taking a specific medication and that medication is not included in the PDP’s formulary, then it makes no sense to enroll in the PDP.
There also remains the question that if an annuitant were to enroll in a PDP EGWP and discovered that the PDP did not address their specific medications, can they opt out of the PDP EWGP in the middle of the year? This question is among the many unanswered questions associated with the PDP EGWPs.
Federal annuitants who may be interested in enrolling in a PDP EGWP are advised to proceed with caution before deciding to enroll. If they have to, they should consult a knowledgeable health insurance broker who is familiar with all the different types of programs offered by Medicare.