
Medicare Prescription Drug Coverage: An Overview of Opportunities and Challenges for PBMs and Industry Partners Todd R. RookerPresident, SilverScript Insurance Co. Wisconsin Association of Health Underwriters Fall Sales Conference Sept. 14, 2005
What is SilverScript? • SilverScript Insurance Company • Indirectly wholly owned subsidiary of Caremark • Will participate as a PDP in 34 regions • Pending insurance licensure in all states • Granted waiver by CMS to operate PDP until licensure secured • Two products offered for 2006 • A fully-insured offering, featuring two basic alternative benefit plan designs
Agenda • Evolution of Part D • Providing employer support • Providing health plan support • The role of agents and brokers in Medicare Part D • The future of the program for duals and low-income subsidy individuals • Conclusions
Medicare Modernization ActThe Evolution of Part D • Encourages growth of managed care in Medicare • Adds a drug-only benefit to the existing Medicare fee-for-service (FFS) program • Relies on private plans (which must bear insurance risk) to deliver drug benefits • Included interim drug discount card, which “sunsets” at end of 2005 • Other significant components • Health savings accounts (HSAs) • Reimportation • Revise Part B drug reimbursements (AWP reform) • E-prescribing • Hatch-Waxman changes • Demonstration projects
Employer subsidy applications due to CMS MAPD/PDPs begin marketing Medicare.gov plan comparison site goes live Dual eligibles auto-assigned Open enrollment begins. Final day to send notices of creditable coverage Part D benefit begins End of initial enrollment period Facilitated enrollment of low-income subsidy eligibles Sept. 30, 2005 Key Dates • Oct. 1, 2005 • Oct. 15, 2005 • Oct. 20, 2005 • Nov. 15, 2005 • Jan. 1, 2006 • May 15, 2006 • May 16, 2006
Employer Options • Subsidy • Employer provides prescription coverage to retirees under regular prescription benefit plan • Direct waiver PDP • Employer becomes a PDP for its own retirees • Indirect waiver PDP • Employer contracts with a PDP to offer a closed Part D plan to their retirees • Wrap • A nonMedicare plan that coordinates with Part D. Employer encourages its retirees to join a Part D plan, but provides additional benefits • Premium subsidy • Employer subsidizes premiums for retirees who enroll in a PDP or MA-PD plan • Drop coverage • Employer drops retiree coverage. Retirees may enroll in a PDP or MA-PD plan of their choice
What are Employers Doing for 2005? Source: Caremark survey of employer clients, June 2005
Employer SubsidyHow to Ensure Your Groups Qualify Five-step process for 2006: • Submit application by Sept. 30 • Extension recently granted to Oct. 31 • Include actuary’s attestation that plan meets actuarial equivalence standard, which is a CMS requirement • Certify that the plan will notify enrollees of the creditable coverage status of the plan • Submit and periodically update enrollment information • Submit aggregate data about incurred drug costs and reconcile costs at the end of the year
Employer SubsidyAdvantages • CMS highlights the administrative advantages of the retiree drug subsidy option including: • Employer control over plan design • Ability to use vendors of choice • Reduced administrative requirements • No service area restriction • Later deadlines • Retiree communication requirements streamlined • Easier to manage requirements for noncalendar year plans
Health Plan Options • Medicare Advantage Prescription Drug Plan (MAPD) • Prescription Drug Plan (PDP) options: • Open PDP • Waiver PDP (indirect or direct) • Support employer-based coverage • 28% subsidy • Wrap plans • Fallback plans • None anticipated for 2006
MAPD/PDP SupportHow Your PBM Can Help • Claims processing • Mail service/specialty • Formulary development, P&T review • Reporting • Rebate processing and billing • Electronic prescribing • Compliance/audit • Client application support • Customer care enrollment and eligibility support • Benefit set up and coordination of benefits • Network contracting and development including long-term care, home infusion, Indian/tribal/ urban pharmacies
MAPD/PDP Outsource ChallengesAreas to be Cautious Assigning to a PBM • Customer care • Customer calls can only support prescription inquiry which may impact beneficiary satisfaction • Information and outreach • Duplicate production of information to accommodate Medical and prescription coverage • Limited control of branding • Enrollment • Owning the beneficiary experience • Missed cross-selling opportunities
Role of Agents and Brokers • Generally, a licensed agent must review and approve a Medicare beneficiary’s Part D application • Significant growth opportunities • Current policyholders • Medicare beneficiaries without prescription coverage • Group business and employers dropping coverage • Impact on Medicare supplement business • H, I, & J plans: not “creditable” coverage
Looking ForwardEmployers • Employers looking to subsidy for 2006 • Re-evaluate for 2007 • Dropping coverage, wraps, waiver PDPs • Part D plans will partner with employers who elect to drop prescription coverage • Direct marketing and education to beneficiaries through a trusted source (employers) • Perceived continuity • Ties-in with normal open enrollment season • Additional services may be offered by Part D plans to ease transition to insured benefit • Premium subsidy • Implement secondary or wrap coverage
62% eligible for full subsidy 20% eligible for reduced subsidy 19% not eligible because of assets Looking ForwardDual Eligibles and Low-Income Subsidy Dual eligibles (6.3 million beneficiaries) Nondual eligibles >150% of poverty (23.6 million beneficiaries) 16% Nondual eligibles <150% of poverty (9.4 million beneficiaries) 60% 24% All Medicare beneficiaries: 39.4 million Nondual eligibles <150% of poverty: 9.4 million beneficiaries Note: 100% of poverty is equal to $9,310/single: $12,490/couple in 2004. Source Congressional Budget Office, November 2003.
Looking ForwardPart D Market • Beneficiary experience • Plan design, adoption, adverse selection • Premiums versus drug pricing • Shift from employer coverage to insured market • CMS • Reinsurance corridors, risk adjusters • COB process • Budgetary factors • Deficit, Iraq, Katrina, political environment • 2007 PDP and MAPD bids • Year-to-year uncertainty on premiums • Re-enrollment process • PDPs versus MAPDs