Question: Employer Group Waiver Plans seem pretty complicated. Is it really worthwhile for brokers and agents to put this tool in their box of options for employers who have retiree drug coverage?
If you knew that more than 3,500 employers with approximately 4 million retirees would be up for grabs, would you think that was business worth going after? If you could get help from an experienced partner to address the complexities of the Employer Group Waiver Plan, would that encourage you to seek these opportunities?
No one is denying that Employer Group Waiver Plans are a sophisticated solution that requires some hand-holding before customers understand it all. But the numbers coming out of a 2011 federal report make it clear that big changes are afoot when it comes to pharmaceutical coverage for retirees.
Because of tax and expense changes in the Patient Protection and Affordable Care Act that will kick in for 2013, today’s existing Retiree Drug Subsidy is worth a lot less money to companies. The proof was in the announcements of huge increased future tax liabilities by companies like AT&T ($1 billion) and John Deere ($150 million) shortly after the reforms were written into law.
The federal government estimates that the current 6.2 million lives now covered under RDS will decline to 2.1 million by 2014. That means many employers today are searching for the most economical solution that will continue to provide their retirees with their current drug coverage. EGWP+Wrap is the option that will maximize their savings. In fact, some experts expect it to save employers 20% more in the first year than the RDS program.
Here are some key features of EGWP+Wrap:
- This is a self-insured product that reflects the employer’s original benefit plan.
- The EGWP part of the plan typically mirror the standard Medicare Part D plan tiering levels, including the “donut hole” during which retirees are required to pay for 100 percent of drugs, but will pay their normal copays.
- The Wrap part of the plan provides coverage for brand name drugs in the donut hole. This is critical so that the manufacturers’ 50% Discount Program, created under PPACA, reduces the employer’s costs.
- As long as the EGWP+Wrap is created on a calendar-year basis, it is eligible to received catastrophic reinsurance funding from the federal government, another source of savings for employers.
- Because the EGWP+Wrap results in lower future benefit costs and obligations, companies are able to reduce their balance sheet figures for post-retirement benefits.
EGWP may have a funny name, but it is a dead-serious opportunity for brokers and agents to grow their business. By working with a prescription benefit administrator that understands the nuances of EGWP+Wrap, they can provide their existing customers with a cost-beneficial product, as well as attract new employers looking for a way out of their drug coverage dilemma.
If you’re a broker with tough questions, I’m here to provide unbiased answers and feedback to help you take the next step in adapting your business. Feel free to leave your question in the comments.
Fleet is president of AmWINS Group Benefits, a wholesale broker of comprehensive group insurance programs and administrative services. He can be reached at asksam@amwins.com.
