Health Reform Affects Prescription Plans, Too
Health care reform is beginning to take effect, but little attention has been paid to the effect on prescription drugs. The law spells out new benefits and regulations affecting the whole pharmacy arena. Prescription drug changes will be phased in between now and 2020, many starting within the next 12 months.
Some of the more significant changes, such as in Medicaid and Medicare, may shift costs to patients, employers and health plans. Many of the significant changes in the prescription drug field will be starting in this year:
• Medicare Part D coverage gap rebate checks go out. One of the first steps to gradually eliminating the coverage gap, or the doughnut hole, in Medicare Part D benefits will be to give Medicare patients whose drug costs reach the coverage gap in 2010 a one-time $250 rebate check from the Centers for Medicare & Medicaid Services (CMS).
• Retiree drug tax exemption will be eliminated. The tax exemption to employers that receive the Retiree Drug Subsidy for providing prescription drug coverage for retirees eligible for Medicare has been eliminated. The actual change does not occur until 2013, but many companies are accounting for the liability now. Many large companies have already indicated they anticipate taking an earnings hit as a result of this change. As a result, companies may consider other ways of providing benefits or could even cut benefits to lessen the impact.
• Lifetime limits will be disallowed. By the end of September, health plans will not be allowed to put lifetime limits on the dollar amount of coverage provided to their members. This provision extends to prescription drug benefits.
• Federal upper limit changes begin. The federal upper limit on pharmacy reimbursement for multiple-source drugs has changed from 250 percent of the average manufacturer price (AMP) for the least-expensive therapeutically equivalent drug to 175 percent of the weighted average, as determined by the most recently reported monthly AMPs of multiple-source drugs available at pharmacies.
• The Early Retiree Reinsurance Program starts. This $5 billion fund helps employers defray the cost of their retiree health insurance. This temporary reinsurance program will reimburse 80 percent of claims between $15,000 and $90,000 for employer-sponsored retiree coverage of individuals 55-64 years old who are not active workers or eligible for Medicare. For employers to take full advantage of the program, they will have to merge their pharmacy and medical claims data, which is typically handled by two different vendors.
The legal and tax information contained in these articles is merely a summary of our understanding and interpretation of some current provisions of tax law and is not exhaustive. Consult your legal or tax advisor for advice concerning your particular circumstances.
