Although the number of retiree health plans has been declining in recent years, there are still plenty of employers looking for cost-effective and flexible options to cover retirees aged 65 and older. Medicare is available beginning at the age of 65, although enrollment can be delayed if an individual is covered by another health plan, such as an employer-sponsored plan.
How can a plan sponsor offer a retiree health plan?
There are many design options. One option for plan sponsors is a Medicare Advantage (MA) plan offered on a group basis, known as an employer group waiver plan, or EGWP (“egg whip”). The terms MA and EGWP can be used interchangeably.
How common are EGWPs?
- In 2017, 19% of the 3.7 million people enrolled in a MA plan were covered by a group plan (EGWP) according to Kaiser’s Medicare Advantage fact sheet. That’s double the number of Medicare beneficiaries (enrollees) in group plans ten years ago.
- According to Kaiser’s 2017 Employer Health Benefits Survey:
- There were 57 million Medicare beneficiaries in 2017, the majority covered by original Medicare, with one-third, or 33%, also enrolled in a Medicare Advantage plan.
- One-quarter of all large firms that offer retiree benefits contribute to those benefits through a contract with a Medicare Advantage plan.
What are the different parts of Medicare? Which part is an MA/EGWP?
Medicare is made up of several parts:
- Part A: Hospitalization, skilled nursing facility, nursing home, hospice and home health services
- Part B: Medically necessary, preventive services, durable medical equipment, mental health, etc.
- Parts A and B together: Commonly referred to as original Medicare. Claims are adjudicated and paid by Medicare. Original Medicare has exclusions such as vision and dental.
- Part C: MA plans/EGWPs. MA plans are offered by private insurance companies. Before enrolling in a MA plan, beneficiaries are required to be enrolled in both Parts A and B. Most MA plans incorporate a prescription drug plan and include wellness services. Some may also cover dental and vision services.
- Part D: Prescription drugs
- Medigap plans/Medicare supplement: Also offered by private insurance companies on either an individual or a group basis. Prescription drugs are not a part of these plans, so beneficiaries would need a separate Part D plan. Beneficiaries would enroll in either a MA plan or a Medicare Supplement plan, but not both.
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How is an EGWP plan offered?
Created by the Medicare Modernization Act of 2003, an EGWP can be structured as either a fully insured or self-funded plan and customized to include different deductibles, coinsurance and copay amounts. The plan is set up directly with an insurance carrier, enabling the plan sponsor to meet union contract requirements and align the benefits to those of the current health plan, therefore maintaining consistency of plan design for retirees. Medicare pays the insurer a fixed amount per enrollee to provide benefits covered by Medicare, and the employer or union pays for any additional benefits. An EGWP is called a waiver plan because the Centers for Medicare & Medicaid (CMS) waives certain requirements to encourage customization. For full details on the waivers available, see Aetna’s whitepaper, The Future of the Medicare Advantage Employer Group Waiver Plan Market.
Thinking about offering an EGWP? Here are five tips to consider:
- Discuss the options in your market with your insurance representatives.
- Determine whether the benefits available will meet the objectives you’ve set for your retiree plan offering.
- Research the PPO network available to ensure it can accommodate retirees in a broad, geographic area. Also, take a look at both in- and out-of-network providers to ensure appropriate coverage.
- Identify the required administrative responsibilities.
- Sign in to use the Foundation Community site or ISCEBS Link and ask other benefit professionals how they structure their retiree plans.
A Medicare Advantage group plan is just one way to offer retiree benefits to your aged 65+ retirees. With a little bit of research, you may find this could be an option for your company.
Related Reading: Coordinating Employer Health Plans With Medicare
Employer Group Waiver Plans, Better Medicare Alliance, March 2018
Anne Newhouse, CEBS
Information/Research Specialist at the International Foundation of Employee Benefit Plans