Four in five employers that pay for retirees’ drug costs will accept government subsidies to continue coverage, according to a survey conducted by the Kaiser Family Foundation and Hewitt Associates, of 300 companies with 1,000 employees each, the Seattle Post-Intelligencer reports. When it drafted the program, Congress created a tax-free subsidy to encourage companies to continue offering retiree drug coverage. The subsidy, for 2006, will be equal to 28 percent of a retiree’s drug costs between $250 and $5,000, the Intelligencer states. But the survey found that companies will continue to reassess their strategies for 2007 and beyond.
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Frank McArdle, manager of the Washington office of Hewitt Associates, a human resources consulting firm, said that total savings from subsidies represent only 7 percent of the estimated total for retiree health costs, according the Pittsburgh Post-Gazette. “This illustrates why cost pressures, in my opinion, are going to remain intense even in the aftermath of the Medicare drug benefit. The savings are going to be significant and important, but the costs are also going to be impressive as well,” McArdle said.
The more than 80 insurers offering Medicare Part D drug plans to retirees not covered by employer plans face an uncertain future as well, anticipating costs in a market that promises to be very competitive. “Only time will tell how that shakes out,” says Lindsey Spindle, spokeswoman for Avalere Health, a private research firm that has analyzed the drug plans
Most of the insurers are regional, but Medicare has approved 10 companies for coverage nationwide. Humana offers plans with very low premiums and has ties with Wal-mart. Humana’s plans may attract customers who have few drug expenses, USAToday reports, in a separate analysis of market trends, based on Avalere data. Cigna’s plans are more expensive but include more drugs. Unicare offers a more expensive plan that has fewer restrictions. Both Humana and Pacificare offer plans that cover some of the coverage gap, the “doughnut hole.”
In California, “the competition has driven the average premium rate down to $25.41. Six plans are charging $20, the lowest in the nation,” said John Leighty, an analyst with HealthLeaders-InterStudy, a provider of managed care industry information, according to PRNewsire.
Insurers are participating in the program with an eye to the $60 billion Medicare will pay out next year, and because it offers potential access to thousands of new customers, USAToday says, “in a market where it can be hard to increase a sales base outside of luring members from rival firms.”
Changes are likely in future years in policies and in the number of firms offering plans. "It’s going to play out market by market,” Rod Cavin of the Health Strategies Group, a consulting firm to the pharmaceutical industry, said, according to USAToday. "You could design a grander social experiment, but it would be difficult.”