Medicare regulations for retiree prescription plans draw reaction from employers, labor

Employers and labor relations groups have urged the Centers for Medicare and Medicaid Services (CMS) to move quickly in finalizing a new set of regulations affecting retiree prescription drug plans under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). Many of the groups suggested that CMS needed to release the final rules by the end of 2004 so employers and plan participants will have time to prepare and comply with the Jan. 1, 2006, effective date.

The new regulations will govern Medicare payments to sponsors of retiree prescription drug plans, which many employer groups now refer to as "the retiree drug subsidy program." It is designed to ensure that employers with retiree prescription drug plans do not reduce or eliminate coverage because of new Medicare-based drug benefits created when President Bush signed the MMA into law last year.

Among the comments CMS received, most employer groups--including the Society for Human Resource Management (SHRM)--stressed the need to quickly issue the new rules.

"It is not uncommon, for example, for an HR professional to begin the planning process more than a year in advance of a proposed effective date in order to get formal approval of the change at least six months in advance," stated Susan R. Meisinger, SPHR, SHRM president and CEO.

The National Association of Manufacturers suggested finalizing the rules by Dec. 31 "or as early as possible in 2005 to allow employers the necessary lead time to structure their benefit offerings and communicate those offerings to employees."

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Organized labor agreed it was in the best interest of all parties to issue the final regulations quickly. AFL-CIO officials, however, pointed out that the proposed rules contained flaws and left room for abuse by employers interested in profiting from the subsidy plan.

"The proposed regulations do not include a process for retirees to challenge an employer's claim that its plan is actuarially equivalent to the Medicare drug benefits, nor does it require transparency in regard to plan sponsors' attestations or the underlying assumptions and projections," stated the AFL-CIO and the National Education Association.

Both labor unions stressed that the proposed rules needed to provide plan participants a mechanism to challenge an employer's claim that their prescription plan's coverage is equal to the Medicare benefits.

"Providing for such transparency and attestation challenges is critical to empowering retirees and other interested parties to act as guardians of this new federal subsidy," the unions stated.

Employer groups disagreed with the unions' stance, saying that creating such a complaint system would be counterproductive and ultimately cost retirees valuable prescription drug benefits.

"[Since] retiree health benefits are a frequent subject of litigation, employers might respond to such additional requirements by deciding not to participate in the program to avoid exposing themselves to additional procedural appeals and lawsuits," the SHRM comments read. "This would reduce, not maximize, the number of retirees who stand to benefit from the subsidy program."

Sources familiar with the issue believe the CMS most likely will release the final rules in January.

COPYRIGHT 2004 Society for Human Resource Management
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