<nobr>Mar 3, 2005</nobr>

ERIC: Medicare Regulation Summary

Below please find a summary of the final Medicare Part D regulations written by the Employee Benefits Practice Group of Covington & Burling. Also, below please find a short explanation of the document. We just received this paper from Amy Moore and wanted to pass it along as soon as possible. The paper is well written and identifies and explains the key issues relevant to employers. Please contact Edwina Rogers at 202-789-1400 or at erogers@eric.org if you have any questions regarding the final Medicare regulations.

Edwina Rogers

Per Covington & Burling:

At the end of January, the Centers for Medicare and Medicaid Services issued a final regulation interpreting the new Medicare prescription drug benefit (Medicare Part D). The final regulation, which is more than 1,500 pages long in typescript, provides important new information about how the Medicare prescription drug benefit will affect employer health plans. Selecting and implementing appropriate options for coordinating employer health plans with the new Part D benefit will require significant advance planning, and might also require plan design changes in 2005.

The final regulation creates flexible rules that will allow many employers to qualify for a 28% tax-free subsidy if they offer a prescription drug benefit to Medicare-eligible retirees. CMS estimates that the subsidy will have an average value of $668 per participant in 2006 (the equivalent of a taxable payment of $1,028 per participant for companies that pay tax at the maximum rate).

Employer health plans that provide prescription drug benefits only to active employees also are affected by the new rules. Employers are required to determine whether their plans are actuarially equivalent to Part D, and to notify CMS and Medicare-eligible individuals of the results of this analysis periodically, beginning in the fall of 2005. The final regulation includes additional information concerning the notice requirement.

Covington & Burling's employee benefits group has prepared a memorandum summarizing the final rule and identifying key issues for employers. We have attached a copy of the memorandum with the hope that you will find it useful.

Text Files:

Covington Medicare Regulation Summary

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