Supplemental Insurance Benefit Strategies for Retirees: Medicare exchange vs. EGWP – or both!
April 3, 2012
As employers consider alternatives to offering retirees traditional group Medicare insurance, they may evaluate more than one supplemental insurance solution. Employers often compare an Employer Group Waiver Plan (EGWP) solution with a private Medicare exchange such as the one provided by Extend Health. Both solutions offer some clear benefits, including:
- Financial relief provided by CMS subsidies
- GASB and FAS liability reductions
- Catastrophic payment relief
- Increased benefit flexibility
However, only a Medicare exchange can reduce an employer’s administrative burden, and only a Medicare exchange can provide post-65 retirees with the flexibility to choose a supplemental plan that meets their needs, often at a lower cost. These are solid reasons to move to a Medicare exchange solution, but employers with certain populations, such as unions that have strong contractual benefits obligations, may prefer not to migrate their full Medicare-eligible population to an exchange.
Understanding that both solutions offer advantages for employers, Extend Health has partnered with Medco to provide an Extend Health EGWP solution. Employers can leverage the power of the individual Medicare marketplace through the nation’s largest private Medicare exchange, recognize savings, and meet ongoing obligations to retain a group prescription drug program where necessary.
Read on to learn more.
Here’s how it works:
Employers who choose this health care insurance solution work with Extend Health as the single point of contact. Their retirees then enroll in an individual Medigap plan paired with a Medco (EGWP) group prescription drug benefit product. If an employer has retirees who are allowed to opt out of the EGWP, Extend Health will transition them to the individual Medicare Part D prescription drug plan that best meets their needs.
As the single point of contact, Extend Health provides:
- Communications: employer-branded communications explaining the enrollment process, and offer guidance across both the medical and prescription plan offerings.
- Reporting: enrollment reports in both Individual Medicare programs and Medco prescription plan programs.
- HRA Administration: managing reimbursements for both the Individual Medicare and Group prescription plan premiums.
See the following section for a deeper dive into the differences between an EGWP and the Medicare exchange model.
Comparing Benefits of EGWPs and Exchanges
An EGWP, often pronounced “egg whip,” is a Medicare Part D plan that is tailored specifically to Medicare-eligible retiree populations of employers or unions. Employers typically provide an EGWP to deliver a group prescription drug program.
Insurance carriers position EGWPs as a way for employers to lower their cost of providing retiree group medical benefits without fully exiting the group insurance market. The insurance companies pass on the CMS subsidies savings to the employer or union and their members. Employers, unions and beneficiaries can also take advantage of the Medicare Part D donut hole manufacturer’s discount by using a modified version of an EGWP called an “EGWP + Wrap” plan where additional benefits are added to the EGWP.
How Does An EGWP Compare to a Private Medicare Exchange?
|Category||EGWP||Extend Health Exchange|
|CMS Subsidy Eligibility||Yes||Yes|
|Self-Insured Claims Risk||Reduced||Reduced|
|Risk Pool||Limited to employer’s retirees; adverse health events among a few can increase population risk||Expanded to county or state; younger members entering every month|
|Union Impact||Less challenging to accommodate union contract terms||Union contract terms may be written to exclude an exchange solution|
|Benefits Administration||No reduction||Union contract terms may be written to exclude an exchange solution|
|Transition Experience||Seamless||Simple process fully managed by Extend Health|
|Plan Choice||None||Broad carrier and plan design choice and range of premium options|
|Donut Hole Discount||Must be structured to receive||All plans receive|
|Coverage Needs||One-size-fits-all. Low users subsidize the frequent/high-cost users||Allows retirees to “right-size” their coverage to fit their health needs|
|Overall Retiree Impact||Retirees have no control over plan design or cost issues and high-users may spend more on OOP expenses||Wide choice of plan design, range of premium options, “right-size” coverage.|
Visit Extend Health to use the ExtendExchange™ platform – the nation’s largest private Medicare exchange.