Human Capital & Careers

New Medicare-Reform Rules for Companies

For companies to qualify for the subsidy, they must offer plans that are ''at least as good as'' Medicare as well as contribute as much as Medicare...
Stephen TaubJanuary 24, 2005

The Centers for Medicare and Medicaid Services (CMS) finally announced final rules for companies that want to participate in a new, expanded drug plan under the Medicare Reform Act signed into law in December 2003.

Under the law, Medicare will begin covering a broad range of prescription medicines beginning in 2006. Businesses that enroll in the retiree drug plan will receive $668 in average annual per-capita subsidies, according to Bloomberg, citing CMS administrator Mark McClellan. Employers that continue to offer drug insurance will save an average of $900 per worker, he added.

In order for companies to qualify for the subsidy, they must offer plans that are “at least as good as” Medicare as well as contribute as much as Medicare would for coverage, McClellan said, according to Reuters.

Companies that do not qualify have three alternatives: they could offer a plan to supplement Medicare, offer their own complete plan through Medicare Advantage, or contract with another Medicare Advantage plan, the wire service added.

“Many employers and unions have dropped retiree coverage over the past decade, and the new Medicare law is the first real effort by the federal government to change this trend,” the agency reportedly declared in a statement. The new regulations aim to provide “a very clear path” for interested companies and beneficiaries, noted McClellan, according to Reuters.

The wire service noted that while some health experts fear businesses may instead choose to cut back on benefits as Medicare implements its new coverage, a recent study found that most large firms plan to maintain retiree health benefits in 2005.