Inflation Reduction Act: Important Updates Affecting Group Health Plans and Medicare Clients
Published: 07.30.2024
Significant IRA Changes Effective January 1, 2025
Under the Inflation Reduction Act (IRA), there will be significant changes to Medicare Part D effective January 1, 2025. These updates aim to expand benefits, lower drug costs, keep prescription drug premiums stable and improve the overall strength of the Medicare program.These changes will not only impact those individuals already on Medicare but will shake up how your group clients are providing benefits and what they will need to consider for their employees who are 65 or older or are eligible for Medicare due to a disability.
As a health insurance and benefits broker, you need to be aware of how the updates to Medicare Part D will impact existing Medicare members, employer groups, Medicare-eligible employees, dependents, retirees and those on COBRA—so that you can help your clients understand their options and responsibilities and mitigate their risk.
Let’s dive into what you need to know.
- Part D Improvements Under the Inflation Reduction Act
- What do these changes mean for your clients already enrolled on Medicare?
- What do these changes mean for employer-sponsored health plans?
- The Bottom Line
Part D Improvements Under the Inflation Reduction Act
Individuals with Medicare will benefit from lower prescription drug costs and a redesigned prescription drug program. Some benefits include:
- Insulin available at $35 per month per covered prescription
- Access to recommended adult vaccines without cost-sharing
- A yearly cap ($2,000 in 2025) on out-of-pocket prescription drug costs in Medicare
- Expansion of the low-income subsidy program (LIS or “Extra Help”) under Medicare Part D to 150% of the federal poverty level starting in 2024
- Medicare will be able to negotiate directly with drug manufacturers to lower the price of some of the costliest prescriptions for individuals covered by Medicare
- Part D plan members will have the option of paying their prescription drug costs in limited monthly installments over the course of each plan year through the Medicare Prescription Payment Plan (MPPP) provision
What do these changes mean for your clients already enrolled on Medicare?
The Inflation Reduction Act changes are aimed at improving Medicare Part D benefits for existing Medicare members.While benefits are becoming more robust, these changes could also have a negative effect on the way insurance carriers provide Medicare Part D benefits. For example, some carriers may choose to increase premiums and or copays for Part D plans to compensate for the increase in costs they are taking on.
✔ What brokers need to do:
It is more important than ever to contact your Medicare clients prior to the Annual Enrollment Period (AEP) to review their current coverage, prescription drug needs and options for the upcoming plan year. Discuss these Part D changes and the Inflation Reduction Act with your clients so that you can help ensure they are in the best plan for their needs and budget. This is not the year to simply allow them to auto renew without first discussing their options.
What do these changes mean for employer-sponsored health plans?
The Inflation Reduction Act (IRA) could affect employer-sponsored group health plans in a few ways. Most notably, it may affect a group’s creditable coverage status when it comes to prescription drug coverage.Prescription Drug Coverage – Creditable vs. Non-Creditable Coverage Status
An employer-sponsored prescription drug plan is considered creditable coverage when the amount the plan pays is equal to or greater than the standard prescription drug coverage through Medicare.The IRA changes to the Medicare prescription drug program enhance the overall value of the Part D standard benefit, making it harder for some employer-sponsored health plans to demonstrate that their prescription drug coverage is creditable.
This means many plans that were borderline creditable in 2024 are likely to be considered non-creditable for the 2025 plan year.
While plan sponsors are not required to provide creditable coverage, they are responsible for notifying Medicare-eligible plan members on the status of the plan’s credibility. Employers must also disclose whether their coverage is creditable to the Centers for Medicare and Medicaid (CMS).
For more information on Creditable or Non-Creditable Coverage disclosures, visit our Medicare Part D Employer Notification Requirements resource page.
How can you determine if the plan is considered creditable coverage under Medicare Part D?
Visit our Medicare Part D Creditable Coverage Determination chart to learn the different methods for determining creditability and how you can assist your group clients with reviewing and assessing their employer-sponsored plan.📝 [Creditable Coverage Determination Chart]
If a plan loses its creditable status, employees need to consider enrolling in Part D. This is because individuals who do not enroll in Medicare Part D when they are first eligible may incur penalties.
To prepare for these changes, employers should review their coverage as soon as possible so that they can anticipate any decisions and communications that will need to be made.
Retiree Drug Subsidy
The Retiree Drug Subsidy Program is offered by the Centers for Medicare and Medicaid (CMS) and reimburses health plan sponsors for a portion of their expenses for prescription drug benefits provided to Medicare-eligible retirees.To be eligible for the Retiree Drug Subsidy (RDS), employer-sponsored prescription drug plans must be considered creditable; therefore, the IRA enhancements to Part D coverage could make it more difficult for employers to qualify for the subsidy.
To avoid cost increases, employers could choose to stop sponsoring their group plan for retirees and direct retirees to obtain individual Part D coverage through a marketplace exchange.
Employer takeaways
- It is becoming more costly for employers to provide creditable coverage for their Medicare-eligible population.
Employee takeaways
- If the group plan is not considered creditable, Medicare-eligible employees will need enroll in Part D separately or risk paying penalties.
- If a Medicare-eligible employee transitions from their group plan to Medicare, any dependents on the plan will need to seek alternative coverage. Depending on the specific situation, the dependent could either switch to coverage through their own employer, Medicare if they are 65+, or an Individual Health plan.
✔ What brokers need to do:
It is important you help your group clients review their coverage to determine if it will be considered creditable for the upcoming plan year. Educate your groups on the Inflation Reduction Act changes and make them aware of their options.Each employer group’s situation will vary based on the specifics of their plan, but it is important to begin assessing how the Inflation Reduction Act will affect plan sponsors and how they are providing benefits to their Medicare-eligible population.
Download our email template to help you get started with reaching out to your affected group clients:
Group Client Email Template - Download
The Bottom Line
The Inflation Reduction Act is helping to strengthen the individual market and expand coverage for those currently on Medicare and those soon turning age 65—but it is also creating a lot of uncertainty for brokers and their Medicare and employer group clients.Now is the time to discuss these IRA changes with your clients and prepare them for what’s to come.
Savoy is here to help.
At Savoy, we have a dedicated team of compliance and Medicare experts ready to assist brokers and their clients with navigating the complexities of the Inflation Reduction Act and other significant legislative regulations.📧 Contact our team to learn more.
