Citing PPACA, employers dropping retiree drug benefits

By BenefitsPro

By Allen Greenberg

A growing number of employers plan to drop pharmacy benefits to their Medicare-eligible retirees.

That development, reflected in a survey by Buck Consultants, appears to be an outgrowth of the Patient Protection and Affordable Care Act.

“Employers have options for controlling prescription drug costs for Medicare-eligible participants,” said Paul Burns, a principal at Buck Consultants. “For example, since Retiree Drug Subsidy payments are no longer tax-exempt and do not keep pace with rising drug costs, some employers are considering moving to an Employer-Group Waiver Plan to take advantage of additional subsidies available as a result of the Affordable Care Act.”

At the moment, 48 percent of employers who responded to the survey by the HR and benefits consulting firm said they offer prescription drug plans to Medicare-eligible participants.

Of these respondents, only 55 percent intend to continue this benefit, down from 75 percent in the previous survey.

The better news for workers is that nearly all (99 percent) respondents provide active employees with prescription drug coverage, an increase from 96 percent in 2011.

More than 250 organizations participated in the survey, representing a broad range of industries and more than 3.9 million covered lives.

The majority (71 percent) of survey respondents said they spend 16 percent or more of their total healthcare benefits cost on pharmacy benefits.

The survey asked organizations how they are responding to some of the pharmacy-specific requirements within ACA.

Of the two major categories of health benefit plans under ACA – grandfathered (i.e., plans in existence on March 23, 2010 meeting certain requirements) and non-grandfathered (subject to a larger set of requirements) – only 26 percent of survey respondents report being grandfathered.

Of those grandfathered plans, 42 percent plan to keep this status long-term, beyond 2014.

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