Retiree health plans are a major expenditure for organizations, and costs can be volatile. In particular, self-funded plans face increasing costs each year—and there is no cap on the potential costs when retirees have serious health issues.
A Better Option than RDS?
Selecting the right retiree drug program can signiﬁcantly reduce your risk and increase subsidies—and it can reduce your time administering the plan.
Many organizations have historically ﬁled for the Retiree Drug Subsidy (RDS) because of its stability and longevity. But the Employer Group Waiver Plan (EGWP) may provide greater cost savings. EGWP is becoming more popular due to PPACA changes, including a 50% brand drug discount in the donut hole. This option should be considered annually when you evaluate your retiree drug plans.
What Is EGWP?
An EGWP (pronounced “egg whip”) could potentially provide twice as much money in subsidy as the RDS program. And it gives you access to additional subsidy dollars that aren’t available under RDS:
- Upfront capitation—funding that replaces the RDS Program
- Catastrophic coverage—funding specifically for claims that reach a catastrophic level
- Low Income subsidy—funding specifically for low-income individuals
- Pharma donut hole—brand name discounts for drugs in the donut hole
In addition, the RDS Program tasks would no longer be required if you move from RDS to EGWP coverage.
An EGWP could be a more affordable way to provide prescription drug coverage for retirees. An EGWP is a group Medicare Part D option under the Medicare Modernization Act of 2003. With an EGWP, you don’t have to file any subsidies.
There are pros and cons to both the RDS and EGWP programs, so you’ll need to carefully consider which option is right for your organization.
Pros of EGWP
- GASB/FASB standards allow employers to include EGWP savings in OPEB valuation
- Catastrophic subsidy is available
- Pharma manufacturer brand drug discount in donut hole
- If you’re fully insured, you are guaranteed fixed annual rates
- You may save money compared to RDS
Cons of EGWP
- If the current prescription spend is low with little high-cost specialty prescriptions, RDS may be a better fit
- There is less expense visibility when you’re fully insured
- You no longer receive lump sum subsidy payments
Start Saving Money Today
Our expert consultants at RDS can perform a detailed analysis to determine the best choice for your organization. We have extensive knowledge of Medicare programs and have created proprietary tools for prescription drug claim data aggregation, auditing, and analysis.
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