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Medicare Advantage Payments to Medicare Employer Retiree Plans

Medicare Advantage Payments to Medicare Employer Retiree Plans

Medicare Advantage Payments to Medicare Employer Retiree Plans

Waiving the Requirement to Submit Bids will Encourage Plan Offerings of High Quality Coverage

Beginning in CY 2017, CMS will implement an alternative payment policy for Medicare Employer Retiree Plans (Employer Group Waiver Plans), which will facilitate employers and unions offering high quality coverage for their Medicare eligible retirees. CMS will establish payment amounts for Medicare Employer Retiree Plans based on non-Medicare Employer Retiree plan bids rather than establishing their payment amounts through bidding, avoiding the cost and administrative burden of submitting complex.

In response to stakeholder feedback, CMS is releasing CY 2017 final local Medicare Employer Retiree Plans county payment rates now in the CY 2017 Rate Announcement, rather than in the proposed August timeframe to facilitate implementation of this policy. In addition, to provide employers and plans more time to adapt to this payment change, CMS is providing a two-year transition to the new Medicare Employer Retiree Plans county payment rate methodology.   

Under this new policy, Medicare Advantage Organizations offering Medicare Employer Retiree Plans will compete for employer contracts for these offerings based on access, quality, customer service, and wrap-around benefits.

Background on Medicare Employer Retiree Plans

Medicare Employee Retiree Plans exclusively serve employer/union groups and are either offered through negotiated arrangements between the Medicare Advantage Organization and employer and/or union groups or offered by the employer and/or union directly. As of 2015, approximately 19 percent of Medicare Advantage beneficiaries were enrolled in these plans.

Because of the manner in which Medicare Employer Retiree Plans are structured and marketed, they do not have the same competitive pressure as typical Medicare Advantage plans to submit low bids. The Medicare Payment Advisory Commission (MedPAC) has calculated that, in 2012, margins were substantially higher for Medicare Employer Retiree Plans (7.2%) than for other plans (4.4%). Due to related concerns in the Part D context, CMS discontinued bidding under Part D for Medicare Employer Retiree Plans in 2008 and began paying each Part D Medicare Employer Retiree Plan an administratively-set amount that is based on an average of Part D plan bids in the individual market. This policy extends that approach to Part C.

Changes to Payments Beginning in CY 2017

CMS is finalizing as proposed the methodology for calculating Medicare Employer Retiree Plan county payments based on the average bid-to-benchmark ratio for non-Medicare Employer Retiree Plans, with two modifications based on feedback from commenters. In the Advance Notice, CMS proposed to calculate the bid-to-benchmark ratios for 2017 using non-Medicare Employer Retiree Plan bids and benchmarks for 2017. To address the timing concerns raised by commenters, CMS has calculated bid-to-benchmarks ratios for 2017 using 2016 bids and benchmarks. The resulting rates for each county are available at: As the bid-to-benchmark ratios have not fluctuated significantly over the past several years, this revised approach will allow CMS to provide employers and insurers with information on payment rates in the Rate Announcement in April rather than waiting until August.

Providing More Standardized and Transparent Information

While each plan and beneficiary experience is distinct, payment under the new approach will allow Medicare Employer Retiree Plans to continue the offering of basic (Original Medicare) and supplemental benefits.  With this new methodology, employers will be in a better position to negotiate with Medicare Advantage Organizations on access, quality, customer service, and wrap-around benefits, as payments amounts will be standardized and more transparent. Employers may be able to use this information to negotiate arrangements with insurers that retain, or potentially even enhance, the value of the Medicare Employer Retiree Plan for their retirees.  In addition, eliminating the bidding process will ease administrative burdens in the offering of these plans.



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