Guest Article

(From the September 29, 2008 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

Medicare Update: 2009 Premiums, New Marketing Rule Effective October 1, and November 15 Deadline Reminder

The Centers for Medicare & Medicaid Services (CMS) announced that the 2008 Medicare Part B standard premium of $96.40 and the Part B deductible of $135 will remain unchanged for 2009. CMS also issued a final rule on the marketing processes for Medicare Advantage (Part C) and Medicare Prescription Drug Benefit (Part D) programs. Employers who provide prescription drug coverage to Medicare-eligible individuals other than through a Medicare Part D plan are reminded that the creditable coverage notices must be provided before November 15.

2009 Medicare Premiums and Deductibles

Normally, the Medicare Part B premium increases at the same rate as the Part B expenditures increase from year to year (e.g., cost of physicians' services, outpatient hospital services, certain home health services, durable equipment, etc.). However, for 2009 the higher anticipated Part B costs are offset by a substantial reduction in the premium "margin" needed to maintain a contingency reserve in the trust fund. This reduction is due to planned increases in the margin that were built into the Part B premium for prior years and to the restoration of assets for certain Part A hospice benefits that were inadvertently paid from the Part B fund. As a result, no increase is needed in the Part B premium for 2009 -- it will remain at $96.40. The 2008 Part B deductible of $135 will also remain the same for 2009.

The Part A deductible will increase to $1,068 in 2009, up from $1,024 in 2008.

New Marketing and Compensation Rules

CMS finalized new marketing rules for Medicare Advantage and Part D Plans that go into effect no later than October 1, 2008, the beginning of the marketing year. The rules finalize six new marketing provisions and modify the "file and use" process, as briefly described below:

In addition, CMS published an interim final rule that requires organizations to establish, by October 1, 2008, a structure by which their agents and brokers who enroll beneficiaries in Medicare Advantage and Part D plans are compensated consistently with CMS requirements. CMS is focused on how compensation is disbursed, whether an agent receives a new or renewal compensation, and what qualifies as compensation. Compensation can vary but is subject to the requirement that renewal compensation be paid for five renewal years (i.e., a 6-year total compensation cycle), that compensation for a change in plans during that 5-year period be the same as renewal compensation, and that initial compensation may not exceed 200 percent of renewal compensation. "Compensation" includes pecuniary or non-pecuniary remuneration of any kind relating to the sale or renewal of the policy (e.g., commissions, bonuses, gifts, prizes, awards and finders' fees). Salary and other benefits are excluded from the definition unless they relate to sales volume.

Further information on the new rules is available on the CMS web site at www.cms.hhs.gov/HealthPlansGenInfo.

November 15 Deadline for Creditable Coverage Notices

Entities that offer prescription drug coverage -- including group health plan sponsors -- are required to provide notice to all Medicare eligible individuals with prescription drug coverage under the plan whether such coverage is creditable (i.e., whether the actuarial value of the coverage is at least equal to that under standard Medicare Part D). These Creditable Coverage Notices must be provided before November 15 of each year, as well as upon the occurrence of certain specified events. CMS updated its model Creditable Coverage Notices earlier this year.

The information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations. If you have any questions or need additional information about articles appearing in this or previous versions of Washington Bulletin, please contact: Robert Davis 202.879.3094, Elizabeth Drigotas 202.879.4985, Mary Jones 202.378.5067, Stephen LaGarde 202.879-5608, Erinn Madden 202.572.7677, Bart Massey 202.220.2104, Mark Neilio 202.378.5046, Tom Pevarnik 202.879.5314, Sandra Rolitsky 202.220.2025, Tom Veal 312.946.2595, Deborah Walker 202.879.4955. Copyright 2008, Deloitte.