04/21/09

Adjusted Cost Threshold and Cost Limit Amounts for Plan Years Ending in 2010, and adjusted parameters for Medicare Part D plans in 2010

On Monday, April 6, 2009, the Centers for Medicare & Medicaid Services (CMS) announced the adjusted cost threshold and cost limit amounts that apply to Plan Sponsors participating in CMS' Retiree Drug Subsidy (RDS) Program, with qualified prescription drug plans that end in 2010, as well as the adjusted parameters for Medicare Part D plans in 2010.

For detailed information about the adjusted cost threshold and cost limit amounts for RDS Plan Years ending in 2010, go to: Cost Threshold And Cost Limit By Plan Year.

The adjusted amounts apply only to RDS Plan Years that end in 2010. RDS plans ending in 2006, 2007, 2008, and 2009 are unaffected. The new cost threshold and cost limit amounts are $310 and $6,300, respectively. This is an increase from the 2009 cost threshold and cost limit amounts of $295 and $6,000. The higher cost threshold and cost limit amounts increases the maximum subsidy per retiree by $79.80, as compared to the application of the 2009 cost threshold and cost limit amounts. In addition, the Medicare Part D benefit parameters (e.g., deductible and out-of-pocket threshold) have been adjusted. These Medicare Part D adjustments affect the actuarial attestations submitted to CMS' RDS Center for plan years that end in 2010.

Impact of Adjustments

The year in which a Plan Sponsor’s RDS plan year ends, as specified in the Plan Sponsor’s Application, determines the applicable cost threshold and cost limit amounts for that Application. This principle applies to both calendar year plans and non-calendar year plans. The new adjusted cost threshold and cost limit amounts are used in determining the amount of subsidy payments for plan years ending in 2010. Thus, for each such plan, subsidy payments to a Plan Sponsor for each Qualifying Covered Retiree will generally equal 28 percent of allowable retiree costs, attributable to gross retiree costs between $310 and $6,300.

Plan Sponsors of RDS plans ending in 2010 that were, prior to April 6, 2009, using the 2009 cost threshold and cost limit as a basis for submitting costs to CMS' RDS Center, should adjust their interim cost data in their next cost submission to reflect the new 2010 cost threshold and cost limit amounts.

Please keep in mind that final cost reports, whether submitted for purposes of reconciling interim payments or submitted by Plan Sponsors that had selected an annual payment frequency, must reflect the applicable cost threshold and cost limit amounts that correspond to the Application plan year end date.

In addition, revised RDS regulations that took effect June 9, 2008, state that the valuation of defined standard prescription drug coverage for a given plan year is based on the initial coverage limit, cost-sharing, and out-of-pocket threshold for defined standard prescription drug coverage under Medicare Part D at the start of such plan year or that is announced for the upcoming calendar year. More specifically, under the revised regulations, any actuarial attestation submitted to CMS' RDS Center within 60 days after the publication of the adjusted amounts can be based on either the adjusted amounts, or the previous year’s amounts. Any actuarial attestation submitted more than 60 days after the publication of the adjusted amounts must apply the adjusted amounts.

For more detailed information on the adjusted cost threshold and cost limit amounts for 2010, and the adjusted Medicare Part D benefit parameters, select the following link to the CMS announcement.

http://www.cms.hhs.gov/MedicareAdvtgSpecRateStats/AD/list.asp#TopOfPage

The 2010 RDS cost threshold and cost limit adjustments, and the adjusted Medicare Part D benefit parameters, appear on page 37 of this document.

If you have any questions contact CMS' RDS Center Help Line.