08/25/09

2010 Medicare Part D Monthly Base Beneficiary Premium is $31.94

On Thursday, August 13, 2009, the Centers for Medicare & Medicaid Services (CMS) announced that the monthly 2010 Medicare Part D base beneficiary premium is $31.94. Actuaries performing the actuarial equivalence test for Retiree Drug Subsidy (RDS) plan years ending in 2010 may (but are not required to) use this amount when determining whether a given group health plan or benefit option satisfies the RDS net test specified in Federal regulations at 42 C.F.R. §423.884(d).

In order for a Plan Sponsor to qualify for the RDS Program for a given plan year, a qualified actuary must submit an attestation to CMS that the Plan Sponsor's retiree prescription drug plan's actuarial value is at least equal to the actuarial value of defined standard prescription drug coverage under Medicare Part D. The standard for actuarial equivalence is a two-part test.

The first prong is the "gross value" test in which the expected amount of paid claims for Medicare beneficiaries under the Plan Sponsor's plan must be at least equal to the expected amount of paid claims for the same beneficiaries under the defined standard prescription drug coverage under Medicare Part D.

The second prong is the "net value" test in which the net value of the Plan Sponsor's plan must be at least equal to the net value of the defined standard prescription drug coverage under Medicare Part D. The net value of the Plan Sponsor's plan is calculated by subtracting the retiree premium contribution from the gross value of the Plan Sponsor's plan. As specified in existing CMS RDS actuarial equivalence guidance, for purposes of determining the net value of the defined standard prescription drug coverage under Medicare Part D, the retiree premium contribution for that coverage (which is subtracted from the gross value of that coverage) can be determined by using either (a) the national average monthly base beneficiary premium for the same year from which the Medicare Part D coverage limits are being utilized for the test, or (b) 25.5% of the gross value of Medicare Part D.

Therefore, actuaries who have already submitted an attestation that was based on the 25.5% figure (rather than the $31.94 figure) for purposes of determining the net value of defined standard prescription drug coverage under Medicare Part D, with respect to the net test for a plan with an RDS plan year ending in 2010, need not recalculate actuarial equivalence, or resubmit their attestation (provided there is no other reason for which a recalculation would be necessary). For attestations for RDS plan years ending in 2010 that have not yet been submitted, actuaries may use either figure to determine the retiree premium contribution for defined standard prescription drug coverage under Medicare Part D.

To view the document in which CMS announced the $31.94 figure, go to: Release of the 2010 Medicare Part D Base Beneficiary Premium. To view the April 6, 2009 CMS document announcing the 2010 Medicare Part D coverage limits and parameters, go to: Adjusted Cost Threshold and Cost Limit Amounts for Plan Years Ending in 2010, and Adjusted Parameters for Medicare Part D Plans in 2010, and click on the second link in that document. To view the CMS guidance on actuarial equivalence, go to: CMS Retiree Drug Subsidy Guidance: Actuarial Equivalence Standard on the CMS RDS Web Page.

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