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Medicare & TEFRA

Frequently Asked Questions: Medicare & TEFRA

What is TEFRA?
Which employers are subject to TEFRA?
How does TEFRA affect employees who qualify for Medicare?
Does TEFRA apply if someone is on Medicare due to disability?
What about employers with less than 20 employees or who have not had 20 for 20 weeks?
Do the same rules apply to dependents that become eligible for Medicare?
What is the cost of Medicare Part A and B?
What is Medicare Part D?
What benefits are associated with Medicare Part D?
When will coverage for Medicare Part D be available?
Is there any penalty for late enrollment in Medicare Part D?
What is the definition of "creditable coverage" for Medicare Part D?
What does Medicare Part D cost?
What if I can't afford to pay for Medicare Part D?
What if the individual has prescription drug coverage from an employer or union?
Do Medicare prescription plans work with all types of Medicare health plans?
Who may be a Prescription Drug Plan Sponsor?
Are there cost containment features in place with Medicare Part D?

1. What is TEFRA?
TEFRA, a federal law, stands for the Tax Equity & Fiscal Responsibility Act. Employers with 20+ employees for 20+ work weeks in the preceding or current calendar year are subject to TEFRA. On the exact day an employer meets this criteria, claims of a Medicare-eligible individual covered under the group health plan must be paid primarily by the group health plan.

2. Which employers are subject to TEFRA?
Employers with 20+ employees – full time, part time, union, non-union, and/or independent contractors count – for 20+ work weeks in the preceding or current calendar year are subject to TEFRA laws.

3. How does TEFRA affect employees who qualify for Medicare?
The Tax Equity and Fiscal Responsibility Act permits at-work, Medicare-eligible persons (due to age) to choose if they want a group health plan as their primary insurance or prefer to opt for Medicare and a supplemental plan. According to Federal law, those who select Medicare cannot have the group plan as secondary.

4. Does TEFRA apply if someone is on Medicare due to disability?
Those Medicare disabled for other than ESRD (End Stage Renal Disease) in a group with less than 100 employees are always Medicare primary. Those disabled due to ESRD have the group plan primary for the first 30 months of the disability regardless of group size.

5. What about employers with less than 20 employees or who have not had 20+ for 20 weeks?
If a company has less than 20 employees or has not had 20+ employees for 20+ work weeks in the preceding or current calendar year, active at work employees who are Medicare-eligible due to age are always Medicare primary. Be sure the employee has Medicare Parts A & B; the carrier is not obligated to pay Part-B claims.

6. Do the same rules apply to dependents that become eligible for Medicare?
Yes, through DEFRA.

7. What is the cost of Medicare Part A and B?
Part A is free to those who qualify. Certain other eligible individuals may purchase Part A. The cost for 2007 is $410/month, with a deductible of $992. Please refer to the Medicare Handbook for qualification requirements. For 2007, Part B is $93.50 / month, with a deductible of $131.

8. What is Medicare Part D?
Medicare Part D is a prescription-drug benefit created as part of the Medicare Prescription Drug Improvement and Modernization Act of 2003, P.L. 108-173. It provides prescription-drug insurance to individuals who are enrolled in Part A or Part B. Participation is voluntary.

9. What benefits are associated with Medicare Part D?
Per the Center for Medicare & Medicaid Services, Part D benefits for 2007 are as follows:

There is a deductible of $265, and 25% coinsurance for drug costs up to $2,400. After that, enrollees pay all drug costs until they reach $3,850 in out-of-pocket expenses.
At this point, catastrophic coverage begins, wherein there is 5% coinsurance or co-payments of $2 for generics and $5 for brand-name drugs.
Once member costs exceed $5,100, they have incurred "true out of pocket expenses" of $3,600. Part D coverage then resumes at 95% of covered costs.

For 2008, the deductible will be $275, coinsurance of 25% to $2,510, and out of pocket will be $4,050. After a total expenditure of $5,725.25, the member pays 5% coinsurance or a minimum co-payment of $2.25 for generic and preferred and $5.60 for other prescription drugs.

10. When will coverage for Medicare Part D be available?
Anyone enrolled in Medicare Part A or B due to age or disability may enroll or change plans once a year between 11/15 and 12/31. Enrollment in Medicare Part D for newly eligible beneficiaries is concurrent with the individual's enrollment in Part B; this is the 7-month period that begins 3 months before the eligibility for Part B and ends 3 months after the first eligibility.

11. Is there any penalty for late enrollment in Medicare Part D?
Eligible individuals who do not enroll in Medicare Part D at the first opportunity will face a late enrollment penalty of 1% for every month. They may avoid the penalty if they maintain "creditable" prescription drug coverage outside Medicare. With loss of creditable coverage, a special enrollment period begins and one may Medicare Part D without being subject to the late penalty. Note that creditable coverage here is different from the HIPAA definition.

12. What is the definition of "creditable coverage" for Medicare Part D?
If a beneficiary has other sources of drug coverage through a current or former employer or union, they may choose not to enroll in the Medicare Part D. If their other coverage matches the new Medicare drug benefit (thus considered "creditable coverage"), they can continue the current plan to avoid higher payments. Refer to www.cms.hhs.gov/medicarereform/CCguidances.asp for creditable notices.

13. What does Medicare Part D cost?
Medicare Part D plans are only being sold by private companies and costs vary. For 2007, the deductible is $265, with coinsurance after deductible of 25% up to $2400, and an out-of-pocket maximum of $3850.

14. What if I can't afford to pay for Medicare Part D?
If a person’s income is at or below a set amount they may qualify for extra help. (Note that assets are considered in this calculation.) Notification of qualification comes from the Social Security Administration.

15. What if the individual has prescription drug coverage from an employer or union?
Members get a notice of Creditable Coverage from their employer or union explaining if their plan covers as much or more than the Medicare prescription plan. If their plan is better than or as good as Medicare, they can keep it without paying a higher premium when joining later. Otherwise, they must join within the specified period to avoid penalties.

16. Do Medicare prescription plans work with all types of Medicare health plans?
Yes. Some plans add to the original Medicare plan and private, fee-for-service plans.

17. Who may be a Prescription Drug Plan Sponsor?
Drug plans submit bids to service eligible individuals in regions. The sponsor must provide information on benefits, cost sharing, service area, actuarial value, assumed administrative expense, and expected reinsurance payments. Prescription Drug Plan sponsors must be licensed under state law.

18. Are there cost containment features in place with Medicare Part D?
Since these plans are only be sold and administered via private companies, they use formularies and may use step therapy.