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Federal Retiree Drug Subsidy (RDS)

Employers and union groups face complex choices regarding Medicare Part D. This new prescription drug benefit is for retirees and others eligible for Medicare. The best choice for many plan sponsors is applying to receive the RDS.

The RDS: Good for Plan Sponsors
  • The subsidy reduces the plan’s retiree drug costs with minimal administrative burdens
  • Plan sponsors receive a tax-free, 28% subsidy back from the Federal government for prescription drug costs between $250-$5,000 per eligible member
  • There is no member disruption, as no plan changes are required to receive the RDS, nor do retirees need to sign up for Part D on their own – they simply continue their current coverage
NMHC: Your RDS Expert
  • Provides a definitive opinion on your plan’s eligibility for the federal subsidy
  • Projects your savings from receiving the subsidy
  • Helps complete the RDS application and ongoing operational requirements

Which Plans are Eligible? All plans actuarially equivalent to the benefit offered through Medicare Part D are eligible for the RDS. In other words, plan benefits, on average, must be at least equal to the standard benefit offered through Medicare Part D.

Additionally, your total contribution toward your plan (plan benefits and premium support) must be at least as large as the government’s total contribution toward Part D.

CMS requires an ‘Actuarial Attestation’ as part of a plan’s application for the RDS. Plans can only receive the RDS for retirees and their dependents, and not for active employees.

A 3-Step Assessment Process
NMHC has established a thorough 3-step review process to help determine a plan’s eligibility for the RDS.
 
  Step 1 — To assess actuarial equivalence, NMHC uses plan design information, contribution requirements, and analysis of maximum benefit limits and/or coinsurance levels.
 
  Step 2 — In cases where plan design information alone is not sufficient to determine equivalence, our actuarial department considers actual claims experience for retirees. This allows us to assess actuarial equivalence, and also provide an estimate of the financial savings you will realize from receiving the RDS.
 
  NMHC can generally complete plan design and financial analysis (Step 1 and Step 2) within ten business days. You will receive a definitive opinion on your plan’s eligibility for the federal subsidy. We will also estimate your projected savings from receiving the subsidy.
 
 
Step 3 — If you decide not to apply for the RDS or the plan is not eligible, NMHC will provide an actuarial analysis and financial assessment of other options available to you. These include:
  • Coordinate benefits with Part D. Your plan keeps its current structure but retirees enroll in Part D as their primary coverage. Your plan provides secondary coverage.
  • Enhance Part D. Your plan helps cover out-of-pocket expenses for its members who enroll in Part D.
  • Sponsor a prescription drug plan (PDP) that is actuarially equivalent to Part D.
  • Drop prescription drug benefits for members eligible for Medicare, requiring them to enroll in Part D by January 2006.
Application Assistance for the Retiree Drug Subsidy
NMHC can help you complete the RDS application process. A summary of application requirements are:
  • Appoint an Authorized Representative. This is typically the CEO or CFO and must be an employee of the plan sponsor. The Authorized Representative will ultimately sign the application and attest to its accuracy.
  • Appoint an Account Manager. This person does not need to be an employee of the plan, although a benefits manager or HR representative of the plan sponsor would be best suited for this role. If nobody in your organization is able to fill this role, NMHC can serve in this role. The Account Manager, along with the designees they assign, will fill out the application and perform other administrative tasks.
  • Complete and submit the application including actuarial attestation, payment schedule, electronic funds transfer information, and eligible retiree list file.
  • Make other appointees. An Actuary is named who will sign the actuarial attestation. A Designee is appointed to support data submission and payment requests. A Benefit Option Administrator assists with submitting drug cost and retiree data.
  • A notice of ‘credible coverage’ must be sent to each active and retired member eligible for Medicare, as well as to CMS.

Ongoing requirements include a monthly submission of the retiree eligibility list to CMS, monthly payment reporting, an annual payment reconciliation process and report, and an annual application to CMS. NMHC provides services to complete these requirements.

NMHC — A Proven Part D Partner
You can achieve many benefits by qualifying for a Medicare Part D Retiree Drug Subsidy, including lower plan costs, minimal disruption to your plan, and more satisfied members. However, understanding your eligibility and navigating the application requirements calls for a partner with deep expertise in the process. Your partner is NMHC, with our proven record of helping plan sponsors successfully apply for the RDS

For more information, please contact the NMHC Sales Department.