Exhibit 10.19




Exhibit
10.19


Explanatory Note Regarding Medicare Prescription Drug Contracts between HealthSpring, Inc. and CMS




Certain subsidiaries of HealthSpring, Inc. (“HealthSpring”) and the Centers for Medicaid and
Medicare Services have entered into separate contracts that allow the HealthSpring subsidiary to
operate a Medicare prescription drug plan under 423 CFR Part 423. In each case, the contract
designates the HealthSpring subsidiary as a Prescription Drug Plan Sponsor (“PDP Sponsor”). Set
forth below is the form of Medicare prescription drug contract.



The following chart summarizes the 2 individual contracts by type and entity:



	 	 	 
	Contract	 	HealthSpring Entity
	 
	 	 
	1. S5932

	 	HealthSpring Life & Health Insurance Company, Inc.
	 
	 	 
	2. S5998

	 	Bravo Health Insurance Company, Inc.





 


 









 





CONTRACT WITH APPROVED ENTITY PURSUANT TO SECTIONS 1860D-1 THROUGH 1860D-42

OF THE SOCIAL SECURITY ACT FOR THE OPERATION OF

A VOLUNTARY MEDICARE PRESCRIPTION DRUG PLAN




CONTRACT (_____)




Between




Centers for Medicare & Medicaid Services (hereinafter referred to as “CMS”)




And





(a Prescription Drug Plan Sponsor, hereinafter referred to as the “PDP Sponsor”)




CMS and the PDP Sponsor, an entity that has been determined eligible to operate a Voluntary
Medicare Prescription Drug Plan by the Administrator of CMS under 423 CFR §423.503, agree to the
following for the purposes of sections 1860D-1 through 1860D-43 (with the exception of sections
1860D-22(a) and 1860D-31) of the Social Security Act (hereinafter referred to as “the Act.”)


 


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Article I.

Medicare Voluntary Prescription Drug Benefit




A. PDP Sponsor agrees to operate one or more Medicare Voluntary Prescription Drug Plans
(hereinafter referred to as a “PDP”), as described in its application and related materials,
including but not limited to all the attestations contained therein and all supplemental guidance,
for Medicare approval and in compliance with the provisions of this contract, which incorporates in
its entirety the Solicitation For Applications for New Prescription Drug Plan (PDP) Sponsors
released on January 5, 2010 (hereinafter collectively referred to as “the contract”). The PDP
Sponsor also agrees to operate in accordance with the regulations at 42 CFR Part 423 (with the
exception of Subparts Q, R, and S), sections 1860D-1 through 1860D-43 (with the exception of
sections 1860D-22(a) and 1860D-31) of the Social Security Act, and the solicitation, as well as all
other applicable Federal statutes, regulations, and policies. This contract is deemed to
incorporate any changes that are required by statute to be implemented during the term of this
contract and any regulations or policies implementing or interpreting such statutory provisions.



B. CMS agrees to perform its obligations to the PDP Sponsor consistent with the regulations at 42
CFR Part 423 (with the exception of Subparts Q, R and S), sections 1860D-1 through 1860D-43 of the
Social Security Act (with the exception of sections 1860D-22(a) and 1860D-31) and the solicitation,
as well as all other applicable Federal statutes, regulations, and policies.



C. CMS agrees that it will not implement, other than at the beginning of a calendar year,
regulations under 42 CFR Part 423 that impose new, significant regulatory requirements on the PDP
Sponsor. This provision does not apply to new requirements mandated by statute.



D. This contract is in no way intended to supersede or modify 42 CFR, Part 423. Failure to
reference a regulatory requirement in this contract does not affect the applicability of such
requirements to the PDP Sponsor and CMS.



Article II.

Functions to be Performed by the PDP Sponsor




A. ENROLLMENT




1. PDP Sponsor agrees to accept new enrollments, make enrollments effective, process voluntary
disenrollments, and limit involuntary disenrollments, as described in 42 CFR, Part 423, Subpart B.



2. PDP Sponsor agrees to comply with the prohibition in 42 CFR 423.104(b) on discrimination in
beneficiary enrollment.



3. For contract year 2011, the PDP Sponsor shall not conduct Part D-related marketing
activities prior to October 1, 2010 and shall not process enrollment applications prior to November
15, 2010. PDP Sponsor shall begin delivering prescription drug benefit services on January 1, 2010.
For contract year 2012 and succeeding years, the PDP sponsor shall conduct Part D-related marketing
and enrollment activities between October 15 and December 7 of the year prior to the contract year.



4. The PDP Sponsor shall accept enrollment applications during the first 45 days of a contract
year from beneficiaries who have elected to disenroll from a Medicare Advantage plan and enroll in
the Medicare fee-for-service program.



B. PRESCRIPTION DRUG BENEFIT




1. PDP Sponsor agrees to provide the basic prescription drug coverage as defined under 42 CFR
§423.100 and, to the extent applicable, supplemental benefits as defined in 42 CFR §423.100 and in
accordance with Subpart C of 42 CFR Part 423. PDP Sponsor also agrees to provide Part D benefits as
described in the PDP
Sponsors bid(s) approved each year by CMS (as referenced in Attachment A, to be replaced each
year upon renewal of the contract to reflect the Sponsors approved bids for the succeeding contract
year).


 


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2. PDP Sponsor agrees to calculate and collect beneficiary premiums in accordance with 42 CFR
§§423.286 and 423.293.



3. PDP Sponsor agrees to administer for its prescription drug plan members at point-of-sale
the Medicare Coverage Gap Discount authorized by section 1860D-14A of the Social Security Act (“the
Act”).



C. DISSEMINATION OF PLAN INFORMATION





1. PDP Sponsor agrees to provide the information required in 42 CFR §423.48.



2. PDP Sponsor agrees to disclose information to beneficiaries in the manner and the form
specified by CMS under 42 CFR §§423.128, 423 Subpart V and in the “Marketing Materials Guidelines
for Medicare Advantage-Prescription Drug Plans (MA-PDs) and Prescription Drug Plans (PDPs),” and to
comply with requirements in 42 CFR 423 Subpart V requiring approval of certain marketing materials
prior to distribution.



3. PDP Sponsor certifies that all materials it submits to CMS under the File and Use
Certification authority described in the Marketing Materials Guidelines are accurate, truthful, not
misleading, and consistent with CMS marketing guidelines.



D. QUALITY ASSURANCE/UTILIZATION MANAGEMENT




PDP Sponsor agrees to operate quality assurance, drug utilization management, and medication
therapy management programs, and to support electronic prescribing in accordance with Subpart D of
42 CFR Part 423.



E. APPEALS AND GRIEVANCES




PDP Sponsor agrees to comply with all requirements in Subpart M of 42 CFR Part 423 governing
coverage determinations, grievances and appeals, and formulary exceptions.



F. PAYMENT TO PDP SPONSOR




1. PDP Sponsor and CMS agree that payment under this contract will be governed by the rules in
Subpart G of 42 CFR Part 423.



2. PDP Sponsor agrees that it is bound by all applicable federal laws and regulations,
guidance, and authorities pertaining to claims and debt collections. In the event that the
government determines that the PDP Sponsor has been overpaid, the PDP Sponsor agrees to return
those overpaid monies back to the federal government.



G. BID SUBMISSION AND REVIEW




If the PDP Sponsor intends to participate in the Part D program for the next program year, PDP
Sponsor agrees to submit the next years bid, including all required information on premiums,
benefits, and cost-sharing, by the applicable due date, as provided in Subpart F of 42 CFR Part 423
so that CMS and the Part D plan sponsor may conduct negotiations regarding the terms and conditions
of the proposed bid and benefit plan renewal.



H. STATE LAW AND LICENSURE REQUIREMENTS




1. PDP Sponsor agrees to comply with State law to the extent that it is not preempted by
Federal law as described in Subpart I of 42 CFR Part 423.



2. PDP Sponsor agrees that where it is operating in a State using a waiver granted pursuant to
42 CFR §423.410, such waiver shall be valid for three consecutive program years. PDP Sponsor agrees
that expiration
of the licensure waiver (and the failure to obtain a license from the relevant State) may be
the basis for CMS deleting from the PDP Sponsors service area those PDP Regions affected by the
waiver expiration. CMS may terminate or non-renew the PDP Sponsors contract where the expiration of
the waiver results in the PDP Sponsor not being qualified to offer a PDP plan in any PDP Region.


 


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3. PDP Sponsor agrees that where it is operating in a State using a waiver granted pursuant to
42 CFR §423.415, such waiver shall be valid for the period that the Secretary of the Department of
Health and Human Services determines is appropriate for timely processing of the PDP Sponsors
license application by the State, but in no case for more than one year only, beginning on January
1 of the contract year for which CMS granted the waiver.



I. COORDINATION WITH OTHER PRESCRIPTION DRUG COVERAGE




1. PDP Sponsor agrees to comply with the coordination requirements with State Pharmacy
Assistance Programs (SPAPs) and plans that provide other prescription drug coverage as described in
Subpart J of 42 CFR Part 423.



2. PDP Sponsor agrees to comply with Medicare Secondary Payer procedures as stated in 42 CFR
§423.462.



J. SERVICE AREA AND PHARMACY ACCESS




1. The PDP Sponsor agrees to provide Part D benefits in the service area for which it has been
approved by CMS utilizing a pharmacy network and formulary approved by CMS that meet the
requirements of 42 CFR §423.120.



2. The PDP Sponsor agrees to provide Part D benefits through out-of-network pharmacies
according to 42 CFR §423.124.



3. PDP Sponsor agrees to provide benefits by means of point of service systems to adjudicate
prescription drug claims in a timely and efficient manner in compliance with CMS standards, except
when necessary to provide access in underserved areas, I/T/U pharmacies (as defined in 42 CFR
§423.100), and long-term care pharmacies (as defined in 42 CFR §423.100).



4. PDP Sponsor agrees to contract with any pharmacy that meets the PDP Sponsors reasonable and
relevant standard terms and conditions.



K. COMPLIANCE PROGRAM/PROGRAM INTEGRITY




1. PDP Sponsor agrees that it will develop and implement a compliance program that applies to
its Part D-related operations, consistent with 42 CFR §423.504(b)(4)(vi).



2. The PDP sponsor agrees to provide notice based on best knowledge, information, and belief
to CMS of any integrity items related to payments from governmental entities, both federal and
state, for healthcare or prescription drug services that would have been reported as part of Table
A. of the Business Integrity section of the PDP application. These items include any
investigations, legal actions or matters subject to arbitration brought involving the sponsor (or
sponsor’s firm if applicable) and its subcontractors (excluding contracted network providers),
including any key management or executive staff, or any major shareholders (5% or more), by a
government agency (state or federal) on matters relating to payments from governmental entities,
both federal and state, for healthcare and/or prescription drug services. In providing the notice,
the sponsor shall keep the government informed of when the integrity item is initiated and when it
is closed. Notice should be provided of the details concerning any resolution and monetary payments
as well as any settlement agreements or corporate integrity agreements.



3. The PDP Sponsor agrees to provide notice based on best knowledge, information, and belief
to CMS in the event the Sponsor or any of its subcontractors is criminally convicted or has a civil
judgment entered
against it for fraudulent activities or is sanctioned under any Federal program involving the
provision of health care or prescription drug services.


 


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L. LOW-INCOME SUBSIDY




PDP Sponsor agrees that it will participate in the administration of subsidies for low-income
individuals according to Subpart P of 42 CFR Part 423.



M. COMMUNICATION WITH CMS




PDP Sponsor agrees that it shall maintain the capacity to communicate with CMS electronically in
accordance with CMS requirements.



N. BENEFICIARY FINANCIAL PROTECTIONS




The PDP Sponsor agrees to afford its enrollees protection from liability for payment of fees that
are the obligation of the PDP Sponsor in accordance with 42 CFR §423.505(g).



O. RELATIONSHIP WITH FIRST TIER, DOWNSTREAM, AND RELATED ENTITIES




1. The PDP Sponsor agrees it maintains ultimate responsibility for adhering to and otherwise
fully complying with all terms and conditions of this contract with CMS.



2. The PDP Sponsor shall ensure that any contracts or agreements with first tier, downstream,
and related entities performing functions on the PDP Sponsors behalf related to the operation of
the Part D benefit are in compliance with 42 CFR §423.505(i).



3. The PDP Sponsor agrees to act in accordance with 45 CFR Part 76 and agrees that it will not
contract with or employ entities or individuals that are excluded by the Department of Health and
Human Services, Office of the Inspector General or included on the Excluded Parties List System
maintained by the General Services Administration.



P. CERTIFICATION OF DATA THAT DETERMINE PAYMENT




PDP Sponsor must provide certifications in accordance with 42 CFR §423.505(k).



Q. ENROLLMENT RELATED COSTS




PDP Sponsor agrees to payment of fees established by CMS for cost sharing of enrollment related
costs in accordance with 42 CFR §423.6.



R. PDP SPONSOR REIMBURSEMENT TO PHARMACIES




1. If a PDP Sponsor uses a standard for reimbursement of pharmacies based on the cost of a
drug, PDP Sponsor will update such standard not less frequently than once every 7 days, beginning
with an initial update on January 1 of each year, to accurately reflect the market price of the
drug.



2. PDP Sponsor will issue, mail, or otherwise transmit payment with respect to all claims
submitted by pharmacies (other than pharmacies that dispense drugs by mail order only, or are
located in, or contract with, a long-term care facility) within 14 days of receipt of an
electronically submitted claim or within 30 days of receipt of a claim submitted otherwise.



3. PDP Sponsor must ensure that a pharmacy located in, or having a contract with, a long-term
care facility will have not less than 30 days (but not more than 90 days) to submit claims to PDP
Sponsor for reimbursement.


 


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Article III.

Record Retention and Reporting Requirements




A. RECORD MAINTENANCE AND ACCESS




Sponsor agrees to maintain records and provide access in accordance with 42 CFR §§ 423.505 (b)(10)
and 423.505(i)(2).



B. GENERAL REPORTING REQUIREMENTS




The PDP Sponsor agrees to submit information to CMS according to 42 CFR §§423.505(f), 423.514, and
the “Final Medicare Part D Reporting Requirements,” a document issued by CMS and subject to
modification each program year.



C. LICENSURE-RELATED REPORTING REQUIREMENTS




1. If the PDP Sponsor is operating under a CMS-granted licensure waiver in any State, the PDP
Sponsor agrees to notify CMS in writing of the States disposition of the Sponsors license
application within ten business days of the date that it receives notice of the States action.



2. For those States where the PDP Sponsor is operating under a risk-bearing license, the
Sponsor agrees to provide written notice to CMS of the States non-renewal of the Sponsors license
within ten days of receiving notice of the States action.



3. In the event that a State regulator imposes a sanction against the PDP Sponsor or requires
the implementation of a corrective action plan, the Sponsor agrees to provide written notice to CMS
of such sanction or corrective action requirement (including basis for the sanction and/or timeline
for corrective action) within ten days of receiving notice of the States action.



4. In the event that there is a change in the status of the PDP Sponsors risk-bearing license
in any State (e.g., suspension, revocation), the Sponsor agrees to provide written notice to CMS of
the change in status (including basis for the change in status and effective date) within ten days
of receiving notice of the States action.



5. If the PDP Sponsor is operating a Part D benefit under a CMS-granted waiver in every State
in its service area, and the Sponsor is terminating or reducing the amount of an existing letter of
credit obtained for the purposes of funding projected losses, the Sponsor shall provide written
notice to CMS of such action 30 days prior to its effective date. The PDP Sponsor agrees that it
must obtain CMS approval prior to terminating or reducing the amount of a letter of credit obtained
for the purposes of funding projected losses under Appendix IV of the PDP Solicitation.



D. CMS LICENSE FOR USE OF PLAN FORMULARY




PDP Sponsor agrees to submit to CMS each plan’s formulary information, including any changes to its
formularies, and hereby grants to the Government, and any person or entity who might receive the
formulary from the Government, a non-exclusive license to use all or any portion of the formulary
for any purpose related to the administration of the Part D program, including without limitation
publicly distributing, displaying, publishing or reconfiguration of the information in any medium,
including www.medicare.gov, and by any electronic, print or other means of distribution.


 


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Article IV.

HIPAA Provisions




HIPAA TRANSACTIONS/PRIVACY/SECURITY




A. PDP Sponsor agrees to comply with the confidentiality and enrollee record accuracy requirements
specified in 42 CFR §423.136.



B. PDP Sponsor agrees to enter into a business associate agreement with the entity with which CMS
has contracted to track Medicare beneficiaries true out-of- pocket costs.



Article V.

Requirements of Other Laws and Regulations




The PDP Sponsor agrees to comply with (a) applicable Federal laws and regulations designed to
prevent fraud, waste, and abuse, including, but not limited to applicable provisions of Federal
criminal law, the False Claims Act (31 U.S.C. §§3729 et seq.), and the anti-kickback provision of
section 1128B of the Act; (b) applicable HIPAA Administrative Simplification Security and Privacy
rules at 45 CFR parts 160, 162, and 164; and (c) all other applicable Federal statutes and
regulations. Requirements of Other Laws and Regulations.



Article VI.

Contract Term and Renewal




A. TERM OF CONTRACT




This contract is effective from the date of CMS authorized representatives signature through
December 31, 2011. This contract shall be renewable for successive one-year periods thereafter
according to 42 CFR §423.506.



B. QUALIFICATION TO RENEW A CONTRACT




1. In accordance with 42 CFR §423.507, the PDP Sponsor will be determined qualified to renew
its contract annually only if:



(a) The PDP Sponsor has not provided CMS with a notice of intention not to renew in accordance
with Article VII of this contract, and




(b) CMS has not provided the PDP Sponsor with a notice of intention not to renew.



2. Although PDP Sponsor may be determined qualified to renew its contract under this Article,
if the PDP Sponsor and CMS cannot reach agreement on the bid under Subpart F of 42 CFR Part 423, no
renewal takes place, and the failure to reach agreement is not subject to the appeals provisions in
Subpart N of 42 CFR Part 423.



Article VII.

Nonrenewal of Contract




A. NONRENEWAL BY THE PDP SPONSOR




1. The PDP Sponsor may elect not to renew its contract with CMS, effective at the end of the
term of the contract for any reason as long as PDP Sponsor provides proper notice of the decision
according to the required timeframes.




2. If the PDP Sponsor does not intend to renew its contract, it must notify:



(a) CMS in writing by the first Monday of June in the year in which the current contract
period ends;



(b) Each Medicare enrollee, at least 90 days before the date on which the nonrenewal is
effective. The PDP sponsor must provide, to enrollees, through this notice or outbound telephone
calls, information on alternatives available for obtaining qualified prescription drug coverage
within the PDP region, including
Medicare Advantage-Prescription Drug plans, Medicare cost plans offering a Part D plan, and
other PDPs, and must receive CMS approval of notices or scripts prior to their use.



 


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3. If the PDP Sponsor does not renew a contract CMS cannot enter into a contract with the
organization for 2 years unless there are special circumstances that warrant special consideration,
as determined by CMS.



4. If the PDP Sponsor does not renew a contract, it must ensure the timely transfer of any
data or files in accordance with CMS instructions.



B. NONRENEWAL BY CMS




1. CMS may determine that the PDP Sponsor is not qualified to renew its contract for any of
the following reasons:




(a) The reasons listed in 42 CFR §423.509(a) that also permit CMS to terminate the contract.



(b) The PDP Sponsor has committed any of the acts in 42 CFR §423.752 that support the
imposition of intermediate sanctions or civil money penalties under 42 CFR §423.750.



2. CMS will provide notice of its decision if the PDP Sponsor is not qualified to renew its
contract as follows:




(a) To the PDP Sponsor by August 1 of the current contract year.



(b) If CMS decides that the PDP Sponsor is not qualified to renew its contract, to the PDP
Sponsors Medicare enrollees by mail at least 90 days before the end of the current calendar year.



(c) CMS will provide the notice described in (B)(2)(ii) of this Article where a non-renewal
results because CMS and the PDP Sponsor are unable to reach agreement on the bid under 42 CFR Part
423, Subpart F.



3. CMS shall give the PDP Sponsor written notice of its right to appeal the decision that the
sponsor is not qualified renew its contract in accordance with 42 CFR §423.642(b).



Article VIII.

Modification or Termination of Contract




A. CONTRACT MODIFICATION OR TERMINATION BY MUTUAL CONSENT




1. This contract may be modified or terminated at any time by written mutual consent of the
parties.



2. If this contract is terminated by mutual consent, the PDP Sponsor must provide notice to
its Medicare enrollees and the general public in accordance with CMSs instructions.



3. If the contract is modified by mutual consent, the PDP Sponsor must notify its Medicare
enrollees of any changes that CMS determines are appropriate for notification according to the
process and timeframes specified by CMS.



4. If a contract is terminated under section A of this Article, the PDP Sponsor must ensure
the timely transfer of any data or files.



5. If a contract is terminated under section A of this Article, CMS cannot enter into a
contract with the organization for a period of up to 2 years unless there are special circumstances
that warrant special consideration, as determined by CMS.


 


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B. TERMINATION OF CONTRACT BY CMS




CMS may terminate the contract in accordance with 42 CFR §423.509.



C. TERMINATION OF CONTRACT BY THE PDP SPONSOR




The PDP Sponsor may terminate the contract only in accordance with 42 CFR §423.510.



Article IX.

Intermediate Sanctions




Consistent with Subpart O of 42 CFR Part 423, the PDP Sponsor shall be subject to sanctions and
civil money penalties.



Article X.

Severability




Severability of the contract shall be in accordance with 42 CFR 423.504(e).



Article XI.

Miscellaneous




A. DEFINITIONS




Terms not otherwise defined in this contract shall have the meaning given to such terms in 42 CFR
Part 423.



B. ALTERATION TO ORIGINAL CONTRACT TERMS




The PDP Sponsor agrees that it has not altered in any way the terms of the PDP contract presented
for signature by CMS. PDP Sponsor agrees that any alterations to the original text the PDP Sponsor
may make to this contract shall not be binding on the parties.



C. ADDITIONAL CONTRACT TERMS




The PDP Sponsor agrees to include in this contract other terms and conditions in accordance with 42
CFR §423.505(j).



D. CMS APPROVAL TO BEGIN MARKETING AND ENROLLMENT ACTIVITIES




PDP Sponsor agrees that it must complete CMS operational requirements prior to receiving CMS
approval to begin Part D marketing and enrollment activities. Such activities include, but are not
limited to, establishing and successfully testing connectivity with CMS systems to process
enrollment applications (or contracting with an entity qualified to perform such functions on PDP
Sponsors behalf) and successfully demonstrating capability to submit accurate and timely price
comparison data. To establish and successfully test connectivity, the PDP Sponsor must, 1)
establish and test physical connectivity to the CMS data center, 2) acquire user identifications
and passwords, 3) receive, store, and maintain data necessary to perform enrollments and send and
receive transactions to and from CMS, and 4) check and receive transaction status information.



E. Pursuant to section 13112 of the American Recovery and Reinvestment Act of 2009 (ARRA), the PDP
Sponsor agrees that as it implements, acquires, or upgrades its health information technology
systems, it shall utilize, where available, health information technology systems and products that
meet standards and implementation specifications adopted under section 3004 of the Public Health
Service Act, as amended by section 13101 of the ARRA.


 


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In witness whereof, the parties hereby execute this contract.



This document has been electronically signed by:



	 	 	 
	FOR THE MA ORGANIZATION
	 	 
	 
	 	 
	 

Contracting Official Name

	 	 
	 
	 	 
	 

Date

	 	 
	 
	 	 
	 

	 	 
	Organization

	 	Address
	 
	 	 
	FOR THE CENTERS FOR MEDICARE & MEDICAID SERVICES
	 	 
	 
	 	 
	 

	 	 
	 

	 	Date





 


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EMPLOYER/UNION-ONLY GROUP PART D ADDENDUM TO CONTRACT WITH APPROVED 

ENTITY PURSUANT TO SECTIONS 1860D-1 THROUGH 1860D-42 OF THE SOCIAL SECURITY ACT 

FOR THE OPERATION OF A VOLUNTARY MEDICARE PRESCRIPTION DRUG PLAN




The Centers for Medicare & Medicaid Services (hereinafter referred to as “CMS”) and HEALTHSPRING
LIFE & HEALTH INSURANCE COMPANY, INC., a Prescription Drug Plan (PDP) Sponsor (hereinafter referred
to as the “PDP Sponsor”), agree to amend the contract                      governing the PDP Sponsors operation
of one or more Voluntary Medicare Prescription Drug Plans, pursuant to sections 1860D-1 through
1860D-42 of the Social Security Act (hereinafter referred to as “the Act”), to permit PDP Sponsor
to offer employer-sponsored group prescription drug plans (as defined at 42 CFR 423.454)
(hereinafter referred to in this Addendum as “employer/union-only group PDPs”) in accordance with
the waivers granted by CMS under section 1860D-22(b) of the Act. The terms of this Addendum shall
only apply to employer/union-only group PDPs offered by the PDP Sponsor exclusively to Part D
eligible individuals enrolled in employment-based retiree health coverage (as defined at 42 CFR
423.882) under a contract between the PDP Sponsor and the employer/union sponsor of the
employment-based retiree health coverage.



This Addendum is made pursuant to Subpart K of 42 CFR Part 423.


 


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Article I.

VOLUNTARY MEDICARE PRESCRIPTION DRUG PLAN




A. PDP Sponsor agrees to operate one or more employer/union-only group PDPs in accordance with the
terms of the Medicare Prescription Drug Plan contract, as modified by this Addendum, which
incorporates in its entirety the 2010 Application Instructions For PDP Sponsors To Offer New
Employer/Union-Only Group Waiver Plans (EGWPs) (released on January 6, 2009) and any
employer/union-only group waiver guidance issued by CMS (including, but is not limited to, those
requirements set forth in Chapter 12 of the Prescription Drug Benefit Manual) (hereinafter
employer/union group waiver guidance).



B. This Addendum is deemed to incorporate any changes that are required by statute to be
implemented during the term of the contract, and any regulations and policies implementing or
interpreting such statutory provisions.



C. In the event of any conflict between the employer/union-only group waiver guidance issued prior
to the execution of the contract and this Addendum, the provisions of this Addendum shall control.
In the event of any conflict between the employer/union-only group waiver guidance issued after the
execution of the contract and this Addendum, the provisions of the employer/union-only group
guidance shall control.



D. This Addendum is in no way intended to supersede or modify 42 CFR Part 423 or section 1860D-1
through D-43 of the Act, except as specifically provided in applicable employer/union-only group
waiver guidance and/or in this Addendum. Failure to reference a regulatory requirement in this
Addendum does not affect the applicability of such requirement to the PDP Sponsor and CMS.



E. The provisions of this Addendum apply to all employer/union-only group PDPs offered by PDP
Sponsor under this contract number. In the event of any conflict between the provisions of this
Addendum and any other provision of the contract, the terms of this Addendum shall control.



Article II.

FUNCTIONS TO BE PERFORMED BY THE PDP SPONSOR




A. ENROLLMENT




1. PDP Sponsor agrees to restrict enrollment in an employer/union-only group PDP to those Part
D eligible individuals eligible for the employers/unions employment-based retiree prescription drug
coverage. PDP Sponsor agrees not to enroll active employees of an employer/union in its
employer/union-only group PDPs.



2. PDP Sponsor will not be subject to the requirement to offer the employer/union-only group
PDP to all Part D eligible beneficiaries residing in its service area as set forth in 42 CFR
§423.104(b).



3. If an employer/union elects to enroll Part D eligible individuals eligible for its employer
group only PDPs through a group enrollment process, PDP Sponsor will not be subject to the
individual enrollment requirements set forth in 42 CFR §423.32(b). PDP Sponsor agrees that it will
comply with all the requirements for group enrollment contained in CMS guidance, including those
requirements contained in Chapter 3 of the Prescription Drug Benefit Manual.



B. PRESCRIPTION DRUG BENEFIT




1. (a) Except as provided in II.B.1(b), PDP Sponsor agrees to provide basic prescription drug
coverage, as defined under 42 CFR §423.100, under any employer/union-only group PDP, in accordance
with Subpart C of 42 CFR Part 423.



(b) CMS agrees that PDP Sponsor will not be subject to the actuarial equivalence requirement
set forth in 42 CFR §423.104(e)(5) with respect to any employer/union-only group PDP and may
provide less than the defined standard coverage between the deductible and initial coverage limit.
PDP Sponsor
agrees that its basic prescription drug coverage under any employer/union-only group PDP will
satisfy all of the other actuarial equivalence standards set forth in 42 CFR §423.104, including
but not limited to the requirement set forth in 42 CFR §423.104(e)(3) that the plan has a total or
gross value that is at least equal to the total or gross value of defined standard coverage.


 


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(c) CMS agrees that nothing in this Addendum prevents PDP Sponsor from offering benefits in
addition to basic prescription drug coverage to employers/unions. Such additional benefits offered
pursuant to private agreements between PDP Sponsor and employers/unions will be considered
non-Medicare Part D benefits (non-Medicare Part D benefits). PDP Sponsor agrees that such
additional benefits may not reduce the value of basic prescription drug coverage (e.g., additional
benefits cannot impose a cap that would preclude enrollees from realizing the full value of such
basic prescription drug coverage).



(d) PDP Sponsor agrees that enrollees of employer/union-only group PDPs shall not be charged
more than the sum of his or her monthly beneficiary premium attributable to basic prescription drug
coverage and 100% of the monthly beneficiary premium attributable to his or her non-Medicare Part D
benefits (if any). PDP Sponsor must pass through the direct subsidy payments received from CMS to
reduce the amount that the beneficiary pays (or, in those instances where the subscriber to or
participant in the employer plan pays premiums on behalf of an eligible spouse or dependent, the
amount the subscriber or participant pays).



(e) PDP Sponsor agrees that any additional non-Medicare Part D benefits offered to an
employer/union will always pay primary to the subsidies provided by CMS to low-income individuals
under Subpart P of 42 CFR Part 423 (the Low-Income Subsidy).



2. PDP Sponsor agrees enrollees of employer/union-only group PDPs will not be permitted to
make payment of premiums under 42 CFR §423.293(a) through withholding from the enrollees Social
Security, Railroad Retirement Board, or Office of Personnel Management benefit payment.



3. PDP Sponsor agrees it shall obtain written agreements from each employer/union that provide
that the employer/union may determine how much of an enrollees Part D monthly beneficiary premium
it will subsidize, subject to the restrictions set forth in II.B.3(a) through (g). PDP Sponsor
agrees to retain these written agreements with employers/unions, including any written agreements
related to items (d) through (f), and must provide access to this documentation for inspection or
audit by CMS (or its designee) in accordance with the requirements of 42 CFR 423.504(d) and
423.505(d) and (e).



(a) The employer/union can subsidize different amounts for different classes of enrollees in
the employer/union-only group PDP provided such classes are reasonable and based on objective
business criteria, such as years of service, date of retirement, business location, job category,
and nature of compensation (e.g., salaried v. hourly). Different classes cannot be based on
eligibility for the Low Income Subsidy.



(b) The employer/union cannot vary the premium subsidy for individuals within a given class of
enrollees.



(c) The employer/union cannot charge an enrollee for prescription drug coverage provided under
the plan more than the sum of his or her monthly beneficiary premium attributable to basic
prescription drug coverage and 100% of the monthly beneficiary premium attributable to his or her
non-Medicare Part D benefits (if any). The employer/union must pass through direct subsidy payments
received from CMS to reduce the amount that the beneficiary pays (or, in those instances where the
subscriber to or participant in the employer plan pays premiums on behalf of an eligible spouse or
dependent, the amount the subscriber or participant pays).



(d) For all enrollees eligible for the Low Income Subsidy, the low income premium subsidy
amount will first be used to reduce any portion of the monthly beneficiary premium paid by the
enrollee (or in those instances where the subscriber to or participant in the employer plan pays
premiums on behalf of a low-income eligible spouse or dependent, the amount the subscriber or
participant pays), with any remaining portion of the premium subsidy amount then applied toward the
portion of any monthly beneficiary premium paid by the employer/union. However, if the sum of the
enrollees monthly premium (or the subscribers/participants monthly
premium, if applicable) and the employers/unions monthly premiums (i.e., total monthly
premium) are less than the monthly low-income premium subsidy amount, any portion of the low-income
subsidy premium amount above the total monthly premium must be returned directly to CMS. Similarly,
if there is no monthly premium charged the beneficiary (or subscriber/participant, if applicable)
or employer/union, the entire low-income premium subsidy amount must be returned directly to CMS
and cannot be retained by the PDP Sponsor, the employer/union, or the beneficiary (or the
subscriber/participant, if applicable).





 


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(e) If the Part D sponsor does not or cannot directly bill an employer groups beneficiaries,
CMS will permit the Part D sponsor to directly refund the amount of the low-income premium subsidy
to the LIS beneficiary. This refund must meet the above requirements concerning beneficiary premium
contributions; specifically, that the amount of the refund not exceed the amount of the monthly
premium contribution by the enrollee and/or the employer. In addition, the sponsor must refund
these amounts to the beneficiary within a reasonable time period. However, under no circumstances
may this time period exceed forty five (45) days from the date that the Part D sponsor receives the
low-income premium subsidy amount payment for that beneficiary from CMS.



(f) The PDP Sponsor and the employer/union may agree that the employer/union will be
responsible for reducing up-front the premium contribution required for enrollees eligible for the
Low Income Subsidy. In those instances where the employer/union is not able to reduce up-front the
premiums paid by the enrollee (or, the subscriber/participant, if applicable), the PDP Sponsor and
the employer/union may agree that the employer/union shall directly refund to the enrollee (or
subscriber/participant, if applicable) the amount of the low-income premium subsidy up to the
monthly premium contribution previously collected from the enrollee (or subscriber/participant, if
applicable). The employer/union is required to complete the refund on behalf of the PDP Sponsor
within forty-five (45) days of the date the PDP Sponsor receives from CMS the low-income premium
subsidy amount payment for the low-income subsidy eligible enrollee.



(g) If the low income premium subsidy amount for which an enrollee is eligible is less than
the portion of the monthly beneficiary premium paid by the enrollee (or subscriber/participant, if
applicable), then the employer/union should communicate to the enrollee (or subscriber/participant)
the financial consequences of the low-income subsidy eligible individual enrolling in the
employer/union-only group PDP as compared to enrolling in another Part D plan with a monthly
beneficiary premium equal to or below the low income premium subsidy amount.



4. For non-calendar year employer/union-only group PDPs, PDP Sponsor may determine benefits
(including deductibles, out-of-pocket limits, etc.) on a non- calendar year basis subject to the
following requirements:



(a) Applications, formularies, and other submissions to CMS must be submitted on a calendar
year basis;



(b) The prescription drug coverage under the employer/union-only group PDP must be at least
actuarially equivalent to defined standard coverage for the portion of its plan year that falls in
a given calendar year. An employer/union-only group PDP will meet this standard if its prescription
drug coverage is at least actuarially equivalent for the calendar year in which the plan year
starts and no design change is made for the remainder of the plan year. In no event can PDP Sponsor
increase during the plan year the annual out-of-pocket threshold;



(c) After an enrollees incurred costs exceed the annual out-of-pocket threshold, the
employer/union-only group PDP must provide coverage that is at least actuarially equivalent to that
provided under standard prescription drug coverage; eligibility for such coverage can be determined
on a plan year basis.



5. PDP Sponsor agrees to administer for its prescription drug plan members at point-of-sale
the Medicare Coverage Gap Discount authorized by section 1860D-14A of the Social Security Act (the
Act).


 


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C. DISSEMINATION OF EMPLOYER/UNION-ONLY GROUP PLAN INFORMATION



1. Except as provided in II.C.2., CMS agrees that with respect to any employer/union-only
group PDPs, PDP Sponsor will not be subject to the information requirements set forth in 42 CFR
§423.48 and the prior review and approval of marketing materials and enrollment forms requirements
set forth in 42 CFR §423.50. PDP Sponsor will be subject to all other dissemination requirements
contained in 42 CFR §423.128 and in CMS guidance, including those requirements contained in Chapter
12 of the Prescription Drug Benefit Manual.



2. CMS agrees that the dissemination requirements set forth in 42 CFR §423.128 will not apply
with respect to any employer/union-only group PDP when the employer/union is subject to alternative
disclosure requirements (e.g., the Employee Retirement Income Security Act of 1974 (ERISA)) and
fully complies with such alternative requirements. PDP Sponsor agrees to comply with the
requirements for this waiver contained in employer/union-only group waiver guidance, including
those requirements contained in Chapter 12 of the Prescription Drug Benefit Manual.



D. PAYMENT TO PDP SPONSOR




Except as provided in II.D.1 through 3 of this section, payment under this Addendum will be
governed by the rules of Subpart G of 42 CFR Part 423.



1. PDP Sponsor is not required to submit a Part D bid and will receive a monthly direct
subsidy for each employer/union-only group PDP enrollee equal to the amount of the national average
monthly bid amount, adjusted for health status (as determined under 42 CFR §423.329(b)(1)) and
reduced by the base beneficiary premium for the employer/union-only group PDP, as adjusted under 42
CFR §423.286(d)(3), if applicable. The further adjustments to the base beneficiary premium
contained in 42 CFR §423.286(d)(1) and (2) will not apply.



2. PDP Sponsor agrees that the risk-sharing payment adjustment described in 42 CFR §423.336 is
not applicable for any employer/union-only group PDP enrollee.



3. PDP Sponsor will not receive monthly reinsurance payment or low-income cost-sharing subsidy
amounts in the manner set forth in 42 CFR §423.329(c)(2)(i) and 42 CFR §423.329(d)(2)(i) for any
employer/union-only group PDP enrollee, but instead will receive the full reinsurance and
low-income cost-sharing subsidy payments following the end of year reconciliation as described in
42 CFR §423.329(c)(2)(ii) and 42 CFR §423.329(d)(2)(ii) respectively.




4. For non-calendar year plans:




(a) CMS payments will be determined on a calendar year basis;



(b) Low income subsidy payments and reconciliations will be determined based on the calendar
year for which the payments are made; and



(c) PDP Sponsor acknowledges that it will not receive reinsurance payments under 42 CFR
§423.329(c).



E. SERVICE AREA, FORMULARIES, AND PHARMACY ACCESS




1. CMS agrees that PDP Sponsor may offer an employer/union-only group PDP in any PDP region in
which eligible enrollees reside provided the PDP Sponsor has properly designated (in accordance
with CMS operational requirements) its employer/union-only group service areas in CMSs Health Plan
Management System (HPMS) as including those areas outside of its individual service area(s) to
allow for enrollment of these beneficiaries.


 


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2. PDP Sponsor agrees to utilize, as the formulary for any employer/union-only group PDP, a
base formulary that has received approval from CMS, in accordance with CMS formulary guidance, for
use in a non-group PDP offered by PDP sponsor. Except as set forth in 42 CFR §423.120(b) and
sub-regulatory guidance, PDP Sponsor may not modify the approved base formulary used for any
employer/union-only group PDP by removing
drugs, adding additional utilization management restrictions, or increasing the cost-sharing
status of a drug from the base formulary. Enhancements that are permitted to the base formulary
include adding additional drugs, removing utilization management restrictions, and improving the
cost-sharing status of drugs.



3. For any employer/union-only group PDP, PDP Sponsor agrees to provide Part D benefits in the
plans service area utilizing a pharmacy network and formulary that meets the requirements of 42 CFR
§423.120, with the following exception: CMS agrees that the retail pharmacy access requirements set
forth in 42 CFR §423.120(a)(1) will not apply when the employer/union-only group PDPs pharmacy
network is sufficient to meet the needs of its enrollees throughout the employer/union-only group
PDPs service area, as determined by CMS. CMS may periodically review the adequacy of the
employer/union-only group PDPs pharmacy network and require the employer/union-only group PDP to
expand access if CMS determines that such expansion is necessary in order to ensure that the
employer/union-only group PDPs network is sufficient to meet the needs of its enrollees.



F. PDP SPONSOR REIMBURSEMENT TO PHARMACIES




1. If a PDP Sponsor uses a standard for reimbursement of pharmacies based on the cost of a
drug, PDP Sponsor will update such standard not less frequently than once every 7 days, beginning
with an initial update on January 1 of each year, to accurately reflect the market price of the
drug.



2. PDP Sponsor will issue, mail, or otherwise transmit payment with respect to all claims
submitted by pharmacies (other than pharmacies that dispense drugs by mail order only, or are
located in, or contract with, a long-term care facility) within 14 days of receipt of an
electronically submitted claim or within 30 days of receipt of a claim submitted otherwise.



3. PDP Sponsor must ensure that a pharmacy located in, or having a contract with, a long-term
care facility will have not less than 30 days (but not more than 90 days) to submit claims to PDP
Sponsor for reimbursement.



G. Public Health Service Act




Pursuant to section 13112 of the American Recovery and Reinvestment Act of 2009 (ARRA), the PDP
Sponsor agrees that as it implements, acquires, or upgrades its health information technology
systems, it shall utilize, where available, health information technology systems and products that
meet standards and implementation specifications adopted under section 3004 of the Public Health
Service Act, as amended by section 13101 of the ARRA.


 


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In witness whereof, the parties hereby execute this contract.



This document has been electronically signed by:



	 	 	 
	FOR THE MA ORGANIZATION
	 	 
	 
	 	 
	 

Contracting Official Name

	 	 
	 
	 	 
	 

Date

	 	 
	 
	 	 
	 

	 	 
	Organization

	 	Address
	 
	 	 
	FOR THE CENTERS FOR MEDICARE & MEDICAID SERVICES
	 	 
	 
	 	 
	 

	 	 
	 

	 	Date







 


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