Source: https://www.federalregister.gov/articles/2005/03/21/05-5592/medicare-program-medicare-prescription-drug-benefit-interpretation
Timestamp: 2016-05-29 01:59:56
Document Index: 557374243

Matched Legal Cases: ['§ 423', '§ 423', '§ 423', '§ 423', '§ 423', '§ 423', '§ 423', '§ 423']

Federal Register | Medicare Program; Medicare Prescription Drug Benefit; Interpretation
-13400 (4 pages)
Document Number: 05-5592
Shorter URL: https://federalregister.gov/a/05-5592 Action
Medicare Drug Benefit Effective Calendar Year 2006--Title I (CMS-4068-F)
4 actions from August 3rd, 2004 to January 2005
69 FR 46632
SUPPLEMENTARY INFORMATION: I. Background and Clarification of “Entity”
I. Background and Clarification of “Entity” Back to Top
II. Provisions of the Final Regulations Back to Top
Subsequent to the publication of the Prescription Drug Benefit (Part D) final rule on January 28, 2005, we have received inquiries from parties about our discussion of the actuarial equivalence standard, as applied to a single retiree group health plan with multiple benefit options under § 423.884(d)(5)(iv) of the final rule. Specifically, these parties have inquired as to whether an employee health plan sponsor could apply the aggregate net value test under that rule to a chosen subset of those benefit options that meet the gross value test, rather than to all of them. For the reasons that follow, while we had not considered this option when we drafted the final rule, we find that it will be consistent with the principle of letting the sponsor identify the benefit options to which it wants the net value test applied. We accordingly believe that this option should be added to the two options discussed in the preamble to the final rule.
Section 423.884(d)(5)(iv) of the final rule provides that for a sponsor maintaining employment-based retiree health coverage with two or more benefit options, a sponsor must attest that all benefit options for which the sponsor claims the retiree subsidy separately satisfy the gross value test, and either separately or in the aggregate satisfy the net value test. This establishes the principle that the sponsor can identify the benefit options for which it is potentially seeking a subsidy. After considering the above inquiry, we believe that § 423.884(d)(5)(iv) can be read to permit a sponsor to claim the retiree subsidy for: (1) All benefit options that separately meet the gross value test and the net value test; (2) all benefit options that separately meet the gross value test and in the aggregate meet the net value test; and (3) a subset of the benefit options that separately meet the gross value test and in the aggregate meet the net value test. For example, if a retiree group health plan consists of five benefit options, all of which separately meet the gross value test, the plan could claim the subsidy for: (1) Each of the benefit options that separately meets the net value test; (2) all five benefit options if in the aggregate they meet the net value test; or (3) a subset of the five benefit options if in the aggregate this subset meet the net value test (for example, three of the five benefit options). If a sponsor should choose to aggregate a subset of the benefit options in a plan in order to meet the net value test, it could not collect the subsidy for the remaining options in the plan if the remaining options do not pass the net value test individually or in the aggregate.
In response to comments on the application of the actuarial equivalence standard to retiree group health plans with multiple benefit options, the preamble to the January 28, 2005 final rule (70 FR 4409) stated that “the final rule provides sponsors with flexibility by allowing them to choose whether to apply the net prong of the actuarial equivalence test for each benefit option, or to apply the net prong of the actuarial equivalence test on an aggregated basis for all benefit options within a group health plan that satisfy the gross test.” While we believe that both these options should be available, limiting sponsors to these two options will foreclose sponsors from claiming the retiree subsidy for a subset of the benefit options separately meeting the gross value that in the aggregate meet the net value test (the third option described above). We believe the following statement is a more accurate reflection of our policy of maximizing sponsor choice and flexibility, as reflected in the final rule at § 423.884(d)(5)(iv): “The final rule provides sponsors with flexibility by allowing them to choose whether to apply the net prong of the actuarial equivalence test for each benefit option, or to apply the net prong of the actuarial equivalence test on an aggregated basis to two or more benefit options within a group health plan that satisfy the gross test and for which the sponsor is claiming the retiree subsidy.” The preamble to the Part D final rule scheduled to take effect on March 22, 2005 is hereby amended to include the foregoing alternative interpretation in place of that set forth in the final rule published on January 28, 2005 concerning application of the actuarial equivalence standard to employment-based retiree health coverage with multiple benefit options.
The final rule at § 423.286(d)(3) contains our formula for calculation of the late enrollment penalty. That section states that for 2006 and 2007 the penalty equals one percent of the base beneficiary premium (computed under § 423.286(c)) “unless another amount is specified in a separate issuance based on available analysis or other information as determined by the Secretary.” The same language for § 423.286(d)(3) also was included in the proposed rule published on August 3, 2004. In the proposed rule, at 69 FR 46684, we provided an example stating that if the penalty amount is $.36 per month in 2004, and a beneficiary is subject to 12 months of penalty, the beneficiary will pay an additional $.36 * 12 or $4.32 per month as long as they are enrolled in Part D. We are clarifying in this final rule that the example provided in the proposed rule conflicted with regulatory language and could not be correct because it did not account for the fact that the base beneficiary premium, upon which the penalty is based, changes on an annual basis. Given these changes, the reference to the base beneficiary premium in § 423.286(d) must be read to mean that as the base beneficiary premium changes, the late enrollment penalty, when set at one percent of the amount, also changes. Thus, assuming the one percent rule, the late enrollment penalty for 2007 would be based on the amount of the base beneficiary premium for 2007. In addition, during the comment period on the proposed rule, we received comments asking how the late enrollment penalty would be coordinated with the late enrollment penalty for Part B, and whether a one percent penalty would be sufficient to control for adverse selection. Our clarification also responds to these comments because it ensures that the late enrollment penalty is calculated in a manner that coordinates more properly with the Part B penalty, where the penalty is always a percentage of the current year's premium. Finally, in response to some the commenters' statements that any late enrollment penalty should properly account for adverse selection, the statute provides that the late enrollment penalty is the greater of an actuarially determined amount or one percent for each uncovered month. Given the newness of the program and the lack of data to determine an actuarially based penalty, we are initially implementing the penalty based on the one percent methodology. Once we have sufficient program experience, we will reassess this policy. To the extent that an actuarially determined amount provides a greater disincentive to late enrollment, we will move to that methodology given the statutory requirement that the penalty be the larger amount. The preamble to the Part D final rule scheduled to take effect on March 22, 2005 is hereby deemed to include the foregoing clarification.
Instead, we know that there are a variety of circumstances in which a beneficiary will need to be appropriately transitioned from their currently prescribed drugs to alternative drugs covered under the Part D plan's formulary. It is for these special circumstances that we require Part D plans to have an established transition process. To further clarify this transition issue, we provide a brief discussion of the importance we place on protecting beneficiaries as they transition from a prior plan's drug coverage to a new Part D plan's coverage and an overview of our expectations for Part D plans as they develop their transitions processes.
As noted in the preamble and in § 423.120(b)(3) of our final rule, Part D plans are required to establish an appropriate transition process for new enrollees who are transitioning to Part D from other prescription drug coverage, and whose current drug therapies may not be included in their Part D plan's formulary. Also as noted in the preamble we will review Part D plans' transition processes. Our proposed approach to evaluating a transition process review is consistent with our intent to provide potential plan sponsors with maximum flexibility to develop their own formularies in order to manage their prescription drug benefit offerings. We expect plans to document how it will ensure that new enrollees, who are stabilized on drugs that are not on the plan's formulary and that are known to have risks associated with any changes in the prescribed regimen, will continue to have access to medically necessary drugs without adverse health consequences. In addition, it is important that the transition process take into account the unique needs of residents of long term care (LTC) facilities enrolling into a new Part D plan, especially given the fact that a large proportion of residents may be dually eligible for both Medicare and full Medicaid benefits, and therefore, could be auto-enrolled into the plan without making an affirmative selection based on the individual's existing treatment needs.
IV. Waiver of 30-Day Delay in Effective Date Back to Top