Donut Hole is Closing in 2019

Open enrollment for Medicare Part D prescription Drug benefits is starting soon. It runs from October 15 through December 7. Enrollments and changes will be effective 1/1/2019.

Medicare Part D is the program that provides prescription drug benefits to seniors and those enrolled in Medicare Part A and/or eligible for Part B. The program first became available in 2006. Prior to that, there was no drug coverage for this population.

The list of vendors marketing plans in our area was released 9/28 and includes 35 plans offered by 12 carriers. There are a few carriers that are new to the Part D market so don’t be surprised if your agent does not know much about them yet. Further, the Medicare Star Ratings have not yet been released, so we don’t have much guidance on these plans. (Medicare Star ratings give an indication of the plan’s ratings in different areas of performance.)

The government designs the benefits and effectively “outsources” the coverage to the insurance carriers. The carriers must offer at least, the benefit structure outlined by the government. The benefits can be better, but they cannot be worse.

Further, they must cover at least two drugs in every therapeutic class. However, each plan will use different preferred pharmacies and have its own formulary. So the “best” plan for an individual really depends on the Rx that they take as well as the pharmacy they use. Further, some plans can be very attractive if the insured is willing to use the mail order feature of the plan.

Although I have noticed some changes there. I suspect this is because the plans have become more closely associated with the pharmacies. In that case the pharmacy likely wants to increase foot-traffic into the store. So, sometimes there isn’t much savings to use the mail order option.

There are four phases of coverage: Deductible, Initial Coverage, Gap (Donut hole) and Catastrophic:

Deductible: In 2018 the calendar year deductible could be no greater than $405. It could be less, but not more. For 2019, that increases to $415.

Initial Coverage phase: The plan will pay approximately 75% of covered medications and the enrollee pays 25%. This could be via a flat copay or coinsurance amount.

Gap (Donut hole): After the retail cost of the enrollee’s medication exceeds $3820 the coverage changes. The plan pays about 65% of generic drugs and 5% for covered brand name drugs. But the manufacturer must give a 70% discount for brand name drugs, leaving the enrolled to pay about 37% the cost of generic drugs and 25% the cost of brand name drugs.

In 2018 the enrollee payed about 44% the cost of generics and 35% the cost of brand name drugs.

Catastrophic: Once the enrollee pays $5100 out of pocket for covered Rx, the plan will pay 95% and the enrollee will pay the greatest of 5% or $8.50 for brand name and $3.40 for generic drugs.

The most important fact to understand is that the retail cost of medications is what drives one into the donut hole. Since pricing varies widely under these plans at different pharmacies, a thorough analysis is important for those that take a lot of medicine.

We have a wonderful organization in town called HICAP, (530) 223-0999. They can assist individuals by running the reports from the Medicare website that compare the total cost, including deductible, premium and copayment for every plan available based on your current Rx. While we are all one doctor visit away from a new medication, this service is the best way that I know to evaluate the plans.

We have instructions on our website here.

In 2019, 25% of the carriers will not pay a commission to agents. So, I suspect that HICAP will be seeing more and more clients.

There is no requirement to enroll in a drug plan. However if the individual does not enroll when eligible, they can only enroll during the annual open enrollment period and will be assessed a penalty for every month not enrolled. That penalty will be added to the premium for as long as one stays enrolled.

If already enrolled in a plan, the carrier must send out a Notice of Annual Changes. It is important to review this thoroughly. Changing plans always creates some inconvenience. If your current drugs are not covered, take a look at the alternatives and discuss it with your physician.

I recommend that enrollees download the app for their plan or take the printed formulary with them to their doctor appointments. Your doctor cannot be expected to know your plan. Help them out!

Time seems to go faster in the fall with all the holidays, so get started!

Margaret R. Beck

Margaret Beck CLU, ChFC, CEBS started her insurance practice in Redding in 1978. She founded Affiliated Benefit Services.