by Melissa Homa
Think about your experiences at the pharmacy counter. Have you ever been shocked by what you owe for a prescription (even after applying your health insurance)? If so, it’s not surprising considering the fact that Americans spent $263 billion on prescription drugs in 2011, according to a 2013 report by the National Center for Health Statistics (NCHS).
Prescription drugs are a vital component of U.S. health care. They help people live healthier, more comfortable lives, which is why the demand and cost for them will continue to increase. A Mayo Clinic study observed that nearly 70% of Americans were prescribed at least one medication in 2009. In a 2013 report, the NCHS found that 90% of adults aged 65 and older took at least one prescription in the 30 days leading up to the study, and 39.7% of those adults took five or more prescriptions.
The problem is that many Americans can’t afford the prescription drugs they need. Seniors with fixed incomes have an especially hard time footing the bill, which is why most purchase the prescription drug coverage through Medicare called Part D.
The Golden-Ager Opportunity
Approximately 10,000 people turn 65 and become eligible for Medicare every day, and most beneficiaries have the need for Part D coverage. There is an overwhelming number of Part D plans available, which insurance agents in the senior market can capitalize on and use as an effective door opener. A broker’s ability to cut through the Part-D clutter and pinpoint the best drug plans is a desirable service that many seniors decide to take advantage of, resulting in commissions.
PDP commissions are holding steady for another year. For the 2015 selling season, initial commissions are $56 and renewals are $28 for all years. In California, the maximum amount the Centers for Medicare and Medicaid Services (CMS) will allow insurance companies to pay agents and brokers is $510 in initial MA commissions, and renewals for all years are up to 50% of the initial commissions.
Tricks of the Trade
Time is very valuable to agents, and one tip to maximize it when working with Part D clients is to ask them for a list of drugs they’re taking. Knowing which medications they need makes it easy to find the right plans for them fast. Agents can then compare costs and pharmacies against their clients’ lists to help them get the most for their money.
Part D plans can change on a year-to-year basis, and switching from one to another can result in decreased premium costs. To look out for their clients’ best interests, agents should check in with them each year to see if their prescriptions are still covered by their current plans or if better options have become available. A Kaiser Family Foundation study showed that from 2006 to 2010, only 13% of beneficiaries switched drug plans during each AEP despite changes to out-of-pocket costs and coverage, which means that agents have the opportunity to help a lot of seniors save money.
The Future of Part D Plans
For better or worse, the Centers for Medicare & Medicaid Services (CMS) has proposed several changes to Part D plans that may be coming down the pike in 2015, including limits in the number of plans offered. This proposal would only allow insurers to offer two prescription drug plans in the same service area: one basic and one enhanced plan. An analysis from Avalere Health found that this proposition would require 39% of all enhanced plans to be eliminated by 2016, which would be an extreme change, but one that could have a positive outcome.
The Part D program is very complex with an excessive number of plans to choose from. Also beneficiaries are expected to weigh the benefit and formulary differences, cost levels, and plan reputations for each one. In California, there were 31 PDPs available for 2014, and that’s not including MAPDs. Reducing the number of options would simplify the program and could make enrollees more likely to consider switching plans if and when it could benefit their bottom line.
In a Nutshell
Part D plans may not make sense for every Medicare beneficiary, but historically they’re elected by most. On an individual basis, PDP and MAPD commissions might not seem like much; however, they have the potential to accumulate quickly due to the constant, fundamental need for them. As with any health program, Part D has some issues, but the ever-increasing senior market, need for prescription drugs, and cost for those drugs are compelling enough reasons for insurance agents in the senior market to add prescription drug plans to their portfolios.
Melissa Homa is the copywriter and editor at Ritter Insurance Marketing (Ritter). She received her B.A. from Temple University. Ritter is a national Field Marketing Organization that solves the distribution needs of more than 70 insurance companies in the senior health and life markets. Ritter’s proprietary services, including a customized CRM system and quoting tools, have earned the company its reputation as a technology leader in the insurance industry. For more information, visit www.ritterim.com.
A Medicare Part D Primer
Part D reduces the out-of-pocket costs that Medicare beneficiaries pay for their medications. Everyone with Medicare is eligible for it regardless of income. Seniors with limited income and resources may qualify for more highly subsidized coverage. There are two ways to get prescription drug coverage, one of which is to join a Medicare drug plan. A prescription drug plan (PDP) adds coverage to Original Medicare (Part A or B), and can be used to supplement a Medicare Cost Plan, a Medical Savings Account (MSA) Plan, and some Medicare Private Fee-for- Service (PFFS) Plans.
The second way to get Part D is to join a Medicare Advantage (MA) plan or another Medicare health plan that includes prescription drug coverage. Medicare Advantage plans with prescription drug coverage are often referred to as MAPDs. They offer all Medicare coverage under one policy, including Part A (hospital insurance), Part B (medical insurance), and Part D.
Part D is available through insurance companies and other private companies approved by Medicare, which gives consumers freedom of choice. Companies design their plans using different criteria, including network pharmacies, lists of covered prescription drugs called “formularies,” and coverage rules, resulting in a wide range of options. Many plans are structured in tiers that have different costs associated with them. For example, the lowest tier may have the lowest co-payment and so on.
Medicare beneficiaries who don’t join a drug plan when they’re first eligible and choose to do so later may have to pay a late enrollment penalty. Once they sign up, consumers may not be able to make changes to their plans until the next annual enrollment Period (AEP), which runs from October 15 to December 7.