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Retiree drug subsidy changes for municipalities

October 13, 2016

Last October, we sent you a memo regarding the impact of the GIC’s conversion of the UniCare Medicare Extension (OME) drug plan to a Medicare Part D (EGWP) Plan and the effect on the Retiree Drug Subsidy (RDS) program. As indicated, there was no impact for this Calendar year, 2016, and there will be a full year credit in November for the 2015 rebates. As we previously stated, the credits you will receive in November 2017 for the UniCare OME portion will be reduced by about half. We estimate that future RDS rebates will decline regardless of the EGWP program as they are impacted by declines in Federal subsidy amounts, formulary changes and drug management programs.

UniCare OME rates for FY17 took into account the expected EGWP subsidy and we were able to reduce the premium by 7.2%. We anticipate that the savings from the lower premiums will exceed the prior RDS subsidy as we move forward. Please note that this does not mean that the Medicare premiums will not be increasing in the future, only that we will be able to reduce the effect of the increase by utilizing the subsidies.