AmWINS Group Benefits re-launches EGWP program to help reverse negative effects of RDS

AmWINS Group Benefits launched the nation's first Employer Group Waiver Plan (EGWP, pronounced Egg Whip) in 2006, and now in the wake of health care reform is re-launching their program as a direct and immediate approach to help reverse the negative effects of the Retiree Drug Subsidy (RDS), now taxable under the Patient Protection and Affordable Care Act (PPACA).

“As the ramifications and unforeseen consequences of the health reform act begin to unfold, many businesses will be looking for solutions to unexpected health benefit problems”

Since the PPACA was written into law, thousands of employers that accepted the RDS under Medicare Part D are now faced with provisions that reduce the value of the subsidy. Faced with instant write downs to their financial statements to the tune of billions of dollars in future liabilities, AmWINS Group Benefits delivers an innovative solution to repeal the unfortunate losses and relieve administrative burdens these companies are up against.

"Although the new tax status for the 28 percent retiree drug subsidy does not kick in until 2013, it has had an immediate impact on employer financial statements, often to the tune of millions of dollars. One way to eliminate this impact is to use an EGWP," said Sam Fleet, president of AmWINS Group Benefits.

EGWP allows an employer to contract with the federal government as a prescription drug plan (PDP) sponsor to provide drug benefits to retirees. Using a nationally based formula, the government pays the company a capitation fee that can exceed the retiree drug subsidy by $100 to $200 per member per year. Experts estimate that under EGWP, the federal government covers 35 percent or more of the drug prescription costs incurred by an employer, far exceeding the 20 percent average yield of the previous drug subsidy.

800 Series EGWP

A more appealing approach for many companies is what is known as an 800 Series EGWP. Under this strategy, a company can contract with a third party Part D sponsor, who interacts with the federal government. The sponsor retains a fee but passes through the bulk of government payments in the form of lower premiums or direct payments to the employer.

The 800 Series EGWP offers a number of benefits, including:

• The contracted PDP sponsor shoulders the expenses associated with verifying compliance each year
• Can be self-funded or fully insured
• The plan can be customized to match an employer's current benefits, allowing the company to meet its obligations, whether thanks to collective bargaining or to commitments made to employees in a non-union environment
• It maximizes the government contribution toward pharmaceutical expenses without imposing administrative burdens on the company

"As the ramifications and unforeseen consequences of the health reform act begin to unfold, many businesses will be looking for solutions to unexpected health benefit problems," Fleet said. "Being knowledgeable about all of your options, like the 800 Series EGWP, may be just the solution corporations need."