RDS Services Summarizes New ERRP Cost Adjustment Guidance

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RDS Services LLC has helped plan sponsors with ERRP since its creation in March 2010 and wants to stress the importance to plan sponsors on being prepared for this challenge and of RDS Services ability to assist.

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On June 7th HHS released guidance on how to handle cost adjustments under the Early Retiree Reinsurance Program (ERRP). One of the most common adjustments plans will run across are drug rebates. The HHS release identifies several acceptable methods to allocate such “drug rebates”; rebates that are often unknown until some date far beyond the end of the plan year. An example of an acceptable method for allocating a drug rebate would be to use a “master percentage” calculated based on the estimated annual rebate total for a “plan” over the total prescription drug spend for that plan. It will be acceptable to apply an estimated percentage and calculate an estimated rebate for each claim in your claim file for each eligible “early retiree member”. To complicate matters further, the database of early retirees that you maintain will have to account for both the “gross” drug claim cost as well as the “net” drug claim cost since the “Cost Summary Report” you need to send HHS requires the accumulation of claim data for an eligible early retiree on a “net” cost basis. However, the detailed claim file that you need to send HHS must provide both a “gross” cost claim file as well as a separate “cost adjustment” file; the two files when netted should equal your Cost Summary Report’s “net” cost totals.

Moreover, the guidance released makes it clear that HHS expects plans that today receive a “retiree drug subsidy” to identify the portion of “received” subsidy to a “Medicare eligible” spouse or dependent of an “early retiree”, since spouses and dependents of early retirees ARE eligible under ERRP.

Lastly, if a plan’s actual rebate total for a plan year (which may not be identified until well after the end of the plan year) is different from the estimate used at the time of the original ERRP “request for reimbursement”, then a plan must re-run the claim files with the NEW rebate percentage and re-submit their “request for reimbursement” for what may possibly be a closed plan year.

If you are in need of assistance, RDS Services is a Data Aggregator and ERRP service provider and has developed a proprietary database program to manage NOT ONLY aggregation but also the claims and member eligibility rules associated with ERRP. For more information please visit RDS Services.us or call 888-797-8274


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Mark Manquen

Jayne Brown
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