42 U.S.C. § 1395w–132 — Special rules for employer-sponsored programs

(a) Subsidy payment.

(1) In general. The Secretary^* must pay the sponsor of a qualified retiree prescription drug plan^* a special subsidy for each qualified covered retiree. The subsidy is the amount in paragraph (3). This subsection is advance budget authority and obligates the Secretary to make these payments.

(2) Qualified retiree prescription drug^* plan. This means employment-based retiree health coverage, as defined in subsection (c)(1), for which, regarding an eligible individual who participates or is a beneficiary, these requirements are met:

(A) Actuarial-equivalence attestation. The sponsor must annually, or at another time the Secretary requires, attest that the actuarial value of the plan’s drug coverage, determined using section 1395w–111(c)’s processes and methods, is at least the actuarial value of standard prescription drug coverage^*. For years before 2025, do not count discounts or coverage during the gap between the initial coverage limit^* and the out-of-pocket threshold. For 2025 and later, do not count discounts under section 1395w–114c.

(B) Audits. The sponsor or its designated administrator^* must keep the records the Secretary requires and give the Secretary access for audits and oversight needed to check coverage adequacy and payment accuracy. Section 1395w–102(d)(3) applies to this information, including the actuarial value and attestation, similarly to financial records of PDP sponsors and MA organizations.

(C) Disclosure. The sponsor must disclose information about the drug coverage as required by section 1395w–113(b)(6)(B).

(3) Employer and union subsidy amounts.

(A) For a qualifying covered retiree enrolled with the sponsor during a coverage year, the subsidy equals 28 percent of allowable retiree costs attributable to the retiree’s gross covered retiree plan-related drug costs above the threshold in subparagraph (B) and no more than the limit in that subparagraph.

(B) The 2006 threshold is $250 and the 2006 limit is $5,000. For later plan years, both amounts are adjusted in the same way as the annual deductible and annual out-of-pocket threshold under section 1395w–102(b)(1) and (4)(B).

(C) For this paragraph—

(i) “Allowable retiree costs” means the part of gross covered drug costs that the sponsor or someone for the qualifying retiree actually pays, after discounts, chargebacks, and average percentage rebates.

(ii) “Gross covered retiree plan-related prescription drug costs” means the costs incurred under the plan for the retiree during a coverage year, excluding administrative costs but including costs directly related to dispensing covered part D drugs. Count the costs whether the retiree or the plan pays them.

(iii) “Coverage year” has the meaning in section 1395w–115(b)(4).

(4) Qualifying covered retiree. This means an eligible individual who is not enrolled in a prescription drug plan or MA–PD plan^* but is covered under a qualified retiree prescription drug plan.

(5) Payment methods and information. The payment-method and information rules in section 1395w–115(d), including paragraph (2), apply similarly to payments under this subsection.

(6) Construction. This subsection does not—

(A) prevent an eligible individual covered by employment-based retiree health coverage from enrolling in a prescription drug plan or MA–PD plan;

(B) prevent that coverage, an employer, or another person^* from paying all or part of a required premium for such coverage for the individual;

(C) prevent the retiree coverage from providing better-than-standard coverage to retirees in a qualified plan or supplemental benefits to people enrolled in a prescription drug or MA–PD plan, including retirees not covered by a qualified plan; or

(D) prevent employers from making benefit design and pharmacy-access provisions flexible without following basic-coverage requirements, if the actuarial-equivalence requirement in paragraph (2)(A) is met.

(b) MA waiver authority. Section 1395w–27(i) applies to prescription drug plans in relation to employment-based retiree coverage similarly to an MA plan^* in relation to employers. This includes allowing separate premiums for people enrolled because of that coverage and limiting enrollment to eligible people enrolled under it. The authority must be used to help offer prescription drug benefits under a Program plan under section 8903c of title 5 through employment-based retiree coverage, either through a prescription drug plan or through contracts between the Program plan and that plan’s PDP sponsor^*.

(c) Definitions.

(1) Employment-based retiree health coverage means health insurance or other coverage of health-care costs, whether voluntary or required by law or contract, for eligible individuals or them and their spouses and dependents under a group health plan^* because they are retired participants.

(2) Sponsor means a group-health-plan sponsor as defined in section 1002(16)(B) of title 29. For a plan jointly maintained by one employer and an employee organization when the employer is the main source of funding, it means the employer.

(3) Group health plan includes a plan defined in section 1167(1) of title 29 and also includes—

(A) a plan established or maintained for its employees by the Government of the United States^*, by the government of any State^* or political subdivision of a State, or by any agency or instrumentality of the United States, a State, or a political subdivision of a State, including a health benefits plan offered under chapter 89 of title 5;

(B) a plan established or maintained under one or more collective-bargaining agreements; and

(C) a church plan established and maintained for employees or beneficiaries by a tax-exempt church, convention of churches, or association of churches under section 501 of the Internal Revenue Code of 1986.