EGWP Medicare: How Employer Group Waiver Plans Work for Retiree Drug Coverage
Your employer offers retiree drug coverage through an EGWP. Here's what that means and how it compares to individual Medicare Part D.
Key Takeaways
- 1EGWP stands for Employer Group Waiver Plan—a Medicare Part D alternative
- 2Employers use EGWPs to provide subsidized drug coverage to retirees
- 3Coverage is often better and cheaper than individual Part D plans
- 4You keep your employer coverage instead of shopping for individual Part D
- 5Employer receives subsidies from Medicare to offset costs
- 6If you have EGWP coverage, you don't need to enroll in separate Part D
What Is an EGWP?
An Employer Group Waiver Plan (EGWP, pronounced "egg-wip") is a Medicare Part D prescription drug plan offered through an employer or union to their Medicare-eligible retirees.
- **Group coverage:** Covers retirees as a group, not individuals
- **Part D alternative:** Satisfies Medicare Part D requirement
- **Employer-sponsored:** Your former employer manages the plan
- **Medicare subsidized:** CMS provides payments to reduce employer costs
- **Often superior:** May have better formulary and lower costs than individual Part D
- **Automatic enrollment:** If eligible, you're typically enrolled automatically
How EGWPs Work
Understanding the mechanics of employer retiree drug coverage:
- **You enroll in Medicare A & B:** EGWP supplements, doesn't replace
- **Employer offers drug plan:** Through EGWP structure
- **Medicare pays employer:** Direct subsidy or reinsurance payments
- **You pay premiums (if any):** Often lower than individual Part D
- **Employer subsidizes the rest:** Using Medicare payments + their own funds
- **You use covered pharmacies:** Similar to any Part D plan
| Component | Who Pays | Purpose |
|---|---|---|
| Medicare subsidy | CMS | Reduces employer costs |
| Employer subsidy | Former employer | Additional cost offset |
| Retiree premium | You | Your share (often low or $0) |
| Copays/coinsurance | You | At pharmacy for drugs |
EGWP vs Individual Medicare Part D
How does EGWP compare to buying your own Part D plan?
- **Cost advantage:** EGWPs typically cost retirees less due to employer subsidies
- **Convenience:** No annual shopping during open enrollment
- **Trade-off:** Less control over plan design and drug formulary
- **Creditable coverage:** EGWPs are considered creditable, avoiding Part D penalties
| Factor | EGWP | Individual Part D |
|---|---|---|
| Premium | Often lower or $0 | $0-$100+/month |
| Drug formulary | Often broader | Varies by plan |
| Employer subsidy | Yes | No |
| Plan selection | No choice—employer's plan | You choose from many plans |
| Late enrollment penalty | Avoided if creditable | Applies if not enrolled |
| Donut hole | May have better coverage | Standard coverage gap |
| Annual changes | Employer decides | You can switch annually |
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How Employer Subsidies Work
Your employer receives significant financial support to provide EGWP coverage:
- **Direct subsidy:** Medicare pays employer a per-member payment
- **Reinsurance:** Medicare covers a portion of high-cost claims
- **Tax benefits:** Employer deductions for providing retiree benefits
- **Administrative efficiency:** Bulk purchasing and negotiating power
- **Total savings:** Can be 50-70% of what individual coverage would cost
Why Employers Offer EGWPs
Medicare subsidies make offering retiree drug coverage financially attractive. Employers fulfill promises to long-term employees while controlling costs.
What Retirees Should Know
If you're a retiree with EGWP coverage, here's what to keep in mind:
- **Don't drop it for individual Part D:** You'll likely pay more and get less
- **Verify creditable coverage:** Get a letter confirming it meets Medicare standards
- **Keep documentation:** In case you need to prove continuous coverage later
- **Watch for changes:** Employers can modify or discontinue EGWP plans
- **Coordinate with other coverage:** If you have VA or other drug benefits
- **Report to Medicare:** Ensure Medicare knows you have Part D equivalent coverage
Don't Drop EGWP Without Careful Analysis
If you're considering dropping employer EGWP coverage for individual Medicare Part D, do the math carefully. Factor in premiums, formulary coverage for your specific drugs, and any employer subsidies you'd lose. Most retirees are better off keeping EGWP coverage.
Managing All Your Retirement Costs
Drug coverage is just one piece of retirement planning. A diversified retirement portfolio helps manage all your costs:
- Gold provides inflation protection as healthcare costs rise
- Physical assets preserve purchasing power for future medical expenses
- Tax-advantaged Gold IRA keeps more money working for you
- Diversification beyond stocks helps weather market volatility
- Rollover from existing retirement accounts is tax-free
Frequently Asked Questions
1Do I need to enroll in Medicare Part D if I have EGWP?
No. EGWP coverage counts as Medicare Part D equivalent coverage. You don't need to enroll in a separate Part D plan, and you won't face late enrollment penalties as long as your EGWP is considered "creditable coverage."
2What happens if my employer discontinues EGWP?
You'll have a Special Enrollment Period to join a Medicare Part D plan without penalty. Make sure to enroll promptly—typically within 63 days—to avoid gaps in coverage and potential late enrollment penalties.
3Can I use both EGWP and individual Part D?
No, you can only have one Part D plan at a time. If you enroll in individual Part D while having EGWP, you'll likely be disenrolled from one plan. Usually, the newer enrollment takes precedence, and you'd lose your EGWP.
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