Introduction to the Medical Policy Manual

Guide to Retiree Drug Subsidy (RDS)

What Is It?
New Application Required
How to Apply
Services Regence Provides at No Charge
Liability of the RDS Program

What Is It?

The retiree drug subsidy (RDS) is one of several options available under Medicare that enables employers and unions to help their Medicare-eligible retirees obtain prescription coverage.

If approved, employers may receive a subsidy worth up to 28% of allowable prescription costs. The return in subsidy dollars is expected to be more valuable to a larger group employer, since higher participation helps offset the group’s RDS administrative costs.

Is it valuable to me?
A prospective cost analysis of your retirees’ prescription claim experience estimates your Centers for Medicare and Medicaid Services (CMS) subsidy. Regence can do this analysis for you; contact your sales representative. Smaller groups may not see as much value when comparing the prospective subsidy amount to expected RDS administrative costs.

New Application Required

CMS reminds employer groups (know as "Plan Sponsors") already on the RDS Program that they must submit a new application to participate for the 2007 plan year. Submit your application via the secure RDS Web Site. (To learn more, see How To Apply on the RDS Web site.)

Include Retiree List
This new application must include a new retiree list for the new plan year. (To learn more, see How To Upload a File on the RDS Web site.)

Deadline & Extensions
Submit your application no later than 90 days prior to the start of the plan year. Plan Sponsors can request a 30-day application extension via the RDS Web Site. However, application extensions also must be submitted no later than 90 days prior to the start of the plan year. (To learn more, see How To Request an Application Extension on the RDS Web site.)

How to Apply

1.	Decide Whether to Apply – Will this government subsidy program be of value for your group?
	•	A prospective cost analysis of your retirees’ prescription claim experience estimates your CMS subsidy. Regence can do this analysis for you; contact your sales representative. Smaller groups may not see as much value when comparing the prospective subsidy amount to expected RDS administrative costs.
2.	Test Your Prescription Drug Benefit
	•	CMS requires that your prescription benefit be as good as or better than the standard CMS prescription benefit. Regence can do this comparison for you at no charge. Regence can also provide a notification to employers of creditable coverage at no charge.
3.	CMS Application Process for RDS
	•	Start by reviewing the How to page on the RDS Web site.
	•	Detailed Application Instructions
	•	How To Upload a File
	•	Need an Extension? Request a 30-day application deadline extension if needed. Plan Sponsors must submit an extension request no later than 90 days prior to the start of the plan year. (To learn more, see How To Request an Application Extension.)
	•	Designate Roles On your application, you'll enter a person's name for each of these roles.
		◦	Authorized Representative* – An individual to whom the plan sponsor has granted the legal authority to bind the plan sponsor to the terms of the Plan Sponsor Agreement in the RDS application. Examples of an authorized representative include the plan sponsor's general partner, CFO, CEO, president, human resources director, or an individual who holds a position of similar status and authority within the plan sponsor’s organization. For multi-employer plans, the authorized representative does not have to be a plan sponsor employee, but they may be a member of the jointly appointed board of trustees, which includes both labor and management trustees.
		◦	Account Manager* – Coordinates and maintains the application process. An account manager may be either an employee of the plan sponsor, or an individual who contracts with the plan sponsor to assist with the application process.
		◦	Designee*– Individual(s) chosen by either the authorized representative or the account manager to assist with completion of the RDS application, data submission, and payment request processes. The designee(s) is able to perform only those functions that have been delegated by the authorized representative or account manager.
			▫	A designee(s) can be assigned to an application to assist with one or more of the following application activities:
				•	Assign actuary(ies)
				•	Complete electronic funds transfer (EFT) information
				•	Choose retiree list submission method
				•	Define Benefit Option(s) [UBOI]
				•	Define payment frequency
				•	Request extension
				•	View attestation summary
				•	Submit appeal
				•	Assign Cost Reporter** – choose a Regence representative for this role.
				•	Assign Payment Requestor** – choose a Regence representative for this role.
				•	View/send/receive retiree data – choose a Regence representative for this role.

		The identity of the authorized representative, account manager and designee can be changed. However, only one person may be designated as the authorized representative or account manager at a given point in time. *Note: You may not assign Report Cost and Request Payment privileges to the same designee.
	•	During the application process, your prescription coverage needs to be evaluated each year for actuarial equivalence (even if the benefit has not changed). This test confirms your benefit is at least equal to the CMS standard benefit after the yearly hreshold changes have been applied.
	•	If your prescription benefit is approved by CMS for the RDS, you are exempt from CMS's requirement to submit an annual Creditable Coverage Disclosure notice via the CMS Web site.
4.	Send "Disclosure of Information Agreement" to Regence
	•	Sign Disclosure of Information Agreement
		▫	Request an agreement form from your Regence account representative, have your organization’s authorized representative sign, keep a copy, and send a signed copy back to your account representative.
		▫	Why? As an RDS vendor, Regence is required to have this agreement with each RDS Plan Sponsor. It allows Regence to perform RDS services for the employer group.
	•	Complete the Group Information Form (MS Word) and send it to your account representative. This short electronic form helps Regence prepare for a group’s RDS reporting.
	•	Provide Retiree List File Data - Regence’s RDS coordinator will contact you to determine the best method of obtaining Retiree File response information. This information helps Regence provide accurate and timely CMS cost reporting.
5.	Work Performed by Regence on Behalf of the Group
	•	Generate RDS cost reporting data
	•	Submit RDS cost reports to CMS
	•	Perform RDS quality control, audit checks, and data reconciliation
	•	Process CMS response files

Work Performed by Regence on Behalf of Plan Sponsor

•	Disclosure of Information Agreement form
•	Actuarial Attestation - Regence can evaluate your current prescription benefits to determine if they are actuarially equivalent to, or better than, CMS's standard prescription drug benefit.
•	Submission of Allowable Cost Data to CMS – Either quarterly or annually.
•	Records Maintenance – As required by regulation.

Liability of the RDS Program

•	The Plan Sponsor is responsible for submitting retiree membership records to CMS. CMS then makes final determination of the Medicare eligibility status for each individual and electronically returns a “response” for each submitted record.
•	The Plan Sponsor is responsible for maintaining and submitting accurate RDS membership data in a timely manner. If the RDS retiree data are incorrect, subsequent cost reporting will also be incorrect, which may require a group to reimburse overpaid subsidy dollars to CMS.
•	If a RDS application is jointly tied to other health plans or third party administrators (TPAs), the Plan Sponsor will be responsible for coordinating the distribution of RDS response file data. The Plan Sponsor may also be responsible for consolidating annual reconciliation reporting data.
•	Accuracy in the application process is of utmost importance.
•	The administrative cost may outweigh the return in RDS subsidy.


	The Blue Cross and/or Blue Shield Plans comprising The Regence Group serve Idaho, Oregon, Utah and much of Washington state. The Regence Group and each of its affiliate Plans are independent licensees of the Blue Cross and Blue Shield Association.