What if I have prescription drug coverage through my former employer or union?

Your current insurer, whether employer, union or insurance company, is required to send you a letter prior to October 15 of each year to let you know whether the coverage you have is “creditable” — or at least as good as Medicare’s. If the answer is yes, you can switch to Part D at a later date without paying a penalty. Save the letter in a safe place, because you may need it to avoid the penalty if you do decide to enroll at a later date. You have a legal right to this information, so if you did not receive a letter from your insurer, ask for it.

You may still want to compare the cost and coverage of your current plan (including premiums, copayments and covered drugs) to see which offers you the best coverage. Keep in mind, however, that if you drop your current coverage, you may not be able to get it back. If your current coverage is not “creditable,” that is, it is not as good as Medicare’s, you will be subject to a late enrollment penalty if you wait until later to enroll in Part D. If you are eligible for Part D’s low-income subsidy known as Extra Help, you will generally receive substantially better drug coverage if you join a Medicare Part D plan than from your employer plan.

Your current provider should also send you information on how your plan works with Part D. For example, some employers may provide “wrap around” benefits in which you are required to enroll in Part D, but your plan provider supplements the benefit by subsidizing premiums, deductibles or other out-of-pocket expenses. Keep in mind, amounts paid by your plan provider will not count toward your out-of-pocket costs, even for covered drugs.

You are allowed to give up your employer coverage in exchange for enrolling in Part D, but be very careful to check the impact on the rest of your health insurance coverage with your provider. Some employers, unions or other insurance providers may disenroll you from all of your health care coverage if you disenroll from their drug plan.

The legislation implementing Part D included significant incentives to employers and unions to continue offering drug coverage to their retirees. While it appears that few of them are dropping their plans in response to the availability of Part D, it is not clear whether that will continue to be the case once the subsidies are phased-out.