Reduction in Retirees

Background

The reduction in retirees error results from a Plan Sponsor failing to process and send in retiree updates during the plan year. This error occurs when a Plan Sponsor submits interim payment requests based on the application's Valid Initial Retiree List and does not make updates to the retiree list until Reconciliation. The interim payment requests are based on the retiree data that RDS has on file. At the time of Reconciliation, the Plan Sponsor realizes that many retirees who were included in the interim payment requests are no longer eligible and should not have been claimed. The removal of those retirees causes an overpayment because the costs reported for these individuals have to be removed, consequently reducing the subsidy amount that was paid during interim payments.

This overpayment situation can be identified and avoided if a Plan Sponsor requests and downloads the Covered Retiree List during the interim payment process, routinely processes Retiree Response Files and Weekly Notification Files sent by CMS' RDS Center, and sends retiree add, update, or delete records back to RDS in the form of a Monthly Retiree List.

Resources Related to This Issue

• Refer to Prepare Cost Data in the RDS User Guide for guidelines and step-by-step instructions for preparing costs.
• Refer to Submit Interim Costs in the RDS User Guide for guidelines and step-by-step instructions for submitting interim costs.
• Refer to Submit a Valid Initial Retiree List and Monthly Retiree List in the RDS User Guide for general information and step-by-step instructions to submit a retiree list to CMS' RDS Center.
• Refer to Process Retiree Response Files in the RDS User Guide for guidelines and step-by-step instructions to process Retiree Response Files.
• Refer to Process Weekly Notification Files in the RDS User Guide for general information and step-by-step instructions to process Weekly Notification Files.
• Refer to the Covered Retiree List and Interim Cost Reporting Technical Article to learn about seven actions Plan Sponsors can complete when preparing interim payment requests to ensure the Covered Retiree List is properly communicated and retiree information is managed.

Examples

Example 4 displays cost data that is being reported by Benefit Option by month. Example 4 demonstrates the impact an erroneous retiree file has on cost data and subsidy paid. The Plan Sponsor in this example had three payment requests for the plan year, which are illustrated by ‘1', ‘2' and ‘FINAL' under the heading “Payment Request #” in Example 4. The Plan Sponsor sent in the original retiree file (the Valid Initial Retiree List) in which 153 retirees were approved for subsidy. The first two payment requests were based on the original retiree list, as the Plan Sponsor never sent in an updated retiree file during the application plan year. In payment request #1, the Plan Sponsor submitted cost data for months 1 through 6 for plan year 2011, and in the second payment request it submitted cost data for all 12 months of the plan year. The cost data did not change for the first 6 months from payment request #1 to #2.

At Reconciliation, the Plan Sponsor requested the Covered Retiree List and realized that a large portion of the retirees on the list were no longer eligible. The revised retiree list resulted in 86 retirees, which is a difference of 67 retirees. The cost data for the final payment request changed dramatically based on what was submitted in the second payment request. In the subsidy column it is clear to see the reduction in subsidy paid for each month from the second payment request to the final. An example of the reduction is month 1 of the second payment request compared to month 1 of the final payment request. The Plan Sponsor had received $5,961.02 in subsidy for month 1 of the second payment request compared to $2,548.48 in subsidy for month 1 of the final payment request. The reduction occurred for each month of the payment request.

Example 4: Errors in Retiree Data Leading to an Overpayment at Reconciliation

Example 5 displays cost data that is aggregated at the application level for all months in the payment request. Example 5 shows the difference in the totals from the second payment request to the final payment request from Example 4. In this example, the "Last Interim" row displays the totals from the second payment request in Example 4. The "Final Reconciliation" row displays the totals from the final payment request in Example 4. The "Difference" row displays the "Final Reconciliation" amounts subtracted from the "Last Interim" amounts. The "Difference" row clearly reflects a dramatic reduction in all the cost factors. The reduction in the number of retirees resulted in subsidy being reduced from $96,092.08 from the last interim down to $53,671.22 at final Reconciliation. That is a $42,420.86 reduction in subsidy, which is the overpayment amount.

Example 5: Final Cost Data for Application Affected by Reduction in Retirees Error

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