Medicare Part D, which covers prescription drugs, has moved quickly from "a new to a relatively mature marketplace" since it went into effect in 2006, according to Dave Osterndorf, chief health actuary for Towers Perrin. But there are still "a huge number of options" for both company benefit managers and retirees to sort through.

First, Osterndorf says, the company must decide what, if anything, it will do about the "doughnut hole " - the gap in coverage that begins when a person's annual individual drug expenditures reach a certain amount and ends when those expenses reach the "catastrophic" phase of coverage.

The way Medicare Part D is structured drives an all-or-nothing approach, he says, not one in which the company can subsidize coverage of prescription drugs for retirees during the time they are in the gap. So employers must ask: "Do I need to have a plan that avoids having a coverage gap? If the answer is yes, the company will continue to sponsor a plan," Osterndorf explains.

If an employer does decides to exit from a plan and allow retirees to pay for prescriptions out of their own pockets, at a reduced cost, it needs to send several key messages to those retirees, Osterndorf says.

First, "there is a viable marketplace out there. You will be able to buy coverage." Second, "prescription coverage has relatively low premium-cost. Our plan would have had higher costs." And, third, "the coverage gap has an endpoint to it. Even in the worse-case scenario, it won't be more than $4,300" for 2009, Osterndorf says.

Employers can help retirees work their way through the many options, with slightly different benefits structures, that they have under Medicare Part D. "The employer can say, 'Here's what plans look like. Here are things you need to look at.' Employers can engage a third party to provide counseling services," he says. Whoever counsels retirees will want to remind them that "every single Part D plan has a coverage gap for brand-name drugs."

If an employer opts to continue the plan it already has, "it tends to be a pretty straightforward conversation" with retirees about drug benefits, Osterndorf notes. But even then, employers regularly tweak their plans with small changes to improve efficiencies, and retirees need to be kept informed of these changes.

Benefits pros should to keep retirees informed, he adds, giving them the best information available to help them be cost-effective consumers.

'Dealing with human beings'

Whatever decisions a company makes about retiree health benefits, it's imperative to communicate those decisions clearly and sensitively.

"You really need to remember that you are dealing with human beings. Health, and covering health care, and paying for health care are very emotional issues. If you forget that, you are setting yourself up to fail," says Elizabeth Byerly, Watson Wyatt's office practice leader for communication and education in Atlanta.

First of all, employers should thoroughly understand their audience and realize that a one- size-fits-all benefits communications plan is not going to work, Byerly says.

Although retirees want to be connected to the company, they tend to be "a step removed," she adds, and "we find that this group wants more dialogue. Companies should be open to that dialogue. That doesn't mean that the company has to do everything for retirees, but it should be open to listening."

If a company has a retiree or alumni group, educate the leaders about Medicare coverage so they can spread the word, she says. "That group can be a big friend."

If a company does decide to make changes affecting prescription drug coverage, "know the rationale behind the changes and how it fits with the business plan going forward," Byerly says, and make sure benefits managers are prepared to communicate well and answer questions clearly.

Avoid what Byerly calls the "one-hit wonder syndrome" - communicating the information only once, usually before the open enrollment period. Employees may have questions throughout the year and "there's a lot to wade through. The company needs to understand that these are human beings who aren't experts in health plans."

She also advises avoiding the "dribble" approach - announcing a change, but giving out no information. "If you're going to announce a change, be ready to answer questions. Give [retirees] time to react. Have a long-range communication strategy."

That doesn't mean the company has to communicate every nuance of Medicare Part D. Byerly recommends using the Centers for Medicare and Medicaid Services' "Medicare & You 2009" guide, available at www.medicare.gov (see sidebar).

"It's the easiest thing I've found. It clearly outlines what a retiree needs to do. The company shouldn't try to rewrite all this. You don't have to communicate all the details; drive people to the appropriate resources," she says.

Byerly does have practical recommendations to make when it comes to how the company should communicate with retirees. The materials should be simple, easy to read and highly visual.

"Tell the story with the picture. Make sure colors pop off the page. Use larger font size, more white space. Use illustrations and graphs," she says. "Make it a visual path for the person to follow, versus just putting it in writing."

Remember that people learn in different ways and that older retirees might feel more comfortable if they have an opportunity for face-to-face discussion, Byerly says. And don't forget about caregivers. Include caregivers in meetings and put together a tip sheet to help them help retirees understand any changes in benefits.

It's worth making the investment of taking the steps to communicate these benefits clearly, Byerly says. "You will save money and add value 10 times over if you put out good communications."

Stephenie Overman is a New Jersey-based freelance writer specializing in workplace and health care issues.

Medicare & You 2009

The Centers for Medicare and Medicaid Services guide "Medicare & You 2009" (available at www.medicare.com) addresses all aspects of the government-run health insurance program for people who are age 65 or older and for people under age 65 who have certain disabilities. That includes Medicare Part D, which covers prescription drugs.

The government handbook explains that to be eligible for Medicare drug coverage an individual must join a plan run by an insurance company or other private company approved by Medicare. Each plan can vary in cost and drugs covered. It spells out that there are two ways to get Medicare prescription drug coverage:

1. Medicare prescription drug plans. These plans, sometimes called PDPs, add drug coverage to original Medicare, some Medicare cost plans, some Medicare private fee-for-service plans and Medicare medical savings account plans.

2. Medicare Advantage plans (like an HMO or PPO) or other Medicare health plans that offer Medicare prescription drug coverage. Retirees get Part A and Part B coverage, including prescription drug coverage (Part D), through these plans. Medicare Advantage Plans with prescription drug coverage are sometimes called MA-PDs. To join a Medicare prescription drug plan, an individual must have Medicare Part A and/or Part B.

To join a Medicare Advantage plan, an individual must have Part A and Part B.

Retirees can be referred to www.MyMedicare.gov to access personalized Medicare information. Information also is available at 1-800-MEDICARE (1-800-633-4227). TTY users should call 1-877-486-2048.

The handbook also explains ways that people who have limited income and resources may qualify for extra help from Medicare to pay for prescription drug coverage.