What Are Employer Group Waiver Plans?

Approximately 5.4 million Medicare beneficiaries are enrolled in employer group waiver plans in 2023, which equals roughly one in five Medicare Advantage (Medicare Part C) plan members. 

An employer group waiver plan, often shortened to EGWP and pronounced “egg-whip,” is a special type of Medicare Advantage plan designed for group of employees from the same employer or union group. These organizations offer EGWPs to their retired or retiring employees.

Understanding EGWPs and how they work can help you decide whether this health plan is right for you.

How Does an Employer Group Waiver Plan (EGWP) Work?

Private insurance companies provide employer group waiver plans. Like other Medicare Advantage plans, EGWPs offer members the same benefits and services that are covered by Original Medicare (Medicare Part A and Part B).

In other words, people with employer group waiver plans are covered for:

• Hospital visits and stays
• Doctor’s office visits
• Medical tests, preventive care and therapy

The vast majority of Medicare Advantage plans – including most employer group waiver plans – cover prescription drugs, which Original Medicare typically doesn’t pay for.

Approximately 75% of all EGWPs are local preferred provider organizations, meaning that members have the lowest out-of-pocket fees when they use preferred providers or health services in a local network. 

Members are free to use out-of-network providers, but they pay more for their services. Despite these restrictions, people in employer group waiver plans often have lower out-of-pocket costs than people in standard Medicare Advantage plans.

The Centers for Medicare & Medicaid Services (CMS) provides insurance companies with special waivers for their EGWPs. These special waivers apply to enrollment periods, service areas and plan premiums. 

Many employer group waiver plans also offer extra services that aren’t included in some other Medicare Advantage plans.

These services may include:

• Dental and eye exams
• Foot care
• Health and wellness classes
• Prescription drug coverage for a spouse or dependent not yet eligible for Medicare

How Much Does an Employer Group Waiver Plan Cost?

The premium costs of an employer group waiver plan vary depending on how much your employer or union subsidizes your coverage. However, you can expect to pay a low monthly premium for maintaining your coverage, as you would with many Medicare Advantage plans.

Depending on your policy, you may incur other out-of-pocket costs, including copays, deductibles and coinsurance.

How Are Employer Group Waiver Plans Paid?

Medicare pays a set amount to insurance companies offering employer group waiver plans for an employer or union’s retired population. In most cases, the employers and unions also make payments to the insurer that cover extra member benefits.

Do Employer Group Waiver Plans Cover Prescription Drugs?

As they are comprehensive Medicare Advantage plans, employer group waiver plans often offer Medicare Part D prescription drug coverage in addition to the prescription drugs you might need when receiving inpatient hospital care or at a doctor’s office or clinic.

What’s the Difference Between Group and Individual Medicare Advantage?

A group Medicare Advantage plan like an employer group waiver plan differs from individual Medicare Advantage plans in several ways.

• Organizations buy group insurance plans from insurance companies on behalf of a group of people, such as retired employees. As companies purchase group insurance plans in bulk, they can negotiate policies with better conditions and prices. 
  
  
• Individuals buy single Medicare Advantage plans for themselves directly from an insurance company or an insurance broker/licensed Medicare insurance agent.

Retiree Drug Subsidy Vs. Employer Group Waiver Plan Coverage

Retiree drug subsidies and employer group waiver plans are two ways that organizations give retirees subsidies for their Medicare-eligible prescription drug costs. 

• Retiree drug subsidies are federal subsidies for continuing Medicare Part D prescription drug coverage. Retiree drug subsidies used to be the most common plan offered, as these plans were tax-exempt. However, that changed with the introduction of the Affordable Care Act in 2013, and many businesses moved to employer group waiver plans.
  
  
• Because organizations customize their employer group waiver plans, it’s challenging to compare employer group waiver plans with retiree drug subsidies directly. However, as employer group waiver plans often receive extra subsidies and tax advantages, they usually provide a higher base subsidy than a retiree drug subsidy.
  
  Data shows that retirees with EGWPs can get nearly four times greater benefits than people receiving retiree drug subsidies.
  
  Employer group waiver plans usually come with catastrophic insurance, which activates when members’ out-of-pocket drug costs exceed $7,050 (in 2022) to reduce their bills. 

Enhanced employer group waiver plans with wraparound provisions help retirees save money when they are in the Part D “donut hole” coverage gap, with manufacturers offering 50% discounts on brand-name medications during this period. 

Employer Group Waiver Plan Provide Attractive Benefits 

Employer group waiver plans are an excellent way to save on prescription drugs if you're a retiree, especially if your former employer contributes to the plan's costs.

As you consider leaving the workforce, speak to your employer or union about whether they offer employer group waiver plans. Do your research, and find out each plan’s star rating, provider network, prescription drug coverage and coverage area to see if an employer group waiver plan is the right choice for you.