What are the copayments for a Part D Plan?

Part D plans are allowed some leniency in the structure of their cost-sharing strategies. Standard Part D plans, for example, are permitted to use copayments (a set cost per prescription), coinsurance (a set percentage of the actual prescription cost), or a combination of both in the initial coverage period. They can spend up to $4050 (in 2008) in total cost of drugs covered by the plan, as long as the average cost of the Part D plan is actuarially equivalent to the standard structure. In contrast, enhanced Part D plans are permitted to lower the out-of-pocket requirements for enrollees in their plans, provided that the design does not increase the annual deductible or the spending level at which an individual enters the catastrophic coverage. HAP has created a chart that outlines the cost-sharing structure of a standard Part D plan. 

Source: Sections 423.104(d) - (f) of the MMA Regulations address the structure of the standard and enhanced Part D plan cost-sharing structure as well as define the initial coverage limit and annual out-of-pocket threshold:

(d) Standard prescription drug coverage. Standard prescription drug coverage includes access to negotiated prices as described under paragraph (g)(1) of this section, provides coverage of Part D drugs, and must meet the following requirements (1) Deductible. An annual deductible equal to— (i) For 2006. $250; or (ii) For years subsequent to 2006. The amount specified in this paragraph for the previous year, increased by the annual percentage increase specified in paragraph (d)(5)(iv) of this section, and rounded to the nearest multiple of $5. (2) Cost-sharing under the initial coverage limit. (i) 25 Percent coinsurance. Coinsurance for actual costs for covered Part D drugs covered under the Part D plan above the annual deductible specified in paragraph (d)(1) of this section, and up to the initial coverage limit under paragraph (d)(3) of this section, that is— (A) Equal to 25 percent of actual cost; or (B) Actuarially equivalent to an average expected coinsurance of no more than 25 percent of actual cost, as determined through processes and methods established under § 423.265(c) and (d). (ii) Tiered copayments. A Part D plan providing actuarially  equivalent standard coverage may apply tiered copayments, provided that any tiered copayments are consistent with paragraph (d)(2)(i)(B) of this section and are approved as described in § 423.272(b)(2). (3) Initial coverage limit. The initial coverage limit is equal to— (i) For 2006. $2,250. (ii) For years subsequent to 2006. The amount specified in this paragraph for the previous year, increased by the annual percentage increase specified in paragraph (d)(5)(iv) of this section, and rounded to the nearest multiple of $10. (4) Cost-sharing between the initial coverage limit and the annual out-of-pocket threshold. Coinsurance for costs for covered Part D drugs above the initial coverage limit described in paragraph (d)(3) of this section and annual out-of-pocket threshold described in paragraph (d)(5)(iii) of this section that is equal to 100 percent of actual costs. (5) Protection against high out-of-pocket expenditures. (i) After an enrollee's incurred costs exceed the annual out-of-pocket threshold described in paragraph (d)(5)(iii) of this section, cost-sharing equal to the greater of— (A) Copayments. (1) In 2006, $2 for a generic drug or preferred drug that is a multiple source drug (as defined in section 1927(k)(7)(A)(i) of the Act) and $5 for any other drug; and (2) For subsequent years, the copayment amounts specified in this paragraph for the previous year increased by the annual percentage increase described in paragraph (d)(5)(iv) of this section and rounded to the nearest multiple of 5 cents; or (B) Coinsurance. Coinsurance of five percent of actual cost. (ii) As determined through processes and methods established under § 423.265(c) and (d), a Part D plan may substitute for cost-sharing under paragraph (d)(5)(i) of this section an amount that is actuarially equivalent to expected cost-sharing under paragraph (d)(5)(i) of this section. (iii) Annual out-of-pocket threshold. For purposes of this part, the annual out-of-pocket threshold equals— (A) For 2006. $3,600. (B) For years subsequent to 2006. The amount specified in this paragraph for the previous year, increased by the annual percentage increase specified in paragraph (d)(5)(iv) of this section, and rounded to the nearest multiple of $50. (iv) Annual percentage increase. The annual percentage increase for each year is equal to the annual percentage increase in average per capita aggregate expenditures for Part D drugs in the United States for Part D eligible individuals and is based on data for the 12-month period ending in July of the previous year.

(e) Alternative prescription drug coverage.  Alternative prescription drug coverage includes access to negotiated prices as described under paragraph (g)(1) of this section, provides coverage of Part D drugs, and must meet the following requirements— (1) Has an annual deductible that does not exceed the annual deductible specified in paragraph (d)(1) of this section; (2) Imposes cost-sharing no greater than that specified in paragraphs (d)(5)(i) or (ii) of this section once the annual out-of-pocket threshold described in paragraph (d)(5)(iii) of this section is met; (3) Has a total or gross value that is at least equal to the total or gross value of defined standard coverage. (4) Has an unsubsidized value that is at least equal to the unsubsidized value of standard prescription drug coverage. For purposes of this subparagraph, the unsubsidized value of coverage is the amount by which the actuarial value of the coverage exceeds the actuarial value of the subsidy payments under § 423.782 for the coverage; and (5) Provides coverage that is designed, based upon an actuarially representative pattern of utilization, to provide for the payment, for costs incurred for covered Part D drugs, that are equal to the initial coverage limit under paragraph (d)(3) of this section, of an amount equal to at least the product of - (i) The amount by which the initial coverage limit described in paragraph (d)(3) of this section for the year exceeds the deductible described in paragraph (d)(1) of this section; and (ii) 100 percent minus the coinsurance percentage specified in paragraph (d)(2)(i) of this section.

(f) Enhanced alternative coverage. (1) Enhanced alternative coverage must meet the requirements under paragraph (e) of this section and includes- (i) Basic prescription drug coverage, as defined in § 423.100; and (ii) Supplemental benefits, which include- (A) Coverage of drugs that are specifically excluded as Part D drugs under paragraph (2)(ii) of the definition of Part D drug under § 423.100; or (B) Any of the following changes or combination of changes that increase the actuarial value of benefits under the Part D plan above the actuarial value of defined standard prescription drug coverage, as determined through processes and methods established under § 423.265— (1) A reduction in the annual deductible described in paragraph (d)(1) of this section; (2) A reduction in the cost-sharing described in paragraphs (d)(2) or (d)(5) of this section, or (3) An increase in the initial coverage limit described in paragraph (d)(3) of this section. (C) Both the coverage described in paragraph (f)(1)(ii)(A) of this section and the changes or combination of changes described in paragraph (f)(1)(ii)(B) of this section.

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