What are EGWPs?
Employer Group Waiver Plans, often referred to as EGWPs (Egg-whips), are a type of Medicare Advantage (MA) Plan that is growing in popularity both for employers and employees. As the name suggests, EGWPs are a group-enrollment plan that employers can elect to have and enact for their entire group of employees, both active and retired. These MA Plans cover Part A (hospital), Part B (Medical), and Part D (prescription drug) benefits and are growing in popularity with state and local governments, industries, and unions as they are often a lower-cost option for large groups.
How do they differ?
EGWPs differ from traditional plans in a few key ways. First, nearly 76% of EGWPs are PPOs rather than HMOs, meaning their coverage extends to a larger geographic area than many traditional HMO MA plans. This is a particular advantage for the retiree community as people may seek to relocate after retirement. Second, there is a more seamless transition for employees going from an active worker to a retiree: In an EGWP plan, employees receive the same coverage no matter their status, and are able to add on Medicare supplements once they retire. Third, EGWPs generally offer a lower overall cost, particularly when it comes to prescription drugs, which the retiree community typically fills at a rate four times that of an active member.
Benefits of EGWPs by group
For employees, EGWP plans offer greater flexibility, lower costs, and generally excellent care, making them a highly desirable option. Packaging most EGWP plans as PPOs as opposed to HMOs increases options geographically, making it easier not only to find coverage, but to consider relocation—especially for those looking to retire.
For employers, EGWP plans are just as desirable. They typically have increased flexibility and a lower cost overall—especially when considering Part D (prescription drugs) coverage and the higher cost for retirees. Employers have two options for employee enrollment: Either direct enrollment or through a third-party administrator, giving increased options to fit employers’ needs best. And because these plans are desirable among employees, they encourage people to stay with the employer until the end of their career and into retirement.
EGWPs also make the transition from working to retired significantly easier for both employees and employers, since coverage remains the same regardless of retirement status with the option of adding more benefits as needed.
Today, roughly five million Medicare Advantage enrollees are covered by an EGWP product, more than doubling the number of participants since 2010 and comprising about 19% of total Medicare Advantage enrollment in 2021, and for good reason: Research shows beneficiaries in EGWPs see 26.7% lower out-of-pocket costs than those enrolled in other types of plans. The same research found that beneficiaries enrolled in an EGWP pay an average of $7 less out-of-pocket per prescription. Whether it’s the North Carolina State Employees, the teacher's union in Kentucky, or New York City employees, these plans are offered across the country. When surveying current enrollees, EGWPs have an astonishing 97% approval rating—meaning that members are taking note of these plans’ high quality and lower costs.
The thing to remember when it comes to EGWPs is that the benefit has to be better than the Medicare offering available to employees. In many cases, the difference is seen in the ease of use and the fact that employers are paying a percentage of the cost. This allows employers to provide drug benefits that are much more comprehensive and cost-effective than what is offered by other Part D plans—EGWPs typically have lower, or no deductibles and charge enrollees fixed copayments for their prescriptions, which is similar to a commercial plan. In addition, because fewer EGWP enrollees reach the catastrophic phase of the benefit, where Medicare pays 80% of drug costs, EGWP plans also provide significant value for Medicare. Since there is a benefit to both members and the government, and they’re still moneymakers for payers, there is a high probability we will see and hear more about EGWPs in the coming year.