Inflation Reduction Act (IRA) drives substantial premium rate increases on group Medicare Advantage Prescription Drug (MAPD) plans

Average 2025 group Medicare Advantage Prescription Drug (MAPD) premium rate increases exceeding 30%

The Inflation Reduction Act (IRA), passed in 2022, includes major changes to Medicare Part D intended to control prescription costs, cap maximum retiree out-of-pocket costs and simplify coverage for Medicare enrollees. With these mandated benefit enhancements combined with changes in MAPD funding, group MAPD plan sponsors will start to see renewal rates skyrocket. Group MAPD plans surveyed by WTW show an average 2025 rate increase of 31%, nearly $600 per member per year. While it will take several years for the full impact of the legislative changes to become known, many plan sponsors may need to take action sooner to manage these cost increases.

$583 average rate increase per member per year

31% average rate increase

To mitigate these skyrocketing costs, plan sponsors have several options.

• The plan sponsor can absorb the cost increase.

• Cost increases can be shifted to enrollees through changes in plan design or contributions.

• Plan sponsors can cease group plan sponsorship and instead direct retirees to obtain individual Medicare Part D coverage (and medical coverage) through a marketplace exchange.

Plan sponsor funding can continue through a Health Reimbursement Arrangement (HRA). With this approach, retirees enjoy all the Part D benefits required by the IRA in an individual market offering a wide choice of high value plans. Plan sponsors see a reduction in their administrative effort and potentially in their coverage costs. Plan sponsors should consider (or reconsider) whether it is time to explore an exchange approach as individual market insurance coverage continues to become more attractive compared to group plan coverage.