NCML expands to offer health insurance: Medicare Part D program may spell profits for new plan providers.

North Carolina mutual Life Insurance Company jumped to the fray of companies fighting for a piece of the new Medicare Part D pie, a potentially profitable opportunity given that nearly 43 million people are eligible for the program.

NCML is one of many businesses interested in becoming one of the prescription drug plan (PDP) sponsors and has created a co-branding agreement with Universal American Financial Corp., which specializes in products for seniors and has underwritten roughly $1 billion in premiums.

"We wanted to leverage our insurance knowledge and the relationship with our partner" to "add value to the lives of our senior policy holders," says Arthell Davis, NCML's group department vice president. Davis says NCML is not looking at the product as one that will directly yield profits, but will "provide [additional] services to customers." The company's Prescription Pathway program was expected to be available in April.

According to Mohit Ghose, vice president of public affairs for America's Health Insurance Plans, a trade association of health insurance companies, "[Potential providers] should make a bid factoring in expected administrative cost and profit. If the PDP is approved, the government-sponsored Centers for Medicare and Medicaid Services (CMS) provides monthly payments based on the original bid minus the beneficiary premiums."

In order to receive these subsidies, a PDP sponsor must go through a rigorous, six-month application process and provide several requirements, including access to negotiated drugs prices, a contracted retail pharmacy network for consumers, outreach activities consistent with CMS standards, quality assurance operations, and drug utilization reviews.

There has been speculation about the effect of competition on the long-term survival rates of new PDP sponsors. Prior incarnations of private health plans have shown that programs tend to come and go.

The problem in the past was that payment rates were cut and, as a result, health plans were not able to provide stable, reliable benefits, according to CMS Administrator Dr. Mark McClellan. To insure a sound future for all PDPs, he says that each program is undergoing continuous review to make sure that "coverage will be there for beneficiaries" and that overall costs remain at the levels seen "in the start of this directive."