CMS Pub. 100-18, ch. 12, § 20.2.1

For contract years 2006 and 2007, CMS employer group waiver policy required PDP sponsors

to offer plans to individual Medicare beneficiaries as a condition of being able to offer “800

series” plans associated with the same contract. Also, if the PDP offered individual coverage

in the PDP region where the most substantial portion of an employer’s employees reside, PDP

sponsors were permitted to extend their “800 series” plan service area and enroll an

employer/union sponsor’s retirees that resided outside of the individual plan service area.

(This service area extension policy is commonly known as the “nexus test”).

Beginning with the 2008 contract year, PDP sponsors offering prescription drug plans are not

required to offer these plans to individual beneficiaries as a condition of offering associated

“800 series” plans. This change includes the elimination of the “nexus test.” The changes

described above will apply to entities renewing “800 series” plan benefit packages in 2008, as

well as to entities offering “800 series” plans for the first time in 2008.

Notwithstanding these changes, entities offering these plans will continue to have to meet all

CMS requirements that are not otherwise waived or modified, including the requirement to be

licensed as a risk bearing entity eligible to offer health insurance or health benefits. For

entities that choose to only offer “800 series” plans for a particular PDP sponsor contract, this

requirement will be met if the entity is licensed in at least one state.

For more details on the service area waiver policies (including the “nexus test” policy) that

applied to EGWPs in contract years 2006 and 2007, see Appendix I below.