2027 Medicare outlook: What the Part D National Average Bid means for retiree health strategies
The Medicare Part D program continues to evolve
On July 28, Centers for Medicare & Medicaid Services (CMS) released the 2027 Part D National Average Bid (NAB), the benchmark used to determine subsidies for all Part D plans including Employer Group Waiver Plans (EGWPs). The NAB will rise 24% in 2027, following a 33% jump in 2026 and a near-tripling from 2024 to 2025. These increases reflect benefit enhancements and other funding changes introduced by the Inflation Reduction Act (IRA).
CMS also announced the end of its three-year Part D Demonstration program that funneled modest additional funding of about $10 per member per month to standalone Part D plans to reduce 2026 premium increases. The program’s expiration was widely expected as insurers gain more certainty in the pricing of Part D plans post-IRA changes. Separately, on July 1, CMS launched the Medicare GLP-1 Bridge program under which all Part D enrollees (including EGWPs) can obtain discounted GLP-1 drugs for treating obesity at a $50 monthly copay. This program operates totally outside of the Part D benefit
What this means for retirees
Retirees continue to benefit from dramatic enhancements to Part D starting in 2025 including lower maximum out-of-pocket costs and premium suppression policies.
About 57 million people are enrolled in Part D: 32 million in Medicare Advantage Prescription Drug (MAPD) plans and another 25 million in standalone Part D plans; over 6 million are enrolled in EGWP Prescription Drug Plans (PDPs)
All 57 million gained access to subsidized GLP-1 drugs for obesity on July 1
Retirees benefit from federally negotiated prices on high-cost Part D drugs which took effect for 2026 with additional rounds effective in 2027 and later
About three in four individual market MAPD enrollees are now in $0 premium plans that include Part D; we expect that many $0 premium MAPD plans will remain available in 2027
Average 2026 premiums for standalone Part D plans are about $36 per month; 2027 premiums won’t be known till this fall, but some increases are likely with the sunsetting of the CMS Demonstration program. Retirees buying coverage in the individual market should continue to evaluate their prescription drug and medical 2027 options carefully
The annual out-of-pocket limit for all Part D enrollees will rise from $2,100 in 2026 to $2,400 in 2027
Employer implications and challenges
Employers that have already transitioned away from group retiree health benefits may view these developments as further validation of that strategy. An individual market model supported by a health reimbursement arrangement (HRA) can help manage accounting liabilities, reduce exposure to group plan pricing, regulatory change, claims volatility and administrative complexity while giving retirees access to a competitive Medicare marketplace.
Employers that continue to sponsor group post-65 Part D plans (EGWPs) can expect higher CMS direct subsidy payments in 2027, helping to offset employer cost or retiree contributions. For standalone EGWPs, employers will no longer collect Demonstration payments. For employers with integrated MAPD plans, premium rates continue to rise for 2027, and CMS risk scoring policies continue to penalize integrated Part D plans and favor standalone plans. This risk scoring policy is driving the rapid trend toward “decoupling” of group MAPD plans into standalone group Medicare Advantage (MA) and Part D EGWPs
Factors to consider in assessing whether group plan sponsorship still makes sense:
Rising value of Rx (and medical) benefits in the individual Medicare market. Part D plans are now richer than Rx benefits offered by many employers to active employees.
Continued exposure to legislative and regulatory changes and claim risk that can affect group plan liability, funding and stability.
Administrative burden of managing group plans can be reduced by transitioning to a Medicare Marketplace.
The growing value of the individual Medicare market
Approaching the third year of post-IRA Part D changes, the individual Medicare market continues to offer high-value prescription drug and medical coverage at affordable retiree premiums. Given these evolving market dynamics, employers should consider whether group plan sponsorship continues to provide incremental value for their organizations and retirees.
As Medicare coverage continues to evolve, employers may wish to periodically reassess whether a group-sponsored approach remains aligned with organizational objectives, retiree needs, and long-term cost expectations. For organizations evaluating alternatives, Medicare marketplace platforms such as Via Benefits can offer a defined-contribution approach that establishes more predictable costs through an HRA, reduces exposure to regulatory and funding volatility, and eases plan administration. At the same time, retirees gain access to a broad range of Medicare coverage options, personalized guidance from licensed Benefit Advisors, and ongoing support as their healthcare needs evolve.
