The CMS premium calculation is based on bids submitted to CMS by Part D plan sponsors in early June. Avalere experts note that the average Part D plan premium will drop slightly for 2018, for the first time in 5 years.

Avalere experts find that the slight decrease in the base Part D premium is driven by two factors—lower expected costs for individuals who will not reach catastrophic coverage and slightly lower predicted costs for individuals who will have high spending above the catastrophic threshold. Most recently, reinsurance costs have increased dramatically, leading to increases in Part D premiums for the last few years. Reinsurance covers high-cost beneficiaries who reach catastrophic coverage. According to CMS, higher reinsurance costs had been driven by high-cost specialty drugs.

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