Each year, Medicare Part D requires group health plan sponsors to disclose to individuals who are eligible for Medicare Part D and to the Centers for Medicare and Medicaid Services (CMS) whether the health plan's prescription drug coverage is creditable. Plan sponsors must provide the annual disclosure notice to Medicare-eligible individuals before October 15, 2019 - the start date of the annual enrollment period for Medicare Part D. CMS has provided model disclosure notices for employers to use.
Why is this important?! This notice is important because Medicare beneficiaries who are not covered by creditable prescription drug coverage and do not enroll in Medicare Part D when first eligible will likely pay higher premiums if they enroll at a later date. Although there are no specific penalties associated with the notice requirement, failing to provide the notice may be detrimental to employees.
A group health plan's prescription drug coverage is considered creditable if its actuarial value equals or exceeds the actuarial value of standard Medicare Part D prescription drug coverage. In general, this actuarial determination measures whether the expected amount of paid claims under the group health plan's prescription drug coverage is at least as much as the expected amount of paid claims under the Medicare Part D prescription drug benefit. For plans that have multiple benefit options (for example, PPO, HDHP and HMO), the creditable coverage test must be applied separately for each benefit option.
CMS has provided two model notices for employers to use:
- A Model Creditable Coverage Disclosure Notice for when the health plan's prescription drug coverage is creditable; and
- A Model Non-Creditable Coverage Disclosure Notice for when the health plan's prescription drug coverage is not creditable.
These model notices are also available in Spanish on CMS' website. Employers are not required to use the model notices from CMS. However, if the model language is not used, a plan sponsor’s notices must include certain information, including a disclosure about whether the plan’s coverage is creditable and explanations of the meaning of creditable coverage and why creditable coverage is important.
The creditable coverage disclosure notice must be provided to Medicare Part D-eligible individuals who are covered by, or who apply for, the health plan’s prescription drug coverage. An individual is eligible for Medicare Part D if he or she:
- Is entitled to Medicare Part A or is enrolled in Medicare Part B; and
- Lives in the service area of a Medicare Part D plan.
In general, an individual becomes entitled to Medicare Part A when he or she actually has Part A coverage, and not simply when he or she is first eligible. Medicare Part D-eligible individuals may include active employees, disabled employees, COBRA participants and retirees, as well as their covered spouses and dependents. As a practical matter, group health plan sponsors often provide the creditable coverage disclosure notices to all plan participants.
Timing of Notices
At a minimum, creditable coverage disclosure notices must be provided at the following times:
- Prior to the Medicare Part D annual coordinated election period - Oct. 15 through Dec. 7 of each year
- Prior to an individual's initial enrollment period for Medicare Part D
- Prior to the effective date of coverage for any Medicare-eligible individual who joins the plan
- Whenever prescription drug coverage ends or changes so that it is no longer creditable or becomes creditable
- Upon a beneficiary's request
If the creditable coverage disclosure notice is provided to all plan participants annually before Oct. 15 of each year, items (1) and (2) above will be satisfied. “Prior to,” as used above, means the individual must have been provided with the notice within the past 12 months. In addition to providing the notice each year before Oct. 15, plan sponsors should consider including the notice in plan enrollment materials for new hires.
If this all sounds a blur to you, creditable, non-creditable, compliant, non-compliant; you are not alone. For more information the above including greater detail regarding methods of delivering notices and disclosure to CMS, contact a member of the WalkerHughes Benefits team.