The following information is provided as guidance for employers and their employees regarding Medicare Part D notification requirements. Should you have specific questions regarding your organization’s health plan, or other employee benefits, please contact a FosterThomas Employee Benefits Specialist.
Medicare Part D Eligible Employees
This post serves as a reminder that employers who provide prescription drug benefit plans must notify Medicare eligible employees, not later than October 15th, each calendar year, as to whether their prescription drug benefit falls under creditable coverage or non-creditable coverage.
A quick definition of creditable coverage: the employer provided drug benefit plan is expected to cover as much as the Medicare Part D prescription drug plan, or …”if their other coverage is at least as good as the new Medicare drug benefit (and therefore considered “creditable coverage” ), then the beneficiary can continue to get the high quality care they have now as well as avoid higher payments if they sign up later for the Medicare drug benefit.” (www.cms.gov). For a further, in depth definition of creditable coverage, please see below.
The creditable coverage notice must be provided to all Medicare Part D eligible employees prior to October 15th each year. Medicare Part D applies to those that are covered under or apply for an employer’s prescription drug benefits plan.
Attention Employers – Which Employees Must be Notified?
If you are a Medicare Part D plan sponsor, you must review and tailor applicable notifications to make sure they reflect the provisions of your prescription drug benefit plan. Employers must also notify the Centers for Medicare & Medicaid Services (CMS) as to whether the employer health plan is creditable. This notification must also occur each year.
The notice must be provided to the following:
- Medicare beneficiaries who are active employees (and their dependents)
- Medicare beneficiaries who are retired (and their dependents)
- Medicare beneficiaries who are covered as spouses under active or retiree coverage (dependents)
- Medicare eligible COBRA individuals and their dependents
Notification to CMS
Employers must also notify CMS as to the creditable coverage status of the group health plan for prescription drug coverage. The following deadlines for notification are as follows:
- Change in the Creditable Coverage Status: Within 30 days after any change in the creditable coverage status
- Termination of a Drug Plan: Within 30 days after the termination of the prescription drug plan
- Beginning of a Plan Year: Within 60 days after the beginning date of the plan year
Forms for Electronic Notification to CMS
HR Compliance and Why this Matters: Participant Disclosure Model Notices
The CMS has provided Model Notice Disclosures for creditable and non-creditable coverage. These Model Notice Letters will help employers adhere to compliance, while properly notifying plan participants. These Model Notices are also available in Spanish (by clicking the button below). Additionally, these Model Notices may be modified in order to notify applicable plan participants. These Model Notices can be found by clicking the button below:
Method of Notification to Plan Participants, Beneficiaries and Dependents
- Regular USPS mail is the preferred and recommended method of notification/delivery; however, it is important to verify terms of notification in an individual employee’s personnel records.
- Email/Electronic notification is also an option, but must be in accordance with the DOL electronic delivery requirements. It is a good idea to send out a hard copy of the notification via USPS, and follow up with an electronic/email notification to the plan participant. As an employer you must stress that the participant is responsible to provide a copy to their Medicare eligible dependents who may be covered under the health plan.
- Website notification – In addition to the above methods, the employer must also post the disclosure notice on the company intranet or employee accessible area of the website. It is also recommended that the link to the creditable coverage notice is also made available.
- COBRA qualified beneficiaries – It is important to note that this group of beneficiaries may no longer have access to the company website. In this instance certified USPS mail, is the recommended method of notification.
Remember, the model notices are available on the CMS website (see the Model Notices button above) and may be modified to fit the needs/personalization of your organization. If you are unclear as to how to do this, please contact a FosterThomas Employee Benefits Specialist for assistance.
Late Enrollment Penalty
The MMA imposes a late enrollment penalty on individuals who do not maintain creditable coverage for a period of 63 days or longer following their initial enrollment period for the Medicare prescription drug benefit.
2 in 1 Notification: Open Enrollment and Medicare Part D
It is recommended that employers provide notice of Medicare Part D during the same time period as the notification of the organization’s annual open enrollment for health care coverage.
Definition of Creditable Coverage
Please note that most insurance carriers and third party administrators will advise whether or not the prescription drug coverage is creditable or non-creditable. In many cases, the plan may be integrated to include medical, dental, vision, etc. which combined will have a plan year deductible for all benefits (annual or lifetime maximum). See your plan administrator for a further understanding of your prescription drug benefit coverage.
From the CMS.Gov website – Beginning January 1, 2006, Medicare beneficiaries will have the opportunity to receive subsidized prescription drug coverage through the new Medicare Part D program. Beneficiaries who choose not to sign up at the first opportunity may have to pay more if they wait to enter the program later after the open enrollment period.
Beneficiaries who have other sources of drug coverage – through a current or former employer or union, for example – may stay in that plan and choose not to enroll in the Medicare drug plan. If their other coverage is at least as good as the new Medicare drug benefit (and therefore considered “creditable coverage” ), then the beneficiary can continue to get the high quality care they have now as well as avoid higher payments if they sign up later for the Medicare drug benefit.
Under §423.56(a) of the final regulation, coverage is creditable if the actuarial value of the coverage equals or exceeds the actuarial value of standard prescription drug coverage under Medicare Part D, as demonstrated through the use of generally accepted actuarial principles and in accordance with CMS actuarial guidelines. In general, the actuarial equivalence test measures whether the expected amount of paid claims under the entity’s prescription drug coverage is at least as much as the expected amount of paid claims under the standard Part D benefit.
The above definition of Creditable Coverage is taken from the Centers for Medicare & Medicaid Services website, click below for the official definition of Creditable Coverage
Employee Benefits Guidance from FosterThomas HR
If you need assistance with your Medicare Part D 2017 Notice, contact a FosterThomas Employee Benefits Specialist for guidance.