By: Philip Qualo, J.D.
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 requires group health plan sponsors and employers that provide prescription drug coverage to disclose to employees and dependents eligible for Medicare Part D whether the plan's coverage is creditable or non-creditable. Prescription drug coverage is creditable when it is at least actuarially equivalent to Medicare's standard Part D coverage and non-creditable when it does not provide, on average, as much coverage as Medicare's standard Part D plan. The Centers for Medicare & Medicaid Services (CMS) has provided a Creditable Coverage Simplified Determination method that plan sponsors can use to determine if a plan provides creditable coverage.
The notice requirement applies to all employers and health plans who offer prescription drug coverage, regardless of size, whether insured or self-funded, Affordable Care Act (ACA) grandfathered status or whether the plan pays primary or secondary to Medicare. Accordingly, the notice obligation is not limited to retirees but also Medicare-eligible active employees, COBRA participants and their respective dependents.
Notices of creditable or non-creditable coverage must be provided before the Medicare Part D annual enrollment period, which commences on October 15. Disclosure of whether prescription drug coverage is creditable or not allows individuals to make informed decisions about whether to remain in their current prescription drug plan or enroll in Medicare Part D plan during the enrollment period. The required notices may be provided in annual enrollment materials, separate mailings or electronically. Whether plan sponsors use the CMS model notices or other notices that meet prescribed standards, they must provide the required disclosures no later than Oct. 14, 2018. Individuals who do not enroll in Medicare Part D during their initial enrollment period and subsequently go at least 63 consecutive days without creditable coverage will generally pay higher premiums if they enroll in a Medicare drug plan at a later date.
It is important to note that Medicare-eligible individuals must be given notices of creditable or non-creditable prescription drug coverage at other times throughout the year as well. The notice must be provided: (1) before the effective date of coverage for any Medicare-eligible individual who joins an employer plan (2) whenever prescription drug coverage ends or creditable coverage status changes and (3) upon the individual’s request.
In addition to the to the notice distribution requirement, plan sponsors that provide prescription drug coverage to Medicare-eligible individuals must also disclose their Part D creditable or non-creditable prescription drug coverage status directly to CMS annually, no later than 60 days after the beginning of each plan year.