Each year, Medicare Part D requires group health plan sponsors to disclose to individuals who are eligible for Medicare Part D whether the health plan’s prescription drug coverage is creditable. Plan sponsors must provide the annual disclosure notice to Medicare-eligible individuals before the start date of the annual enrollment period for Medicare Part D – which begins on October 15 of each year.
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 later. Although there are no specific penalties associated with this 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.
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. 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, employers often provide the creditable coverage disclosure notices to all plan participants. The Centers for Medicare & Medicaid Services (CMS) has provided model disclosure notices for plan sponsors to use when disclosing their creditable coverage status to Medicare beneficiaries. The model disclosure notices are available on CMS’ website.
Reach out to your Hylant representative for further information.
The above information does not constitute advice. Always contact your employee benefits broker or trusted adviser for insurance-related questions.