When Congress passed the Medicare Prescription Drug, Improvement, and Modernization Act in 2003, implementing Part D drug coverage under Medicare, it required all employers that offered prescription drug benefits to provide an annual notice to all Medicare-eligible plan participants and qualified beneficiaries before October 15 of each year. This included:
- Retirees and their dependents
- Active Medicare-eligible employees and their dependents
- COBRA participants
Many employers send the notice to all their employees rather than trying to determine which actives, retirees, dependents, and COBRA participants are Medicare-eligible.
Employers should be preparing to send the Medicare Part D Notice of Creditable Coverage.
The notice requirement applies to all employers who offer prescription drug coverage, regardless of size, whether insured or self-funded. It also applies whether the prescription drug coverage is standalone or integrated into another plan.
The notices themselves may be sent separately or included as part of open enrollment or other benefit-related materials. They can also be sent electronically; however, the electronic method has strict rules:
- Participants who receive electronic notices must have regular work-related computer access to the sponsor’s electronic information system.
- Plan sponsors that use this method must inform participants that they are responsible for providing notices to any Medicare-eligible dependents covered under the group health plan.
- Electronic notice may also be provided to employees who do not have regular work-related computer access to the plan sponsor’s electronic information system and to retirees or COBRA qualified beneficiaries, but only with a valid email address and their prior consent.
Defining Creditable
For the purposes of this requirement, “creditable” means that the coverage is expected to pay as much as the standard Medicare prescription drug coverage.
Among the 2022 parameters for what is considered “standard” under Medicare D are:
- Deductible: $480
- Initial coverage limit: $4,430
- Out-of-pocket threshold: $7,050
Determination of Creditable Coverage
The prescription drug plan is deemed to be creditable if it:
- Provides coverage for brand and generic prescriptions
- Provides reasonable access to retail providers and mail order coverage
- Is designed to pay on average at least 60% of participants’ prescription drug expenses
The link below provides a calculator methodology for determining creditable coverage:
https://www.cms.gov/Medicare/Prescription-Drug-Coverage/CreditableCoverage/Downloads/CCSimplified091809.pdf
Providing The Notice
- It must be provided annually prior to the Part D annual enrollment period beginning October 15.
- It should also be sent to new hires.
- If the employer’s prescription drug benefit ever changes from “Creditable” to “Non-Creditable” or vice-versa, an updated notice must be provided as soon as possible, but no later than 30 days from the change.
- It must be provided upon request.
- All plan sponsors must notify CMS within 60 days of the start of each plan year as to whether their prescription drug plan is creditable or non-creditable. For calendar year plans, this means by March 1.
There are model notices available for both ‘Creditable” and “Non-Creditable” plan designs. See below:
Important Notice to those Covered under Sponsor Plans (cms.gov)Creditable
Important Notice to those Covered under Sponsor Plans (cms.gov) Non-Creditable
Penalties
While there are no formal penalties attached to non-conformance of the requirement, the Medicare-eligible individual may incur a late enrollment penalty if notification as to non-creditable coverage exists and that individual then attempts to enroll in Medicare Part D plan.
For more information, please contact compliance@benefitmall.com.