Reminder: Distribute Annual Medicare Part D Notices
September 24, 2014
The annual open enrollment period for Medicare Part D’s prescription drug coverage is approaching. This means that plan sponsors need to make sure that they have distributed the appropriate Certificates of Creditable or Non-Creditable Coverage to all Medicare-eligible persons on their health plans prior to October 15, 2014. Medicare-eligible individuals will be able to enroll in a Medicare Part D prescription drug plan between October 15, 2014 and December 7, 2014 for the 2015 coverage year.
Creditable or Not?
The first step in the process is to determine whether your plan’s prescription drug coverage is “creditable” or “non-creditable”. Benefits offered under creditable coverage are as good as or better than the coverage offered under Medicare Part D. Benefits offered under non-creditable coverage are not as good as the coverage available under Medicare Part D. There is no penalty for having non-creditable coverage; the goal is to help Medicare-eligible plan participants make an informed choice of whether or not to enroll in Medicare Part D. Medicare-eligible participants with creditable coverage can choose not to enroll in Medicare Part D with no penalty. Those without creditable coverage who fail to enroll in Medicare Part D when they are first eligible are subject to a permanent penalty in the form of increased premiums. In order to determine whether their prescription drug coverage is creditable or non-creditable, employers should ask their insurance carrier or pharmacy benefit manager (PBM) if they have a self-funded plan.
If your insurance carrier or PBM cannot tell you whether or not your plan design is creditable, employers can hire an actuary to perform the necessary calculations or they can simply use the approved Safe Harbor. In order to spare employers the expense and hassle of hiring an actuary, the Centers for Medicare and Medicaid Services (CMS) developed a four-part Safe Harbor for prescription drug plans. CLICK HERE for a simplified creditable coverage determination.
Creditable prescription drug plans must meet the following criteria: provide coverage for brand and generic prescriptions; provide reasonable access to retail providers and, optionally, for mail order coverage; be designed to pay on average at least 60% of participants’ prescription drug expenses; and have no annual benefit maximum benefit or a maximum annual benefit payable by the plan of at least $25,000 (or meet one of two other approved deductible/maximum benefit combinations).
A common temptation is to provide certification only to employees who are over the age of 65. The Medicare Part D certificates must be provided to every Medicare-eligible person covered by the medical plan. This includes employees, spouses, and dependents who are either of Medicare-eligible age or who have disabilities that could make them eligible for Medicare. In order to minimize the risk of not providing a certificate to a plan participant who is entitled to one, we suggest that employers provide a certificate to every employee on the medical plan. Employers must not neglect to provide notices to retirees and persons on COBRA continuation as well.
The certificates can be mailed or provided as a memo, as a payroll stuffer, or electronically, using the same rules as for Summary Plan Descriptions (SPDs). It is not permissible to simply post the notice on a bulletin board. The Centers for Medicare and Medicaid Services (CMS) have not changed the model notices for disclosure of creditable and non-creditable prescription drug plan coverage for a number of years, copies are available by using the links below.
CLICK HERE for a sample creditable coverage disclosure notice.
CLICK HERE for a sample non-creditable coverage disclosure notice.
Once the certificates have been provided, the employer must complete a certification with CMS on their website within 60 days of the renewal date of your medical plan. CLICK HERE for the CMS certification website.
Contact Us if you Have Questions
We will continue to keep our clients informed as further information becomes available. If you have questions, please contact your Cottingham & Butler representative.