Sponsors of group health plans that provide prescription drug benefits are responsible for determining creditable or non-creditable drug coverage status and providing notice to Medicare-eligible beneficiaries at least:
- once per year, prior to the start of the Medicare Advantage/Medicare Part D annual general enrollment period (AGEP) or the individual’s initial Medicare enrollment period,
- prior to enrollment in the employer’s health plan,
- upon request, and
- whenever creditable status for the prescription drug coverage provided by the health plan changes.
The AGEP begins October 15, 2020 and runs through December 7, 2020 for Medicare prescription drug coverage (Part D), effective January 1, 2021. The notice deadline is October 14, 2020.
“Creditable coverage” means that the prescription drug coverage provided by the group health plan provides benefits that are at least equal to or better than Medicare Part D. “Non-creditable coverage” means that the group health plan’s benefits are less than Medicare prescription drug coverage.
Creditable or non-creditable coverage notices must be provided to affected participants and beneficiaries (who are Medicare-eligible due to age or disability). This includes active employees, retirees, their spouses and dependents who are Medicare-eligible. In general, fully insured carriers will determine creditable coverage status for the products they offer, and most carriers will send out the Part D notices (but check with the individual carriers to determine whether they have sent out the notices, and when or if they plan to do so).
Employers providing benefits through a self-insured plan may be responsible for determining creditable coverage status of the prescription drug benefits they provide, and sending out the notices. In some cases, the employer’s third-party administrator may be able to assist with compliance.
There is a simplified (safe harbor) method for determining creditable coverage status that may be applied, if the plan fits within certain parameters. This is explained in the Centers for Medicare and Medicaid Services’ “Creditable Coverage Simplified Determination” guidance. Note that if employers are receiving a Retiree Drug Subsidy, or the plan does not fit within the simplified determination parameters and the plan sponsor would like to show creditable status, an actuarial determination is required.
The notice requirement is important because Medicare-eligible beneficiaries who delay enrollment in Medicare Part D when they don’t have other creditable prescription drug coverage will pay a surcharge (penalty) in the form of increased Part D premiums at the time they do enroll in Part D. The surcharge is equal to 1% of the standard Part D monthly premium, multiplied by the number of months the individual did not have creditable coverage. The late enrollment surcharge is assessed every month the beneficiary has Part D coverage. Employees, spouses and dependents who are covered by creditable plans may defer enrollment in Part D until they no longer have other creditable coverage, without late enrollment penalties.
CMS has provided model notices for both creditable and non-creditable coverage for this purpose. The current notice templates have not been updated since April, 2011. If creditable coverage status of prescription drug coverage under the group health plan is unchanged, plan sponsors should be able to simply update current notices prior to reissuing them.
Within 60 days after the beginning of the employer’s plan year, the employer must electronically report the status of their prescription drug plan(s), as well as the last date the Part D notice was provided to CMS, on the Disclosure to CMS Form. The CMS disclosure responsibility lies with the plan sponsor (employer), regardless of whether the plan is fully insured or self-funded. All plan sponsors are responsible for compliance, regardless of the number of employees they have enrolled in their health plan(s). For 2021 calendar year plans, CMS reporting is due 3/1/2021.
This document is provided for general information purposes only and should not be considered legal or tax advice or legal or tax opinion on any specific facts or circumstances. Readers are urged to consult their legal counsel and tax advisor concerning any legal or tax questions that may arise.
Interested in learning more? Connect with us today: