Employers with Medicare eligible participants must provide a notice that specifies whether the plans that they sponsor constitute creditable coverage for Medicare Part D. The notice must be provided in conjunction with the Medicare Part D annual election period which begins on October 15.
This notice must be provided to all Medicare eligible individuals who are covered or eligible for a plan that includes prescription drugs. Notices must be provided to those individuals on COBRA as well.
Employer plan sponsors are required by CMS to provide creditable coverage status to Part D eligible members at least once a year and at the following times:
- Prior to an individual’s initial enrollment period;
- Prior to the effective date of coverage for any Medicare-eligible individual that joins your plan;
- Whenever prescription drug coverage ends or changes so that it is no longer creditable or becomes creditable;
- Prior to the Medicare Part D Annual Coordinated Election Period beginning on October 15 of each year; or
- Upon the request of a beneficiary.
Models of the notice are available here. There are model notices for both creditable and non-creditable coverage in both English and Spanish.
Creditable coverage is defined as coverage that equals or exceeds the actuarial value of standard prescription drug coverage under the Medicare prescription drug benefit. And in communications to Part D eligible individuals, CMS has described creditable coverage as prescription drug coverage that “is, on average for all plan participants, expected to pay out as much as standard Medicare prescription drug coverage pays.”
Employers with insured plans should have received guidance from their carriers indicating whether their plan is creditable or not. In many cases, a high deductible health plan (HDHP) may not be creditable coverage.
Employers can use a “simplified” means to determine whether coverage is creditable or not. The plan must meet four (4) standards to be deemed creditable. A prescription drug plan is deemed to be creditable if it:
1) Provides coverage for brand and generic prescriptions;
2) Provides reasonable access to retail providers;
3) The plan is designed to pay on average at least 60% of participants’ prescription drug
expenses; and
4) Satisfies at least one of the following:
a) The prescription drug coverage has no annual benefit maximum benefit or a maximum annual benefit payable by the plan of at least $25,000, or
b) The prescription drug coverage has an actuarial expectation that the amount payable by the plan will be at least $2,000 annually per Medicare eligible individual.
c) For entities that have integrated health coverage, the integrated health plan has no more than a $250 deductible per year, has no annual benefit maximum or a maximum annual benefit payable by the plan of at least $25,000 and has no less than a $1,000,000 lifetime combined benefit maximum.
An integrated plan is any plan of benefits that is offered to a Medicare eligible individual where the prescription drug benefit is combined with other coverage offered by the entity (i.e., medical, dental, vision, etc.). The plan must have all of these provisions:
- A combined plan year deductible for all benefits under the plan
- A combined annual benefit maximum for all benefits under the plan, and
- A combined lifetime benefit maximum for all benefits under the plan.
The Creditable Coverage Simplified Determination process guidance is here.
Employers with account based plans may find that their coverage is creditable despite the carrier’s assessment. Coverage may be creditable if the employer has an HRA arrangement. The HRA amount may factor in to the creditable assessment in whole or in part depending on how the plan is structured. Guidance on determining creditable coverage status with account based plans, including HRAs, can be found here.
Individuals should keep any notice in case it is required when they decide to sign up for Medicare Part D. The notice may be necessary to show that they had creditable coverage and are not, therefore, subject to the penalty of one percent per month for late enrollment.
Employers also have an obligation to advise CMS whether coverage is creditable or not. The Disclosure to CMS Form can be found here.
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