Employers, this is your annual reminder that the Centers for Medicare & Medicaid Services (CMS) requires sponsors of group health plans to notify eligible individuals whether the employer’s prescription drug coverage is creditable. The purpose of this annual notice requirement is to allow individuals who are eligible for Part D to make an informed decision about whether they want to enroll. If an employer’s coverage is not considered creditable, Medicare-eligible individuals can incur a late enrollment penalty for failing to enroll in Part D coverage in a timely manner. Because Medicare open enrollment begins October 15, the notice must be provided no later than October 14.
Who must send the notice?
The notice requirement applies to all employers who offer prescription drug coverage, regardless of employer size, whether insured or self-funded. Do not assume your health insurer or third-party administrator is taking care of sending the notice on your behalf.
To whom must the notice be sent?
The notice must be provided to Medicare-eligible individuals covered under, or eligible for, the employer’s group health plan. Because an employer does not know who may be eligible for Medicare, or who has an eligible spouse or dependent, the best practice is to send this notice to all participants in the group health plan (including COBRA participants). Remember, Medicare is not just for those over age 65.
Notices do not have to be sent as a separate mailing but may be included with other plan information, such as open enrollment materials, provided such materials are available prior to October 15. Plan sponsors may provide the notice electronically if the DOL electronic delivery requirements are met: Generally, you may provide plan documents electronically if all participants have the ability to access electronic documents at their regular place of work, and accessing the employer’s information system on a daily basis is part of their work duties.
Although October 14 is the due date most associated with creditable coverage notices, Part D-eligible individuals should also be provided the notice: (i) before their individual initial enrollment period for Part D, (ii) before the effective date of coverage for any Medicare-eligible individual who joins an employer plan, (iii) whenever prescription drug coverage ends or creditable coverage status changes, and (iv) at the individual’s request.
How does an employer know if their coverage is “creditable”?
“Creditable” coverage is, on average, at least as comprehensive as Medicare Part D coverage. Employers with fully insured plans can ask their insurer whether the prescription drug coverage is creditable. For others, CMS provides guidance in this “Simplified Determination” document. Employer contributions to a health savings account (HSA) are not considered in creditability determinations. However, a health reimbursement arrangement (HRA) coupled with a high-deductible health plan could serve to make the high-deductible plan creditable, even though, standing alone, it would not be creditable, as explained by CMS here.
What should the notice say?
CMS provides model notices in both English and Spanish. Plan sponsors who choose not to use the model notice must provide a disclosure that meets content standards prescribed by CMS.
If the creditable coverage notice is provided with other plan information, the notice must be “prominent and conspicuous.” If multiple pages of information are included in an open enrollment communication, the first page of the document should include a reference to the creditable coverage notice in at least 14-point font in a separate box, bolded or offset from the other plan information. CMS also provides the following suggested language: “If you (and/or your dependents) have Medicare or will become eligible for Medicare in the next 12 months, a federal law gives you more choices about your prescription drug coverage. Please see page XX for more details.”
Employers must also notify CMS of their prescription drug plan creditability
Employers have 60 days after the start of their plan year (which may not necessarily be January 1) to disclose to CMS the status of their prescription drug benefit plan. Disclosure is made using the Disclosure to CMS Form on the CMS website. In addition to this annual disclosure, employers must submit an updated disclosure form within 30 days after any change of creditable coverage status.
There are no specific penalties for failing to provide these notices or delivering the disclosure to CMS. However, the crucial issue is that Medicare-eligible individuals might delay enrollment in Part D because they assume their coverage is creditable based on an incorrect or missing notice. The individual premium penalty for being a “late enrollee” is based on the number of months the person goes without creditable coverage.