Employers (of any size) providing prescription drug coverage benefits must distribute an annual notice to all Medicare-eligible individuals by October 15th – including both employees and dependents. This important notice helps Medicare-eligible individuals make decisions about their health plans, drug coverage, and/or Medicare enrollment, so they may attain the best coverage for their health needs and avoid potential noncompliance penalties in the Medicare space.
When a person becomes eligible for Medicare (usually at age 65), that person must generally enroll for Medicare coverage upon initial eligibility, or a noncompliance penalty could be on the horizon. However, many can delay this requirement (and its related penalty) by attaining qualified (non-COBRA) coverage through a qualified group health plan in lieu of Medicare.
In order for that coverage to be qualified, the employer’s coverage must be considered “creditable.” That is, the (non-COBRA) group coverage must provide benefits that are at least equal to (or richer than) the benefits provided by Medicare.
Employers must disclose to all Medicare-eligible individuals whether the drug benefits provided in the employer’s plan are “creditable” or “non-creditable,” when compared to Medicare Part D’s drug benefits. Employers must distribute a notice describing this disclosure each year before October 15th, ahead of Medicare’s Annual Election Period (AEP). During this AEP, Medicare beneficiaries and Medicare-eligible persons can enroll in, or change, Medicare Advantage plans, Medigap plans, or Medicare Part D Prescription Drug coverage plans. The information contained in the employer’s disclosure helps the Medicare-eligible person make decisions about enrollment in Medicare Part D drug plans.
A Medicare-eligible person who does not enroll in Medicare Part D Prescription Drug Coverage when first eligible will face an eventual late enrollment penalty for the entire time he or she is enrolled in Medicare Part D coverage, unless that person has qualifying “creditable” drug coverage from an employer plan. The penalty is assessed upon any person who does not maintain creditable coverage for more than 62 days after his/her initial Medicare enrollment period.
Employers are likely to turn to you, as their health insurance broker, for help determining whether the prescription drug coverage they sponsor is creditable. They may also seek an understanding of what to distribute to employees, model notices that should be used – and when everything should be distributed. Word & Brown has you covered.
Medicare Part D Charts – Creditable or Non-Creditable Designation
We’ve surveyed our carrier partners and have placed creditable/non-creditable designations in easy-to-reference charts for all carriers’ Small Group plans and Large Group plans. Refer to these charts to determine whether the coverage sponsored by the employer is creditable or non-creditable:
- * California – Small Group Plans
- * California – Large Group Plans
- * Nevada – Small Group Plans
- * Nevada – Large Group Plans
Creditable Coverage Model Notice
The Centers for Medicare & Medicaid Services (CMS) provide model notices to meet these distribution requirements, along with additional information on the required distribution. The model notices must be customized by the employer, as indicated on the model notices, before the employer releases them to Medicare-eligible individuals. There are different notices for creditable coverage and non-creditable coverage. The forms are also available in Spanish.
CMS Online Reporting Requirement for Employers
Employers providing prescription drug coverage to Medicare-eligible individuals must also submit an online disclosure to CMS annually, and upon any change that affects creditable status. The disclosure is due no later than 60 days from the beginning of a plan year, within 30 days after the termination of prescription drug coverage, or within 30 days after any change in creditable coverage status. This disclosure is required whether the employer-sponsored group coverage pays primary or secondary to Medicare coverage.
For help on calculating group size relating to “Medicare Primary” vs “Medicare Secondary,” COBRA, and the Affordable Care Act (ACA), refer to Word & Brown’s Group Count Reference (CA) or Group Count Reference (NV).
For additional support, contact WBCompliance via phone at 866.375.2039 or by email at ComplianceSupport@wordandbrown.com.