All employers offering prescription drug benefits to employees are required to provide annual notifications to Medicare-eligible employees and dependents before October 15th, regarding the drug status of their plan(s).
These notices help Medicare-eligible individuals make informed decisions about their health insurance and drug benefit options, so they may obtain the best coverage for their needs. It also helps Medicare consumers avoid potential Medicare penalties.
The employer’s notification discloses whether the prescription drug benefits provided by the group health plan are “creditable” or “non-creditable,” when compared to the prescription drug benefits provided by Medicare Part D drug plans.
A “creditable” drug plan provides benefits that are at least equal to, or richer than, the drug benefits provided by Medicare Part D. Conversely, a “non-creditable” drug plan provides pharmacy benefits that are less rich than the drug benefits provided by a Medicare Part D plan.
Medicare-eligible individuals use this information during Medicare’s Annual Election Period (AEP), which runs October 15 through December 7 each year. During the AEP, Medicare enrollees can change their Prescription Drug (Part D) plans and/or can join or change enrollment in a Medicare Advantage (Part C) plan – with or without built-in drug coverage.
Medicare-aged individuals who do not obtain and maintain “creditable” prescription drug coverage, beginning with the date they first become eligible, will be penalized when they inevitably enroll in Medicare’s prescription drug Part D coverage. The penalty generally applies in perpetuity, i.e., for the entire period one is covered by Medicare Part D.
Employers should heed the October 14 deadline and compliance requirements for several reasons. Firstly, federal law requires it. Secondly, employers do not want their senior employees to be hit with noncompliance penalties – especially during retirement.
Determining the drug status of a group health plan
Knowing employers turn to their health insurance agents and advisors in this area, Word & Brown General Agency has created resources to aid with compliance.
We have polled our insurance carrier partners and have collected the statuses of all their drug benefits for plans quoted by Word & Brown. Refer to any of these four charts when determining a plan’s “creditable” or “non-creditable” drug status. These charts are updated each year.
CMS Model Notice for drug status disclosure
The Centers for Medicare & Medicaid Services (CMS) provides model notices (in English and Spanish) that employers can use to comply with this requirement. Employers must customize the model notices to include their own information, such as the name of their plan(s) and the contact information for their plan administrator.
CMS online reporting requirement – for employers
Employers providing prescription drug coverage to Medicare-eligible individuals must also disclose their plans’ drug statuses to CMS. This disclosure is required whether the employer’s group plan pays primary or secondary to group coverage.
Employers must disclose this information to CMS using an online disclosure form. It must be submitted within 60 days of a group plan’s effective date, within 30 days of terminating prescription drug coverage (if applicable), or within 30 days following any change in “creditable” drug status.
Employers are encouraged to document disclosure and receipt of these notices when given to Medicare-eligible individuals. For general Medicare information, refer to CMS’s Medicare website.