Employers and their group health plan sponsors will want to mark October 15, 2020 on their calendars. This is the deadline for plan sponsors to disclose to individuals who are eligible for Medicare Part D and to the Centers for Medicare and Medicaid Services (CMS) whether the health plan’s prescription drug coverage is creditable.
Although this responsibility primarily falls on group health plan sponsors, there are several important things that employers should be aware of that we’ll cover in this post:
- What is Medicare Part D?
- Where can resources and model notices can be found?
- Other timing and delivery rules to be aware of
What Exactly Does “Creditable Coverage” Mean, and How Is It Related to Medicare Part D?
“Creditable Coverage” is a term that involves two simple words, but most people have a hard time understanding what exactly it means in the world of Medicare.
A notice of creditable coverage is simply an official document given to an employee from their employer (or union) that states whether their prescription drug coverage plan is equal to or better than the prescription drug coverage provided through Medicare.
This notice helps the employee make decisions related to their benefits, as remaining under their employer’s prescription drug plan might be very advantageous for them as they approach retirement. For plans that are not creditable, employees should generally move to Medicare as this will save them money from future late-enrollment penalties in the future. Medicare allows employees who choose to stay on plans that are creditable to avoid these penalties should they choose to enroll later on.
In order for CMS to have an official record of an employer’s or union’s status as creditable or non-creditable, employers must disclose that status both to their Medicare Part D eligible employees as well as the CMS. Employers should work with their group health plan sponsors to send this notice, and it must be done by October 15th.
What Resources and Model Disclosures Exist?
Fortunately, the CMS has provided two model notices that employers can use:
- A model notice of creditable coverage when the health plan’s prescription drug coverage IS creditable. (click here to access this model).
- A model notice of non-creditable coverage when the health plan’s prescription drug coverage IS NOT creditable (click here to access this model).
Technically, employers do not have to use these model notices. However, if the models are not used, the notices still must include certain information. These requirements include a disclosure about whether the plan’s coverage is creditable, explanations of what creditable coverage means, and an explanation of why employees should take their coverage decisions seriously.
Employers and their group health care sponsor should strongly consider using these models. It’s the simplest way to make the disclosures and ensure that the required language is used. Another best practice is for employers and their group health plan sponsors to provide this notice to all plan participants, even to those that might not be qualified for Medicare Part D. This way, the employer can ensure that they “cover all their bases” and that they educate employees who will have to make this decision several years in the future.
What Other Rules Should You Be Aware of?
Employers should not that the most important time of year to deliver Part D Notices is prior to the Medicare Part D annual election period, which goes from October 15th to December 7th each year. However, there are other situations in which an employer or their group health plan sponsor must give this notice to an employee:
- Whenever a beneficiary requests the notice
- Whenever there is a change in an employer’s health plan that changes whether the plan is creditable or non-creditable
- Before the effective date of coverage for any Medicare-eligible individual who joins the plan
As we stated in the previous section, it’s not a bad idea to provide Part D notices at multiple times throughout the employment life cycle. Part D notices can even be included in new enrollment materials for employees.
It is important for employers to understand the rules about printed notices and electronic notices. A single printed notice may be delivered to an address, even if multiple beneficiaries of the plan live at that address. However, if it is known that a beneficiary of the plan lives at a separate address, a second printed notice must be sent to that address. Electronic notices can be compliant as well, assuming the employee has regular access to the electronic documents at their regular place of work.
From an official perspective, the Department of Labor (DOL) has three requirements for electronic delivery of Part D Notices:
- The plan administrator uses appropriate and reasonable means to ensure that the system for furnishing documents results in actual receipt of transmitted information.
- Notice is provided to each recipient, at the time the electronic document is furnished, of the significance of the document.
- A paper version of the document is available on request.
As we stated very early in this post, a notice must also be sent to the CMS in addition to the beneficiaries of the plan. This disclosure to the CMS must be delivered on an annual basis, and the following timeline requirements apply – the notice must be provided:
- Within 60 days after the beginning date of the plan year for which the entity is providing the form.
- Within 30 days after the termination of the prescription drug plan.
- Within 30 days after any change in the creditable coverage status of the prescription drug plan.
Part D Notices, or notices of “Creditable Coverage,” are simply an official document given to an employee from their employer (or union) that states whether their prescription drug coverage plan is equal to or better than the prescription drug coverage provided through Medicare. The purposes of these notices is to help beneficiaries of the plan make the best decision for their prescription health coverage moving forward.
Here are additional key takeaways related to these notices:
- The Centers for Medicare and Medicaid Services (CMS) provide sample notices that employers should consider using.
- Employers should work with their group health plan sponsors to ensure that these notices are delivered at the right time – which might end up being more frequently than you think.
- The notices can be provided electronically under certain circumstances.