The Medicare Modernization Act requires group health plan sponsors that provide prescription drug coverage to notify individuals who are eligible for Medicare Part D whether the plan’s coverage is creditable or non-creditable. Creditable coverage means that the plan is expected to cover, on average, as much as the standard Medicare Part D prescription plan.
What You Need to Do
- Visit the CMS website at cms.hhs.gov/CreditableCoverage for further information on creditable coverage and to obtain a copy of the model creditable/non-creditable disclosure letters.
- Disclose to you Medicare-eligible members whether your prescription drug coverage is creditable or non-creditable prior to the Medicare Part D Annual Election period, running from October 15 through December 7.
- Notify CMS whether your prescription drug coverage qualifies as creditable or non-creditable.
Disclosure of whether the group health plan prescription drug coverage is creditable allows individuals to make an informed decision about whether to remain in the group’s prescription drug plan or enroll in Medicare Part D during the Part D annual enrollment period. Individuals who do not enroll in Medicare Part D during their initial enrollment period, and who subsequently go at least 63 days without creditable coverage generally pay higher premiums if they enroll in a Medicare drug plan later.
The notice must be provided to all Medicare-eligible individuals who are covered under, or eligible for, the employer’s prescription drug plan. This means that the notice obligation is not limited to retirees and their dependents, but also includes Medicare-eligible active employees and their dependents, and Medicare-eligible COBRA participants and their dependents.
Although most people become eligible for Medicare when they reach age 65, there are other ways in which an individual may become eligible for Medicare. Specifically, when an individual is determined to be disabled by the Social Security Administration or when they have End Stage Renal Disease. While it is easy for employers to identify those individuals who are eligible for Medicare due to their age, it is much more challenging for them to identify spouses and dependents who are eligible for Medicare for these reasons.
Because of these challenges, the simplest method for meeting the distribution requirement is to provide the notice to everyone who is enrolled in, or seeking to enroll in, the group health plan. A commonly used approach is to include the Part D notice in enrollment materials and to provide those enrollment materials to all employees or retirees who are eligible to enroll in the group health plan.
The Centers for Medicare and Medicaid Services (CMS) provides plans with Model Creditable Coverage Disclosure Notices and Model Non-Creditable Coverage Disclosure Notices, in English and Spanish. Plans may use these model notices to comply with the notice requirement or they may create their own notice. Employers choosing not to use the model notices must ensure their notice meets all the CMS content requirements – and those requirements vary based on whether the coverage is creditable or non-creditable.
The disclosure notice must be provided at specified times:
– Before the annual open enrollment period for Part D
– Prior to an individual’s initial enrollment period for Part D
– Before the effective date of coverage for any Medicare-eligible individual who joins an employer plan