Group health plan sponsors that provide prescription drug coverage to anyone eligible for Medicare Part D coverage—such as employees age 65 or older—must annually disclose to the federal Centers for Medicare & Medicaid Services (CMS) whether that coverage is actuarially equivalent to Medicare Part D prescription drug coverage (i.e., whether it's "creditable" or "noncreditable").
The disclosure obligation applies to all plan sponsors that provide prescription drug coverage, even those that don't offer prescription drug coverage to retirees. Because the disclosures are due 60 days after the start of the plan year, calendar-year plans must submit this year's disclosure to the CMS by March 1. Employers electronically file these notices through the Disclosure to CMS Form on the CMS website.
Because individuals who fail to enroll in Medicare Part D prescription drug coverage when first eligible may be subject to late enrollment penalties if they go 63 consecutive days or longer without creditable prescription drug coverage, both Medicare Part D-eligible individuals and the CMS need to know whether a group health plan's prescription drug coverage is creditable or noncreditable.
Employers that don't offer prescription drug benefits to any Part D-eligible individuals on the first day of their plan year are not required to complete the CMS disclosure form for that plan year, according to CMS guidance. A plan sponsor that contracts directly with Medicare to offer a Part D plan or that contracts with a private Part D plan vendor to provide prescription drug coverage also is exempt from the CMS disclosure requirement.
"While nothing in the regulations prevents a third party from submitting the notices"—such as a third-party administrator (TPA) or insurer—"ultimate responsibility falls on the plan sponsor," advised Elizabeth H. Latchana and Brian T. Gallagher, attorneys with Fraser Trebilcock in Lansing, Mich.
Information Needed to Complete the Disclosure
Richard Stover, a principal at HR advisory firm Buck in New York City, and Randie Thompson, director of compliance consulting at Buck in Denver, Colo., explained that when preparing the annual disclosure to the CMS, plan sponsors need to:
- Identify the number of prescription drug options offered to Medicare-eligible individuals. This is the total number of benefit options offered, excluding any benefit options the plan sponsor is claiming under the retiree drug subsidy (RDS) program (i.e., benefit options for which the plan sponsor is expected to collect the subsidy) or that are employer group waiver plans (EGWPs).
- Determine the number of benefit options offered that are creditable coverage and the number that are noncreditable. Again, this disclosure would exclude drug benefits under an RDS program, which already requires disclosure that the plan provides creditable coverage, and an EGWP, which is itself a type of Medicare Part D coverage.
- Estimate the total number of Part D-eligible individuals expected to have coverage under the plan at the start of the plan year (or, if both creditable and noncreditable coverage options are offered, estimate the total number of Part D-eligible individuals expected to enroll in each coverage category). This includes Part D-eligible active employees, retirees and disabled individuals, any of their Part D-eligible dependents, and any individuals on COBRA who are Part D-eligible.
As with the above disclosure items, the estimated number of eligible individuals excludes Part D-eligible retirees claimed under the RDS program or retirees participating in an EGWP.
In addition, "individuals who will become Part D-eligible after the start of the plan year should not be included in the count for that year," Chan and Laderman said. "However, they must be provided a notice of creditable or noncreditable coverage prior to their initial enrollment period for Part D."
- Provide the most recent calendar date on which the required notices of creditable or noncreditable coverage were provided to employees. A Part D notice of creditable or noncreditable coverage is due to employees before Oct. 15 each year, before the beginning of the Medicare Part D annual enrollment period, and at certain other times.
Notifying the CMS of Changes in Coverage
In addition to the annual disclosure, plan sponsors must submit a new disclosure form to the CMS within 30 days following any change in the creditable coverage status of a prescription drug plan, Stover and Thompson explained. This includes both a change in the coverage offered so that it is no longer creditable or noncreditable, and the termination of a creditable coverage option.
A new disclosure form must also be submitted to the CMS within 30 days after the termination of a prescription drug plan.
Related SHRM Article:
Oct. 14 Deadline Nears for 2021 Medicare Part D Coverage Notices, SHRM Online, September 2021