Employers that offer prescription drug coverage must provide notices of "creditable" or "non-creditable" coverage to Medicare-eligible employees or covered dependents before each year's Medicare Part D annual enrollment period begins. As the enrollment period runs from Oct. 15 to Dec. 7, the final day to provide this notice is Oct. 14, unless that date falls on a weekend.
Prescription drug coverage is creditable when it is at least actuarially equivalent in value to Medicare's standard Part D coverage, and non-creditable when it does not provide, on average, as much coverage as Medicare's standard Part D plan.
The notice must be provided to all Medicare-eligible individuals who are covered under, or eligible for, the sponsor's prescription drug plan, regardless of whether the plan pays primary or secondary to Medicare. The notice requirement applies to both fully insured and self-funded employer-sponsored plans, regardless of plan size, employer size or grandfathered status under the Affordable Care Act.
Employers that provide prescription drug coverage through a Medicare Part D Employer Group Waiver Plan (EGWP), however, are not required to provide the creditable coverage notice to those eligible for the EGWP.
"The tricky part is that Medicare Part D-eligible individuals could be active employees [over age 65], disabled employees, qualified beneficiaries receiving COBRA coverage, and retirees," according to Carlton Pilger, an attorney at Fisher Phillips in Atlanta.
Additionally, covered spouses and dependents also may be Medicare Part D-eligible. "Employers typically do not have accurate information on spouse and dependents, so the best practice is to issue notices to all individuals eligible for the [prescription drug] coverage," Pilger noted.
Generally, one Medicare Part D notice will suffice for a covered Medicare beneficiary, their spouse and all dependents, "but where an employer knows that any Medicare-eligible spouse or dependent resides at a different address, the employer must send separate notice to that last-known address," he advised.
Determination of Creditable Coverage
The Centers for Medicare & Medicaid Services (CMS) has provided a Creditable Coverage Simplified Determination method that employers can use to determine if a plan provides creditable coverage.
"Knowing if their prescription drug coverage is creditable allows individuals to make informed decisions about whether to remain in their current prescription drug plan or enroll in Medicare Part D during the Part D annual enrollment period," explained Leslye Laderman and Richard Stover, principals at Buck, a New York City-based HR consultancy. Those who do not enroll in Medicare Part D during their initial enrollment period and who subsequently go at least 63 consecutive days without creditable coverage "generally will pay higher premiums if they enroll in a Medicare drug plan at a later date," they said.
Plan sponsors may provide an electronic notice to plan participants who have regular work-related computer access to the sponsor's electronic information system, Laderman and Stover said. "However, plan sponsors using this disclosure method must inform participants that they are responsible for providing notices to any Medicare-eligible dependents covered under the group health plan," they noted.
Electronic notice may also be provided to employees who do not have regular work-related computer access to the plan sponsor's electronic information system and to retirees or COBRA qualified beneficiaries, but only with a valid e-mail address and their prior consent. "Before individuals can effectively consent, they must be informed of the right to receive a paper copy, how to withdraw consent, how to update address information, and any hardware/software requirements to access and save the disclosure," Laderman and Stover said. "In addition to e-mailing the notice to the individual, the sponsor must also post the notice on its website."
Other Times When Notices Must Be Provided
CMS also requires that Part D-eligible individuals be given notice of the creditable or non-creditable status of their prescription drug coverage at the following times:
- Before 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.
- Whenever prescription drug coverage ends or creditable coverage status changes.
- On the individual's request.
According to CMS, the requirement to provide the notice prior to an individual's initial enrollment period in Medicare Part D will be satisfied if the notice is provided to all plan participants each year before the beginning of the Medicare Part D annual enrollment period. The required notices may be provided in annual enrollment materials, separate mailings or electronically.
If an employer chooses to send Medicare Part D notices with other printed plan materials, "CMS mandates that the Medicare Part D notice be the first page of the materials," Pilger pointed out. "Alternatively, the employer can place a notice on the first page that references where in the materials individuals can find the required notice. Employers must set off such a reference in a separate, prominent box in a bold face font no smaller than 14-point."
Model Notices Available
Model notices that can be used to satisfy creditable/non-creditable coverage disclosure requirements are available in both English and Spanish on the CMS website.
Plan sponsors that choose not to use the model notice must provide a disclosure that meets content standards prescribed by CMS.
Don't Forget Disclosures to CMS
Plan sponsors that provide prescription drug coverage to Medicare-eligible individuals must also disclose to CMS annually whether the coverage is creditable or non-creditable. This disclosure must be made no more than 60 days after the beginning of each plan year.
Related SHRM Resource:
Medicare Part D Participant Notice (before Oct 15), SHRM Express Request