Annual Medicare Notice of Creditable Coverage Due October 15th

Employers sponsoring group health care plans with prescription drug benefits must provide individuals eligible to enroll in a Medicare Part D prescription drug plan with a Notice of Creditable Coverage (Notice) no later than October 15th. The purpose of the Notice is to inform Medicare Part D eligible individuals whether the prescription drug benefit under their employer group health plan is ‘creditable.’ If coverage is not ‘creditable,’ the Notice must also explain the limitations on when an individual can enroll in a Medicare Part D prescription plan and that late penalties may apply.

Model notices are available, and their use is recommended (see below).

Definition of Creditable Coverage

Per guidance issued by the Centers for Medicare and Medicaid Services (CMS), an employer’s prescription drug benefit is ‘creditable’ if coverage is at least equal to coverage under the standard Medicare Part D prescription drug benefit. CMS criteria include, but are not limited to, coverage of brand-name and generic prescription drugs, reasonable access to retail providers, and the percentage of participant prescription expenses paid by the employer prescription plan. Employers should contact their plan administrators regarding the creditability of their specific prescription drug benefits.

Significance

If a plan participant drops or loses the employer prescription drug coverage and does not enroll in another plan that provides creditable coverage or a Medicare Part D prescription drug plan within 63 continuous days, they will incur a late enrollment penalty when they later enroll in Medicare Part D coverage. The late enrollment penalty may increase the individual’s base monthly premium by 1% for every month the individual went without creditable coverage. For example, if an individual goes without creditable coverage for ten months, their base monthly premium may be increased by 10%, and they may have to pay the higher premium for as long as they have Medicare Part D coverage.

Notice Recipients

The Notice must be provided to active and disabled employees, retirees, spouses, and dependents (including COBRA participants) who are both (1) eligible to enroll in a Medicare Part D plan and (2) enrolled or eligible to enroll in the employer prescription drug plan. Because it can be challenging to identify the individuals eligible for Medicare Part D who intend to enroll in their plan, employers typically send the Notice to all employees, retirees, and COBRA participants.

Providing Notice

The Notice can be provided via first-class mail, by hand, or electronically (if consented to in accordance with federal requirements).

The Notice can be provided with other materials as long as the Notice is “prominent and conspicuous.” If the Notice is not on the first page, it must be referenced in at least 14-point font in a separate box, bolded, or offset on the first age of the provided materials. CMS has provided the following model language: “If you (and\or your dependents) have Medicare or will become eligible for Medicare in the next 12 months, a Federal law gives you more choices about your prescription drug coverage. Please see page xx for more details.”

Model Notices of Creditable Coverage are available on the CMS website at: https://www.cms.gov/medicare/employers-plan-sponsors/creditable-coverage/model-notice-letters

Additional CMS Reporting Requirement

Employers must also disclose whether their prescription drug coverage is creditable to CMS annually within 60 days of the beginning of their plan year using the CMS online portal. For example, if the plan year begins on January 1st, the disclosure deadline is March 1st. 

More information can be found on the CMS website at:     https://www.cms.gov/medicare/employers-plan-sponsors/creditable-coverage/disclosure-guidance-instructions

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If you have questions regarding the Notice of Creditable Coverage, required disclosure to CMS, or the requirements for electronically providing group health plan materials, please contact your employee benefits legal counsel.