Q: What is the purpose of the Medicare Part D notice that must be sent out by mid-October and what are my requirements as an employer?
A: The purpose of the Medicare Part D Notice is to let employees know if the coverage under the group-sponsored health plan is creditable. In general, the prescription plan is creditable if the expected amount of paid claims under the group health plan’s prescription drug coverage is at least as much as the expected amount of paid claims under the Medicare Part D prescription drug benefit. For plans that have multiple benefit options (e.g. PPO, HDHP and HMO), the creditable coverage test must be applied separately for each benefit option.
Employers with group health plans that provide prescription drug coverage to individuals who are eligible for Medicare Part D must comply with certain disclosure requirements as well as disclose to CMS whether the plan is creditable. The Medicare Part D notice must be provided to participants at the following times:
- Prior to October 15th each year.
- Prior to initial enrollment period for Part D.
- Prior to the effective date of coverage for any Medicare-eligible individual who joins the plan.
- Whenever prescription drug coverage ends or changes so that it is no longer creditable or becomes creditable.
- Upon a beneficiary’s request.
Liberty clients are provided with the notice during your plan’s annual open enrollment to distribute for each of the above. Employers are encouraged to distribute the notice during open enrollment which will satisfy (1) and (2). Employers may also want to provide notices to the employee and spouses closer to the date an individual first becomes eligible for Medicare.
A plan sponsor can provide a creditable coverage disclosure notice electronically to plan participants who have the ability to access electronic documents at their regular place of work, if they have access to the sponsor’s electronic information system on a daily basis as part of their work duties or if the employee has elected to receive compliance notices electronically. The DOL regulations for electronic delivery require that the plan administrator must use appropriate and reasonable means to ensure that the system for furnishing documents results in actual receipt of transmitted information. The significance of the document and a paper version of the notice must be available on request.
If the creditable coverage disclosure notice is provided to all plan participants annually before Oct. 15th of each year, items (1) and (2) above will be satisfied.
The disclosure to CMS must be within 60 days after the beginning of the plan year, within 30 days of termination of the prescription drug plan and within 30 days after any change in the creditable status of the plan. Plan sponsors are required to provide the disclosure notice to CMS through completion of the disclosure form on the CMS Creditable Coverage Disclosure webpage. This is the sole method for compliance with the CMS disclosure requirement, unless a specific exception applies.
Medicare eligible employees will want to ensure they understand when they may be subject to late enrollment penalties for Medicare.
- If the Medicare eligible employee and or dependent are enrolled in a creditable group plan, the individual will not be penalized for Part D late entry when enrolling in Medicare outside the original eligibility date.
- If the employee enrolls in an employer plan that is not creditable and does not enroll in Part D at that time or when Medicare eligible, the individual may be subject to a late enrollment penalty.
It is important to note coverage through COBRA is not considered a group health .If a Medicare-eligible beneficiary loses their employer-sponsored group health plan coverage elects COBRA, without enrolling in Medicare Part B and Part D, the individual may be subject to a late enrollment penalty for both Part B and Part D.
Click the link below for detailed information regarding the Medicare Creditable requirements and information for employees to avoid late enrollment penalties.
