Employers that offer prescription drug coverage in 2023 must provide notices of "creditable" or "noncreditable" coverage to Medicare-eligible employees or covered dependents before the annual 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. (In years in which Oct. 14 falls on a weekend, unlike this year, the due date would be the subsequent Monday.)
Prescription drug coverage is creditable when it is at least "actuarially equivalent" in value to Medicare's standard Part D coverage.
The notice must be provided to all Medicare-eligible individuals who are covered under, or eligible for, the employer-sponsored prescription drug plan, regardless of whether the plan pays primary or secondary to Medicare. This allows those who are eligible for Medicare to decide whether their employer's drug coverage or Medicare is the better choice for them.
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. Generally, one Medicare Part D notice is sufficient for a covered Medicare beneficiary, their spouse and all dependents, but when 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.
A best practice is to provide the notice to all employees, wrote Brian Gilmore, lead benefits counsel at Newfront, an insurance and financial services firm in San Francisco, "because employers will not know which employees, spouses, or dependents are enrolled in [Medicare] Part A or Part B, and they will not know which individuals are seeking to enroll in the employer's plan."
Employers using electronic delivery (as discussed below) must inform participants that they are responsible for providing notices to any Medicare-eligible dependents covered under the group health plan.
Employers that provide prescription drug coverage through a Medicare Part D Employer Group Waiver Plan (EGWP) are not required to provide the creditable coverage notice to those eligible for the EGWP.
"The notice requires the plan sponsor to first determine if the prescription drug coverage it offers is creditable (meaning it is on average at least as comprehensive as Medicare Part D coverage) or noncreditable," wrote Gary Kushner, president and CEO of HR and benefits consulting firm Kushner & Co. in Portage, Mich.
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.
"If a plan is fully insured (as opposed to self-funded), the insurance carrier can often assist in making that determination," Kushner noted.
Another consideration: The Inflation Reduction Act, signed into law in August, put in place cost reductions for drug purchased through Medicare, including caps on Medicare Part D out-of-pocket limits. These changes could affect the creditable status of employers' prescription drug coverage, benefits advisors have noted.
Model notices can be used to satisfy creditable/noncreditable coverage disclosure requirements. The CMS has posted on its website:
Plan sponsors that choose not to use the model notice must provide a disclosure that meets content standards prescribed by CMS.
Medicare Part D notices can be hand-delivered, sent by first-class mail or e-mailed to participants who "have access to the plan sponsor's electronic information system on a daily basis as part of their work duties," which is a general standard under the Employee Retirement Income Security Act's electronic disclosure safe harbor.
Medicare Part D notices can be included as part of open enrollment or other benefits-related materials if these are distributed before Oct. 15. However, if an employer chooses to send the notices with other printed plan materials, CMS mandates that the Medicare Part D notice be the first page of the materials.
"If not on the first page, the first page should include a separate box that is bolded or offset on the first page and prominently references the notice in at least 14-point font," Gilmore pointed out.
He suggested language such as, "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."
CMS also requires that Part D-eligible individuals be given notice of the creditable or noncreditable status of their prescription drug coverage at the following times:
Plan sponsors that provide prescription drug coverage to Medicare-eligible individuals must also disclose to CMS annually whether the coverage is creditable or noncreditable. This disclosure must be made no more than 60 days after the beginning of each plan year.
