Each year, Medicare Part D requires group health plan sponsors to disclose to individuals who are eligible for Medicare Part D and to the Centers for Medicare and Medicaid Services (CMS) whether the health plan’s prescription drug coverage is creditable. Plan sponsors must provide the annual disclosure notice to Medicare eligible individuals before Oct. 15, 2020—the start date of the annual enrollment period for Medicare Part D. CMS has provided model disclosure notices for employers to use.
This notice is important because Medicare beneficiaries who are not covered by creditable prescription drug coverage and do not enroll in Medicare Part D when first eligible will likely pay higher premiums if they enroll at a later date. Although there are no specific penalties associated with this notice requirement, failing to provide the notice may be detrimental to employees.
A group health plan’s prescription drug coverage is considered creditable if its actuarial value equals or exceeds the actuarial value of standard Medicare Part D prescription drug coverage. In general, this actuarial determination measures whether 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 (for example, PPO, HDHP and HMO), the creditable coverage test must be applied separately for each benefit option.
CMS has provided two model notices for employers to use:
- A Model Creditable Coverage Disclosure Notice for when the health plan’s prescription drug coverage is
- A Model Non-creditable Coverage Disclosure Notice for when the health plan’s prescription drug coverage is not creditable.
These model notices are also available in Spanish on CMS’ website.
Employers are not required to use the model notices from CMS. However, if the model language is not used, a plan sponsor’s notices must include certain information, including a disclosure about whether the plan’s coverage is creditable and explanations of the meaning of creditable coverage and why creditable coverage is important.
The creditable coverage disclosure notice must be provided to Medicare Part D-eligible individuals who are covered by, or who apply for, the health plan’s prescription drug coverage. An individual is eligible for Medicare Part D if he or she:
- Is entitled to Medicare Part A or is enrolled in Medicare Part B; and
- Lives in the service area of a Medicare Part D plan.
In general, an individual becomes entitled to Medicare Part A when he or she actually has Part A coverage, and not simply when he or she is first eligible. Medicare Part D-eligible individuals may include active employees, disabled employees, COBRA participants and retirees, as well as their covered spouses and dependents. As a practical matter, group health plan sponsors often provide the creditable coverage disclosure notices to all plan
Medicare Part D imposes disclosure requirements on employers with group health plans that provide prescription
drug coverage to Medicare eligible individuals.
- Plan sponsors must provide the annual Medicare Part D
creditable coverage disclosure
notices to individuals before
Oct. 15, 2020.
- Model notices are available for
employers to use.
Employers should confirm whether their health plans’ prescription drug coverage is creditable or non-creditable and prepare to send their Medicare Part D disclosure notices before Oct. 15, 2020. To make the
process easier, employers often include Medicare Part D notices in open
enrollment packets they send out prior to Oct. 15.
Oct. 15, 2020
Group health plan sponsors must provide the annual Medicare Part D notices to Medicare-eligible individuals before this deadline.