Administrating a Group Health plan comes with required notices and documentation that can be difficult to keep up with. The annual Medicare Part D Disclosure Notice is a prime example of the complexities employers can easily forget or possibly may not even be aware of.
As part of our value-added services, TRICOR Insurance reminds our clients around the details to complete the requirements of this two-part mandate: employee notification and CMS online disclosure.
Medicare Part D Creditable Coverage Disclosure Notice
The Medicare Modernization Act (MMA), enacted in 2003, requires employers to notify their Medicare-eligible employees and their dependents about the creditability status of their prescription drug plan. Plans that are deemed creditable coverage provide prescription drug coverage to the same level or better than Medicare Part D. There are two elements to proper disclosure: distributing a written notice to employees and electronic reporting to the Centers for Medicare & Medicaid Services(CMS).
Annual Written Disclosure Notice to Eligible Employees
The written disclosure must be provided before October 15th each year. It may be an email as long as the employees are instructed to inform dependents. The CMS provides templates online for both creditable and non-creditable notices.
This notice can be critical to employees who are eligible for Medicare. If a Medicare eligible employee lets the original open enrollment window for Medicare Part D pass, they will be subject to a late enrollment penalty if they do not have other creditable coverage.
It is important to remember that it is not only people over the age of 65 that can be eligible for Medicare but also those younger than 65 with disabilities and those who have permanent kidney failure. In some instances, employees may have spouses or dependents that are eligible for Medicare without the employer’s knowledge. For this reason, many employers choose to distribute the notice to all employees and dependents that are eligible for the health insurance.
TRICOR Insurance recommends, if manageable, employers provide this notice to all benefit eligible employees.
Online Disclosure to CMS
The online disclosure form stating whether the coverage offered is creditable must be submitted by the employer to CMS annually no later than 60 days from the beginning of the plan year.
If a prescription drug plan is terminated or there is a change in creditable coverage status, the form must be completed within 30 days.
Determining Creditable Status
Two tests can be used to determine creditability status – simplified method and actuarial determination method.
The actuarial determination only needs to be used when the employer is applying for a retiree drug subsidy. Otherwise the simplified method will suffice.
Using the simplified method, a plan is deemed creditable if it
- Provides coverage for brand and generic prescriptions;
- Provides reasonable access to retail providers;
- The plan is designed to pay on average at least 60% of participants’ prescription drug expenses; and
- Satisfies at least one of the following:
- a) The prescription drug coverage has no annual benefit, maximum benefit or a maximum annual benefit payable by the plan of at least $25,000, OR
b) The prescription drug coverage has an actuarial expectationthat the amount payable by the plan will be at least $2,000 annually per Medicare eligible individual. - c) For entities that have integrated health coverage,the integrated health plan has no more than a $250 deductible per year, has no annual benefit maximum or a maximum annual benefit payable by the plan of at least $25,000 and has no less than a $1,000,000 lifetime combined benefit maximum.
As a general rule, all fully insured non-Health Savings Account (HSA) health insurance plans provide creditable coverage. HSA health plans do not provide creditable coverage. Self-insured plans need additional testing.
