Employers who provide a prescription drug benefit to employees or dependents eligible for Medicare Part D have two requirements to meet each year to be in compliance with the Medicare Modernization Act (MMA). Before October 15th, the start of the Medicare annual open enrollment period, employers must provide a Creditable Coverage Disclosure Notice to:
- Medicare eligible active working individuals and their dependents;
- Medicare eligible COBRA individuals and their dependents;
- Medicare eligible disabled individuals covered under your prescription drug plan; and
- any retirees and their dependents.
In addition to providing this Notice once a year, employers also need to provide it in the following circumstances:
- prior to the effective date of an individual's enrollment in the sponsor’s plan and upon any change that affects whether the coverage is creditable prescription drug coverage;
- prior to an individual’s initial enrollment period for the Medicare prescription drug benefit; and
- upon request by a plan participant.
If you have already incorporated the Notice into your benefit and enrollment materials, this will meet the requirements if you make the materials available at least once a year and in the other required instances. Otherwise you may use one of the following Model Notices (available in English and Spanish) at the Center for Medicare and Medicaid Services (CMS) website. In any event, it is important to document how the Notice is being distributed so that you may demonstrate compliance.
Model Notice - Creditable Coverage
Model Notice - Non-Creditable Coverage
ANNUAL DISCLOSURE TO CMS
In addition to the Notice to plan participants, the MMA also requires group plan sponsors to provide an annual disclosure to the CMS of their plan's creditable coverage status. This disclosure must be made within 60 days after the start date of the group's plan year. Groups that contract directly with Medicare or with a Medicare Part D plan to provide qualified coverage are exempt from this disclosure, as are groups that have applied for and been accepted into the Retiree Drug Subsidy program, although only for those participants for whom they are claiming a subsidy.
Since the CMS isn't going to send an email reminder each year, it's a good idea to add this item to your list of annual renewal items. The online form can typically be completed in under 10 minutes, (assuming you already know your plan's creditable coverage status), and requires only a few basic pieces of plan and participant information.
Creditable Coverage Form
Creditable Coverage Instruction Guide
SO WHAT IS CREDITABLE COVERAGE?
According to the MMA:
"Drug coverage is creditable if the actuarial value of the coverage equals or exceeds the actuarial value of standard Medicare prescription drug coverage, as demonstrated through the use of generally accepted actuarial principles and in accordance with CMS actuarial guidelines."
Fortunately, rather than going through these calculations themselves, employers may rely on their insurance carrier or broker to let them know whether or not the prescription drug coverage provided under their plan(s) is considered creditable coverage. The CMS also has a simplified determination test based on a few simple factors, including access to both brand-name and generic medications, reasonable access to retail pharmacies, and a plan design intended to cover at least 60% on average of a participant's prescription expenses.
Employers may incorrectly assume that because none of their employees are on Medicare there is no reason to send a Creditable Coverage Disclosure Notice. However there are instances when an employee or dependent may be eligible for Medicare Part D without the employer's knowledge. For example, an employee’s dependent could be eligible for Medicare Part D because of their disability, age, or medical condition such as end stage renal disease. For this reason, it is recommended that all group sponsors distribute the Notice each year to ensure full compliance.
Aside from meeting compliance requirements, it is important to provide the Notice so that individuals fully understand their coverage and have the information before the annual Medicare open enrollment period. Participants with a break in creditable coverage of over 62 days can face a financial penalty if they enroll outside of the Medicare open enrollment period.
Additional information on the Creditable Coverage Disclosure Notice requirements may be found at the CMS Creditable Coverage website