As a reminder, the Medicare fall open enrollment period now begins on October 15th and ends December 7th. This means that sponsors of group health plans (including employers) that provide prescription drug coverage must notify Medicare eligible individuals with prescription drug coverage under the plan whether the coverage is creditable prior to October 15th.
To determine whether coverage is creditable, an entity must make an actuarial determination annually of whether the expected amount of paid claims under the entity's prescription drug coverage is at least as much as the expected amount of paid claims under the standard Medicare prescription drug benefit. Certain entities may be able to use a simplified determination method to determine the creditable coverage status of their prescription drug plans.
There are two separate creditable coverage disclosure requirements for entities offering prescription drug coverage—written notice to Medicare eligible individuals and online disclosure to the Centers for Medicare & Medicaid Services (CMS).
Written Disclosure Notice to Medicare Eligible Individuals
The first requirement for such entities is to provide a written disclosure notice to Medicare eligible individuals explaining whether their prescription drug coverage is creditable, prior to October 15th each year and at various other times, including:
- Prior to an individual's initial enrollment period for the Medicare prescription drug benefit;
- Prior to the effective date of enrolling in the entity's plan and upon any change that affects whether the coverage is creditable prescription drug coverage; and
- Upon beneficiary request.
This notice must be provided to Medicare eligible active working individuals and their dependents, Medicare eligible COBRA individuals and their dependents, Medicare eligible disabled individuals covered under the prescription drug plan, and any retirees and their dependents. Entities may modify the Model Disclosure Notices to notify affected individuals whether their drug coverage is creditable or non-creditable.
The law imposes a late enrollment penalty on individuals who do not maintain creditable coverage for a period of 63 days or longer following their initial enrollment period for the Medicare prescription drug benefit. Accordingly, this information is essential to an individual's decision whether to enroll in a Medicare Part D prescription drug plan.
Online Creditable Coverage Disclosure to CMS
The second disclosure requirement is for entities to complete the Online Disclosure to CMS Form to report the creditable coverage status of their prescription drug plans. This disclosure is also required annually, no later than 60 days from the beginning of the plan year, within 30 days after termination of a prescription drug plan, or within 30 days after any change in creditable coverage status.
If an entity does not offer prescription drug benefits to any Medicare Part D eligible individual on the beginning date of the plan year, the entity is not required to complete the Disclosure to CMS Form for that plan year.
For More Information
Issues regarding creditable coverage determinations can be complex and employers are strongly advised to work with a trusted attorney to ensure full compliance with the law. Visit our section on Medicare to learn more about the program and the employer notice requirements under Part D (including model notices).
Be sure to download our 2012 Employee Benefit Plan Compliance Calendar to help you keep track of other key notice requirements for group health plans under federal law.
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