Prior to the Medicare Part D annual enrollment period, and no later than October 14, 2020, employers that provide prescription drug coverage must provide a notice of creditable or non-creditable coverage to Medicare-eligible individuals.
Creditable coverage means that on average the plan will pay as much as the standard prescription drug plan under Medicare Part D. These notices help individuals decide whether or not they should remain in their current plan or enroll in Medicare Part D during the annual open enrollment period. Individuals that drop their prescription drug coverage, or do not have creditable coverage for at least 63 consecutive days, will be faced with higher premiums if they enroll in Medicare Part D at a later date. If prescription drugs are eligible for reimbursement under a health reimbursement arrangement the plan sponsor must take the HRA into account for Medicare Part D creditable coverage purposes. Health Care Flexible Spending Accounts and Health Savings Accounts (HSA) are not taken into account when determining creditable coverage. The Centers for Medicare & Medicaid Services (CMS) provides a Creditable Coverage Simplified Determination method that employers will find helpful in determining if their plan provides creditable coverage.
Medicare-eligible individuals include individuals who are covered under or are eligible for the employer’s prescription drug plan as follows:
- Under age 65 and disabled
- Active employees who are age 65 and older and their covered dependents
- COBRA participants who are age 65 and older and their covered dependents
- Retirees who are age 65 and older and their covered dependents
Many employers may not be aware of the Medicare eligibility for covered dependents, as you can qualify for Medicare prior to age 65 due to a disability or End Stage Renal Disease (ESRD). Instead of trying to identify Medicare-eligible individuals, employers may elect to provide the notice to all plan participants. CMS provides model notices in both English and Spanish at CMS.gov. Notices are available for both Creditable Coverage and Non-Creditable Coverage. As long as the October 14 deadline is met, the required notices may be included in annual enrollment materials, through a separate mailing or electronically (permitted only if the employer satisfies the Department of Labor safe harbor rules for electronic distribution). If the employer does not offer prescription drug coverage the notice is not required.
In addition to distributing the Certificate of Creditable Coverage or Certificate of Non-Creditable Coverage to your plan participants, you are also required to complete an online disclosure to CMS within 60 days of the beginning of your plan year. This disclosure notifies CMS if your prescription drug plan is creditable or not. This Disclosure Form is available on the CMS.gov website.