We are well into the month of September, which means that employers are preparing to send employees the Medicare Part D Notice of Creditable Coverage.
If you have any type of group health plan, whether it be from an employer, a union, or any other group entity, the notice is sent to advise plan participants as to whether their prescription drug coverage is “creditable.”
What is Medicare D Creditable Coverage?
The Medicare Modernization Act made it a requirement that entities that offered plans which included prescription drug coverage had to disclose to all Medicare-eligible individuals whether that prescription drug coverage was “creditable.”
For the purposes of this requirement, “creditable” means that the coverage is expected to pay as much as the standard Medicare prescription drug coverage. Among the 2020 parameters for what is considered “standard” under Medicare D are:
- Initial coverage limit: $4,020
- Out-of-pocket threshold: $6,350
Determination of Creditable Coverage
The prescription drug plan is deemed to be creditable if it:
- Provides coverage for brand and generic prescriptions
- Provides reasonable access to retail providers and mail order coverage
- Is designed to pay on average at least 60% of participants’ prescription drug expenses
The plan must also satisfy one of the following criteria:
- The prescription drug coverage has no annual benefit maximum benefit or a maximum annual benefit payable by the plan of at least $25,000
- The prescription drug coverage has an actuarial expectation that the amount payable by the plan will be at least $2,000 annually per Medicare-eligible individual
- 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.
The creditable or non-creditable coverage notice must be provided to Medicare Part D eligible individuals who are covered or who apply for the plan’s prescription drug coverage. This includes active, retired, disabled, and COBRA beneficiaries and dependents. The notice must be furnished no later than October 14. The Part D Annual Election Period runs from October 15 through December 7 of 2020.
It is often difficult to determine which participants are Medicare D eligible, so the prudent solution is to send the notification to ALL plan participants prior to October 14. Click here for a guide that provides a calculator methodology for determining creditable coverage.
There is also a necessary notification requirement for entities to complete the Online Disclosure to CMS Form to report the creditable coverage status of their prescription drug plan. The disclosure should be completed annually no later than 60 days from the beginning of a plan year, within 30 days after the termination of a prescription drug plan, or within 30 days after any change in creditable coverage status.
While there are no formal penalties attached to non-conformance of the requirement, the Medicare-eligible individual may incur a late enrollment penalty if notification as to non-creditable coverage exists and that individual then attempts to enroll in a Medicare Part D plan.