The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) created a voluntary prescription drug program for Medicare Part D eligible individuals. Under the MMA, group health plans — or entities that offer prescription drug coverage on a group basis to active and retired employees and to Medicare Part D eligible individuals — must provide, or arrange to provide, a notice of creditable or non-creditable coverage.
The creditable or non-creditable coverage notice must be provided to Medicare Part D eligible individuals who are covered by, or who apply for, the plan’s prescription drug coverage. The notice alerts the individuals as to whether or not their plan’s prescription drug coverage is at least as good as the Medicare Part D coverage. Medicare beneficiaries who are not covered by creditable prescription drug coverage and who choose not to enroll in Medicare Part D before the end of their initial enrollment period will likely pay higher premiums if they enroll in Medicare Part D at a later date.
At a minimum, creditable or non-creditable coverage notices must be provided at the following times:
- Prior to the Medicare Part D Annual Coordinated Election Period – beginning Oct. 15 through Dec. 7 of each year;*
- Prior to an individual’s Initial Enrollment Period for Part D;
- Prior to the effective date of coverage for any Medicare eligible individual that joins the plan;
- Whenever prescription drug coverage ends or changes so that it is no longer creditable or becomes creditable; and
- Upon a beneficiary’s request.
If the creditable or non-creditable coverage notice is provided to all plan participants annually, before Oct. 15 of each year, items (1) and (2) above will be satisfied. Further, “prior to” as used above means the individual must have been provided with the notice within the past 12 months.
The Department of Health and Human Services has provided a Model Creditable Coverage Disclosure Notice and a Model Non-Creditable Coverage Disclosure Notice for use on or after April 1, 2011.
* Starting in 2011, the Medicare Part D Annual Coordinated Election Period runs from Oct. 15 through Dec. 7 of each year, as provided by Section 3204 of the Affordable Care Act. Prior to 2011, the Annual Coordinated Election Period ran from Nov. 15 through Dec. 31 of each year.
If BIM provides a customized annual open enrollment/new hire notice packet for your plan, the Medicare Part D notice(s) is included in the packet.
It is still the employer’s responsibility to distribute the notices timely to eligible individuals and to notify CMS of the creditable coverage status of the plan(s).
Medicare Part D Common Questions: Notification Requirements
Under Medicare Part D, what notice must employers provide to the Centers for Medicare & Medicaid Services (CMS)?
Employers must notify CMS regarding whether the prescription drug coverage they offer constitutes creditable coverage. The disclosure must be made to CMS on an annual basis, and upon any change that affects whether the coverage is creditable. More specifically, the Medicare Part D disclosure notice must be provided within the following timeframes:
- Within 60 days after the beginning date of the plan year for which the entity is providing the disclosure to CMS;
- Within 30 days after the termination of a plan’s prescription drug coverage; and
- Within 30 days after any change in the plan’s creditable coverage status.
Plan sponsors are required to use the online disclosure form on the CMS Creditable Coverage webpage, unless specifically exempt as outlined in related CMS guidance. This is the sole method for compliance with the disclosure requirement. The disclosure form lists required data fields that must be completed in order to generate the disclosure notice to CMS, such as types of coverage, number of options offered, creditable coverage status, period covered by the disclosure notice, number of Part D eligible individuals covered, date the creditable coverage disclosure notice is provided to Part D eligible individuals, and change in creditable coverage status.
What notices must employers provide to Medicare Part D Eligible Individuals?
Employers that offer prescription drug coverage to active or retired employees who are eligible for Medicare, or their spouses/dependents, must notify each Part D Eligible Individual who is enrolled in or seeks to enroll in this coverage whether the coverage qualifies as creditable coverage under the Part D rules. If the coverage is not creditable, the notice must explain that there are limits on when the individual may enroll in a Part D plan during a year, and that he or she may be subject to a lifetime late enrollment penalty under Part D.
Who Must Receive a Disclosure Notice?
Disclosure notices must be provided to all Part D eligible individuals who are covered under, or who apply for, the plan’s prescription drug coverage, regardless of whether the prescription drug coverage is primary or secondary to Medicare Part D. The disclosure notice requirement applies to Medicare beneficiaries who are active or retired employees, disabled or on COBRA, as well as Medicare beneficiaries who are covered as a spouse or dependent.
An individual is eligible for Medicare Part D if he or she:
- Is entitled to Medicare Part A and/or enrolled in Part B as of the effective date of coverage under the Part D plan; and
- Resides in the service area of a prescription drug plan or Medicare Advantage plan that provides prescription drug coverage.
To simplify plan administration, plan sponsors often decide to provide the disclosure notice to all plan participants.
Under Medicare Part D, what must be included in the Creditable Coverage Disclosure Notices provided to Medicare Part D Eligible Individuals?
CMS has provided model language that can be used when disclosing creditable coverage status to beneficiaries.
Under Medicare Part D, when must the Creditable Coverage Disclosure Notices be provided?
The Notices must be provided to Part D Eligible Individuals annually, before Oct. 15 of each year.* Further, the Notices must be provided:
- Before the individual’s Initial Enrollment Period for Part D;
- Before the effective date of enrollment in the prescription drug coverage;
- Upon any change that affects whether the coverage is creditable prescription drug coverage; and
- Upon request.
* Prior to 2011, the Creditable Coverage Disclosure Notices were required to be provided by Nov. 15 of each year.
Under Medicare Part D, how must the Creditable Coverage Disclosure Notices be provided?
Health plan sponsors have flexibility in the form and manner of providing Creditable Coverage Disclosure Notices to beneficiaries. The Notice need not be sent as a separate mailing. It may be provided with other plan participant information materials, including enrollment and/or renewal materials. The sponsor may provide a single Disclosure Notice to the covered Medicare individual and all Medicare-eligible dependent(s) covered under the same plan.
However, the sponsor is required to provide a separate Disclosure Notice if it is known that any spouse or dependent who is Medicare-eligible resides at a different address than from where the participant materials were provided.
If a plan sponsor chooses to incorporate the Creditable Coverage Disclosure Notice with other plan participant information, then the disclosure must be prominent and conspicuous. This means that the Disclosure Notice portion of the document, or a reference to the section in the document that contains the Disclosure Notice portion, must be prominently referenced in at least 14-point font in a separate box, bolded, or offset on the first page of the provided plan participant information.
Under Medicare Part D, may the Creditable Coverage Disclosure Notices be provided electronically?
Health plan sponsors may use the electronic disclosure standards under the Department of Labor regulations to meet the creditable coverage disclosure requirements. These regulations allow a plan sponsor to provide a Creditable Coverage Disclosure Notice electronically to plan participants who have the ability to access electronic documents at their regular place of work if they have access to the sponsor’s electronic information system on a daily basis as part of their work duties. If this electronic method of disclosure is chosen, the sponsor must inform the plan participant that the participant is responsible for providing a copy of the electronic disclosure to their Medicare-eligible dependents covered under the group health plan.
In addition, a plan sponsor may provide a Creditable Coverage Disclosure Notice through electronic means only if the Medicare beneficiary has indicated to the sponsor that he or she has adequate access to electronic information. A sponsor must not take the right to provide beneficiary materials via electronic means as a permissible way to deliver documents to all beneficiaries. Before beneficiaries agree to receive their information via electronic means, they must be informed of their right to obtain a paper version, how to withdraw their consent and update address information, and any hardware or software requirement to access and retain the Creditable Coverage Disclosure Notice.
Under Medicare Part D, what is required for electronic transfer of the Creditable Coverage Disclosure Notice?
A valid e-mail address must be provided to the plan sponsor and the consent from the beneficiary must be submitted electronically to the sponsor. In addition to having the Disclosure Notice sent to the beneficiary’s email address, the Notice (except for personalized notices) must be posted on the sponsor’s website, if applicable, with a link to the Creditable Coverage Disclosure Notice on the sponsor’s home page.
Under Medicare Part D, where coverage is creditable, are employers required to use the model Creditable Coverage Disclosure Notices?
Employers are not required to use the model Creditable Coverage Disclosure Notices. However, in the event the model language is not used, employers are required to address the following content standards:
- That the entity has determined that the prescription drug coverage it provides is creditable;
- The meaning of creditable coverage (that is, that the amount the plan expects to pay on average for prescription drugs for individuals covered by the plan in the applicable year for which the Disclosure Notice is being provided is the same or more than what standard Medicare prescription drug coverage would be expected to pay on average); and
- An explanation of why creditable coverage is important and a caution that even though coverage is creditable, the person could be subject to payment of higher Part D premiums if the person subsequently has a break in creditable coverage of 63 continuous days or longer before enrolling in a Part D plan.
CMS recommends that health plan sponsors also provide the following clarifications in their Disclosure Notices:
- An explanation of a beneficiary’s rights to a Notice;
- An explanation of the benefit plan provisions/options that affect Part D beneficiaries or their dependents that are related to Part D and their benefit plan;
- Whether the covered Medicare individuals and/or their covered dependents will still be eligible to receive all of their current health coverage if they or their dependents enroll in a Medicare prescription drug plan;
- A clarification of the circumstances, if any, under which individuals could re-enroll in their prescription drug coverage if they drop their current coverage and enroll in Medicare prescription drug coverage and later drop the Medicare coverage; and
- Information on how to get extra help paying for a Medicare prescription drug plan including the contact information for the Social Security Administration (SSA). (Recommended CMS language: For people with limited income and resources, extra help paying for a Medicare prescription drug plan is available. Information regarding this program is available through the Social Security Administration (SSA). For more information about this extra help, visit SSA online at www.socialsecurity.gov, or call them at 800-772-1213.)
Under Medicare Part D, where coverage is not creditable, are employers required to use the model Non-Creditable Coverage Disclosure Notices?
Employers are not required to use the model Non-Creditable Coverage Disclosure Notices. However, in the event the model language is not used, employers are required to address the following content standards:
- That the entity has determined that the prescription drug coverage it provides is not creditable;
- The meaning of creditable coverage (that is, that the amount the plan expects to pay on average for prescription drugs for individuals covered by the plan in the applicable year is less than what standard Medicare prescription drug coverage would be expected to pay on average);
- that an individual may only enroll in a Part D plan from Oct. 15 through Dec. 7 of each year;* and
- An explanation of why creditable coverage is important and that the individual may be subject to payment of higher Part D premiums if the person fails to enroll in a Part D plan when first eligible.
*Before 2011, the Medicare Part D Annual Coordinated Election Period ran from Nov. 15 through Dec. 31 of each year.
CMS recommends that health plan sponsors also provide the following clarifications in their Disclosure Notices:
- An explanation of a beneficiary’s rights to a Notice;
- An explanation of the benefit plan provisions/options that affect Part D beneficiaries or their dependents that are related to Part D and their benefit plan;
- Whether the covered Medicare individuals and/or their covered dependents will still be eligible to receive all of their current health coverage if they or their dependents enroll in a Medicare prescription drug plan;
- A clarification of the circumstances, if any, under which the individual would re-enroll in his or her prescription drug coverage if they drop their current coverage and enroll in Medicare prescription drug coverage; and
- Information on how to get extra help paying for a Medicare prescription drug plan including the contact information for the Social Security Administration (SSA). (Recommended CMS language: For people with limited income and resources, extra help paying for a Medicare prescription drug plan is available. Information regarding this program is available through the Social Security Administration (SSA). For more information about this extra help, visit SSA online at www.socialsecurity.gov, or call them at 800-772-1213.)
For more information….
Additional information about this disclosure requirement and about creditable coverage in general is available on the CMS Creditable Coverage webpage at: www.cms.hhs.gov/CreditableCoverage.