Distribution required prior to October 15th each calendar year and when a Medicare eligible
participant joins the plan
Companies that sponsor a prescription drug plan are required to distribute a form called the Medicare Part D Noticeeach year. This notice is required to be distributed to individuals that are eligible for Medicare Part D and informs those eligible for Medicare Part D whether the prescription drug coverage their group health plan offers is creditable or noncreditable. This requirement has been in place since 2006 when prescription drug coverage became available as part of the Medicare Prescription Drug Improvement and Modernization Act of 2003. Health plan sponsors are also required to report on whether their plan offers prescription drug coverage that is creditable or non-creditable to Centers for Medicare & Medicaid Services (CMS) on an annual basis. This requirement is met through the completion of the Online Disclosure to CMS form. This online disclosure must be completed no later than 60 days from the beginning of the plan year and also within 30 days after a prescription drug plan is terminated or after a prescription drug plan has a change in its creditable coverage status. This disclosure to CMS must be completed regardless of whether the group health plan is primary or secondary to Medicare. The online tool must be used. More information regarding the requirements can be found on the CMS.gov website.
Creditable coverage means that the prescription drug coverage under the group health plan equals or exceeds the value of the standard prescription drug coverage under Medicare Part D based on actuarial value. There are two ways in which a plan can determine whether the coverage provided is creditable or non-creditable. There is the Creditable Coverage Simplified Determination and the use of an Actuarial to make the determination. Guidance on using the Creditable Coverage Simplified Determination can be found on the CMS website. If the company has more than one plan and the plans differ in whether they offer creditable or non-creditable prescription drug coverage, different notices must be distributed for each plan.
Completing the form is a relatively simple process. It is a four-page document. It is noted where to add company
information and plan information. CMS has posted model notices on their website. A company is not required to use the model notices, but must include specific information if creating their own disclosure.
The company that sponsors the health plan may not know which of its participants are eligible for Medicare Part D, so to simplify distribution of the notices, most companies will distribute to all plan participants. The form can be distributed
in printed form either through first class mail or by providing a copy of the notice to the employee. It is acceptable for
companies to provide the notice in the open enrollment packets distributed to all employees provided it would be
received prior to October 15 each year. If the employer knows that a dependent does not reside at the same address
as the employee, a separate notice must be sent to the dependent. Some employers include the notice in a new hire
packet provided to each employee when employment begins. The notice may also be provided electronically but the
Department of Labor (DOL) rules must be followed for electronic disclosure.
Frequently Asked Questions:
What is Medicare Part D?
This is optional Medicare Drug coverage that must provide a standard level of coverage for prescriptions. This
coverage level is set by Medicare. The coverage is sold by private insurance companies and HMO’s.
What is Creditable Coverage?
Coverage is considered creditable if its actuarial value equals or exceeds the actuarial value of standard
prescription drug coverage under the Medicare prescription drug benefit. In general, this actuarial
equivalence test measures whether the expected amount of paid claims under the plan sponsor’s prescription drug
coverage is at least equal to the expected amount of paid claims under standard prescription drug coverage under
How does a plan know whether the prescription drug coverage under the plan is creditable or noncreditable?
If the plan is fully insured, the carrier will confirm whether the prescription drug coverage is creditable or noncreditable.
If the plan is self-funded the plan actuary will determine the status of the plan. There is also the Creditable Coverage Simplified Determination that plans can use to determine whether or not the prescription coverage is creditable.
When must the Medicare Part D Notice be distributed?
Prior to October 15th each calendar year. The reason for the October 14th deadline is for Medicare eligible individuals to receive the notice before the annual enrollment period for those wishing to enroll in Medicare Part D. Open enrollment generally runs from October 15th through December 7th each year.
To whom must the Medicare Part D Notice be distributed? The law requires that the Medicare Part D Notice be distributed to all plan participants (covered by the plan or eligible to be covered by the plan) eligible for Medicare Part D. As a matter of convenience, it is probably best to distribute to all plan participants as the sponsor may not know which plan participants, which will include dependents on the plan, are eligible. It must be distributed to Medicare-eligible employees and dependents, regardless of whether they are actively employed, disabled employees on Medicare, retirees on the health plan and COBRA participants. Plan sponsors should also provide a Medicare Part D notice to Medicare eligible participants at the time they enroll on the plan.
If it is known that a dependent of a participant that is eligible for Medicare Part D lives at a different address from where the notice for the participant was mailed, a separate notice must be sent to that dependent.
What entities are required to provide the Medicare Part D Notice?
Group Health Plans
Health Insurance Issuers
State Sponsored Plans
Indian Health Services, Tribe or Tribal Organizations and Urban Indian Organizations
Medicare Supplement (Medigap) Insurers
All of the above are required to distribute the notice no matter how many employees the company has and no matter what type of plan the group has (fully-insured or self-insured).
There are exemptions to the disclosure requirement. If the group health plan does not offer prescription drug
benefits, then no disclosure is required. A plan sponsor approved for retiree drug subsidy is also exempt.
For more information go to: Entities required to provide disclosure to all Medicare Eligible Individual
Source: HR Workplace Services