All employers sponsoring group health plans that include prescription drug coverage are required to notify all Medicare-eligible individuals whether such coverage is creditable. There is no minimum number of employees required to trigger this notice; it applies to all employers who sponsor group health plans. As a reminder, Medicare Part D notices have to be distributed by October 14th. Here's what you need to know to be ready.
Creditable Coverage
Creditable coverage means that the coverage of the employer group health plan is expected to pay, on average, as much as the standard Medicare prescription drug coverage. If your employer group health plan does not have creditable coverage, those individuals eligible for Medicare will need to enroll in Medicare Part D or they will incur a late enrollment penalty. That penalty is approximately 1% of the national base premium (currently $34.10) for each month the employee did not elect coverage. If an employer fails to inform its employees that its prescription coverage is not creditable, the employer better brace for criticism from its employees who are Medicare eligible and who fail to sign up for Medicare Part D.
Written Disclosure to Individuals
This written disclosure notice must be provided annually to the following individuals:
- Medicare-eligible active working individuals and their dependents (including a Medicare-eligible individual when he or she joins the plan);
- Medicare-eligible COBRA individuals and their dependents;
- Medicare-eligible disabled individuals covered under an employer's prescription drug plan; and
- Any retirees and their dependents.
We recommend you distribute notices to all eligible employees under the group health plan unless you know for certain the ages of all covered spouses and you know for certain the entire family health history. In other words, it is difficult for employees to know the health history of all family members; specifically whether any dependents are disabled because disabled individuals of all ages must receive this Medicare notice. By providing this notice to all employee participants, you insure that there were not any disabled individuals or older spouses missed during this notice process.
It is also important to remember that besides the October 14th deadline, these notices may be required at other times during the year upon the occurrence of a triggering event.
Disclosure to CMS Also Required
There is a second element to the Medicare Part D notice process. That occurs after the end of the employer’s group health plan year. Employers are required to complete an online disclosure to the Centers for Medicare & Medicaid Services (“CMS”). The disclosure is a report as to whether the prescription drug plan(s) of the employer provides creditable coverage. This disclosure is required annually, no later than 60 days from the beginning of your group health plan year, and at certain other times. If you have not been completing this second step in the Medicare Part D process, you must start doing so immediately. I am not aware of any monetary penalty for failure to make the required disclosure to CMS but common sense and best practices would suggest that the employer would want to remain in compliance with these disclosure requirements.
Typically either your insurance company or HNI assists benefits clients with one or both parts of this process. If you are uncertain as to whom provides you with these Medicare Part D notices or you need assistance making the required disclosures to CMS in a timely fashion, please contact your HNI benefits representative.
Model notices are available online at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/CreditableCoverage/Model-Notice-Letters.html
