Could New Part D Limit Cause Working Seniors to Sign Up for Medicare?

This post may be a bit early as we’re still awaiting final guidance from the Centers for Medicare and Medicaid Services (CMS), but we wanted to alert you to an upcoming change that could have a significant impact on Medicare-eligible employees and dependents who currently have group health coverage. Starting in 2025, Medicare Part D plans will have a $2,000 out-of-pocket limit. As CMS explains, this change, which is part of the Inflation Reduction Act, also includes measures like a $35 cap on insulin and new authority for Medicare to negotiate prices for certain high-cost drugs.

The new $2,000 cap for Part D is particularly important because it could alter the status of many employer group health plans that currently provide drug coverage. Each year, employers must determine whether their prescription drug coverage is “creditable,” meaning it’s expected to pay at least as much as the standard Part D plan.

Two Key Compliance Requirements for Employers (from the CMS website):

1. Written Notice: Employers must send a notice to Medicare-eligible individuals every year before October 15th (and whenever they join the plan) informing them whether their prescription drug coverage is creditable.
2. Online Reporting: Entities must also report the creditable coverage status of their plan to CMS each year within 60 days of the plan's start date (or within 30 days of any changes to the plan or if it ends), except for plans receiving the Retiree Drug Subsidy (RDS).

These notices are important because they help Medicare-eligible employees and their dependents make informed choices about whether to stay on their group health plan or opt for Medicare. It's important to remember that individuals who are eligible for Medicare Part D face a lifetime penalty if they go more than 63 days without creditable coverage, making these decisions critical.

Until now, many copay plans and lower-deductible HSA-qualified plans were deemed creditable. However, with the new lower cap on Part D expenses, the formula for determining creditable coverage may change. As a result, some plans previously considered creditable might no longer meet the criteria, potentially prompting more employees to choose Medicare (and a Medicare Advantage plan or a supplement + a Part D plan) over their group coverage.

Opportunity for Medicare Agents:

As an agent who specializes in Medicare-related products, now is an excellent time to collaborate with agents who focus on group health coverage. By partnering together, you can help group agents to ensure their employer clients are aware of the new Part D cap and its potential impact on older workers and their spouses. You could offer to meet with Medicare-eligible individuals to guide them through their options, providing a valuable service to group agents and creating a steady source of Medicare leads.

We will keep you updated with any further guidance from CMS as it becomes available.