If you sell group health insurance, there are a couple Medicare notification requirements your clients need to be aware of. The law requires that companies whose group health plans include prescription drug coverage to notify Medicare-eligible policyholders whether their prescription drug benefit is “creditable,” which means that the coverage is expected to pay on average as much as the standard Medicare prescription drug coverage.
For these employers, there are two annual disclosure requirements, explained in the next two sections. This information is reprinted from the CMS.gov website.
Notice to Medicare Eligible Individuals – due prior to October 15
The first disclosure requirement is to provide a written disclosure notice to all Medicare eligible individuals annually who are covered under its prescription drug plan, prior to October 15th each year and at various times as stated in the regulations, including to a Medicare eligible individual when he/she joins the plan.
This disclosure must be provided to Medicare eligible active working individuals and their dependents, Medicare eligible COBRA individuals and their dependents, Medicare eligible disabled individuals covered under your prescription drug plan and any retirees and their dependents.
The Medicare Modernization Act (MMA) imposes a late enrollment penalty on individuals who do not maintain creditable coverage for a period of 63 days or longer following their initial enrollment period for the Medicare prescription drug benefit. Accordingly, this information is essential to an individual's decision whether to enroll in a Medicare Part D prescription drug plan.
Online Disclosure to CMS – due no later than 60 days following the renewal date
The second disclosure requirement is 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 (contract year, renewal year), within 30 days after termination of a prescription drug plan, or within 30 days after any change in creditable coverage status.
What is Creditable Coverage?
According to the Centers for Medicare and Medicaid Services, “coverage is creditable if the actuarial value of the coverage equals or exceeds the actuarial value of standard prescription drug coverage under Medicare Part D, as demonstrated through the use of generally accepted actuarial principles and in accordance with CMS actuarial guidelines. In general, the actuarial equivalence test measures whether the expected amount of paid claims under the entity's prescription drug coverage is at least as much as the expected amount of paid claims under the standard Part D benefit.”
There are two ways to determine whether the drug benefit under your client’s group health plan is creditable or not: the simplified method and the actuarial method. Before you pull out your calculator and start doing the math, though, check with the insurer. The group health carrier should be able to tell you which of its plans provide creditable coverage and which do not. In general, plans with copayments for prescriptions as well as lower-deductible HSA-qualified plans probably provide creditable coverage. Higher deductible HSA plans probably do not. However, you should check with the carrier just to make sure.
Note: For group plans, it is the responsibility of the employer, not the insurer, to provide the required notices.
Below are some helpful links that you may want to share with your group clients.
- Creditable Coverage Requirements Explained
- Disclosure to CMS Guidance and Instructions
- Disclosure to CMS Form
- Model Notice Letters
Advising Employees about Creditable Coverage
If you sell both group coverage and Medicare, you’re probably finding that more and more people are working past age 65 and have questions about whether they should stay on their group health plan or drop the group coverage, sign up for Medicare, and purchase a Medicare supplement or Medicare Advantage plan.
In many cases, especially if the company has fewer than 20 employees and Medicare is primary, signing up for Medicare is the better option. However, whether an employee or dependent should stay on the group plan, sign up for Medicare, or both is different for every person. The answer varies depending on the size of the company, the group health benefits, the employee’s share of the monthly premium for the group plan, the individual’s medical expenses and monthly prescriptions, the family’s income, and more.
One other consideration that’s very important is whether the group plan provides creditable coverage for Medicare Part D. If not, the employee could face a penalty whenever he retires and signs up for Medicare. This comes up a lot when an employee is working past age 65 and the employer offers HSA-compatible coverage. The employee may decide to postpone both Medicare A and B so he can remain HSA-eligible and continue to accept any employer contributions to the Health Savings Account.
The problem is, depending on the amount of the deductible, the prescription coverage may not be creditable. This means that the employee may have to pay a penalty when he does eventually sign up for Medicare Part D. The penalty is 1% per month for every month the Medicare beneficiary was eligible but not enrolled (and did not have other creditable coverage), and the penalty continues for the rest of his life. Clearly, this is information that should be factored into the employee’s decision, so be sure to mention Part D creditable coverage when you’re having these sorts of conversations with employees.