The October 14 deadline for plan sponsors who offer prescription drug coverage to give creditable/non-creditable coverage notice to Medicare-eligible individuals is rapidly approaching.
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) requires plan sponsors offering prescription drug coverage to disclose to individuals eligible for Medicare Part D whether the plan’s prescription drug coverage is “creditable” or “non-creditable.” In general, coverage is creditable when it is at least actuarially equivalent to Medicare standard prescription drug coverage.
The Centers for Medicare and Medicaid Services (CMS) has provided model notices for employers to use:
• Model Creditable Coverage Disclosure Notice
• Model Non-Creditable Coverage Disclosure Notice
The model notices are also available in Spanish on the CMS website. Employers are not required to use the model notice and may draft their own notice, but they must include specified information including whether the coverage is creditable, the meaning of creditable coverage, and the importance of creditable coverage.
Why must employers provide the notice?
The information in the notice allows individuals to make informed decisions about whether to remain in their employer’s prescription drug plan. Individuals who do not enroll in Part D when they are first eligible may be subject to a late enrollment penalty if they subsequently enroll in Part D after having a lapse in creditable prescription drug coverage for 63 days or more.
When must the notice be provided?
The MMA requires plan sponsors to provide notice of creditable or non-creditable coverage at the following times:
- Before the Medicare Part D annual enrollment period (which runs from October 15 through December 7
- Before an individual’s initial enrollment period for Part D
- Before the effective date of coverage for any Medicare eligible individual who joins the employer’s plan
- Whenever prescription drug coverage ends or coverage becomes non-creditable
- Upon an individual’s request
If the notice is provided to all plan participants annually by October 14, the timing in the first two bullets above is satisfied. The notice may be included in annual enrollment materials or provided separately.
Who should receive the notice?
The notice must be provided to Medicare Part D-eligible individuals who are covered under, or eligible for coverage under, the employer’s prescription drug plan, including active employees, disabled employees, COBRA participants, retirees and dependents and spouses of each. As a practical matter, because of the challenge of determining who may be eligible for Medicare Part D, employers may choose to provide the notice to all plan participants annually by October 14 and to all new hires before their enrollment in the employer’s plan.
Plan sponsors who have not already provided this notice to Medicare-eligible individuals should do so by October 14. If you would like additional information or have questions, please feel free to reach out SHRR.