Plan sponsors of group health plans offering prescription drug coverage to Medicare eligible individuals have been responsible for issuing notices to Medicare Part D eligible individuals for several years now. In prior years, the annual notice deadline was November 15. However, changes in the law require that these notices now be issued before October 15. This Client Advisory will explain the steps employers should take to meet these new requirements.
Who Do These New Rules Impact? All sponsors of group health plans, including private employers, unions, government entities and other group health plan sponsors, must comply with this notice requirement. Traditional health plans, including HMOs and PPOs, providing prescription drug coverage are subject to the notice requirements. However, flexible spending accounts, health savings accounts and Archer Medical Savings Accounts are not taken into account in determining whether prescription drug coverage is creditable and employers do not have to send the Medicare Part D notice for these types of plans.
What Is the Purpose of the Notice? The notice explains whether coverage under the employer's prescription drug program is creditable or non-creditable so that Medicare Part D eligible individuals do not unknowingly incur late enrollment penalties due to a break in creditable prescription drug coverage. Individuals who are not covered under a creditable prescription drug program and who elect not to enroll before the end of their initial enrollment period for Medicare Part D will face higher premiums on a permanent basis when they subsequently enroll in Medicare Part D. Individuals who do not get the required notice and who do not apply for Medicare Part D coverage when they first become eligible for those benefits may face late enrollment penalties. However, the Centers for Medicare and Medicaid Services may waive those penalties if the individual can establish that his or her employer failed to provide the proper notification. Although there are no penalties imposed on employers who do not send out the notice, employers who do not send out the notice will not qualify for the retiree drug subsidy.
When Are the Notices Distributed? The notices must be distributed to Medicare Part D eligible individuals at specific times including, but not limited to, the annual enrollment period for the group health plan. These notices must be distributed to all Medicare Part D eligible individuals, including active employees, retirees, spouses and dependents, who are enrolled in or seek to enroll in employer-provided prescription drug coverage. Because most employers will not know who falls under these requirements, employers generally should distribute the notice to all employees eligible to enroll in their health plans. In general, a notice mailed to an employee will satisfy the notice requirements to that employee's eligible Medicare Part D spouses and dependents, unless the employer knows that the spouse or dependent who is Medicare Part D eligible resides at a different address than where the employee's materials are mailed. If a Medicare Part D eligible spouse or dependent lives at a different address, the employer should be sure that they receive a separate mailing.
What Has Changed In the Requirements? The enrollment period for Medicare Part D plans now will begin one month earlier, on October 15, 2011, and end on December 7, 2011. Accordingly, employers should move the 2012 annual notification to precede the opening of the enrollment period (before October 15, 2011). Model notices, including notices in Spanish, can be found on the Centers for Medicare and Medicaid Services (CMS) website: http://www.cms.gov/CreditableCoverage/.
Additionally, employers should be aware of a separate requirement to disclose creditable coverage status to CMS annually. More information about this requirement can also be found on the CMS website