Sponsors of group health plans that provide prescription drug coverage must notify Medicare-eligible participants and beneficiaries as to whether the drug coverage offered is “creditable” or “non-creditable” prior to October 15th. Note that the rule is to provide the notice to both participants and beneficiaries (ex. spouses), so unless the plan sponsor is 100% certain that no individual on the plan, either subscriber or member, is eligible for Medicare, we recommend providing this notice to all employees on an annual basis (prior to Oct. 15) and include it in the Summary Plan Description or wrap document given to new hires.
Medicare Part D is a federal program to subsidize the cost of prescription drugs for Medicare beneficiaries. If the employer-sponsored prescription drug plan is expected to pay out as much as standard Medicare drug coverage it is considered “creditable” coverage, and if it is expected to pay out less than it is “non-creditable” coverage. This is an important distinction for the newly eligible, for they need to be aware of the options available in order to enroll in the appropriate plan; they will choose the employer-sponsored coverage if it is creditable or enroll in a Medicare Advantage plan that covers prescription drug services if employer-sponsored coverage is non-creditable.
Individuals can sign up for Medicare Part D coverage when they become eligible for Medicare Part A and Part B, or during the open enrollment period. The open enrollment period for Medicare Part D is October 15th to December 7th. Employers must distribute notices to Medicare-eligible plan participants and beneficiaries so that these individuals can make prudent choices regarding their prescription drug coverage. If an individual does not join Medicare Part D when initially eligible, and does not have creditable coverage and enrolls at a later date, the premium he or she will pay will include a penalty payment for late enrollment. This penalty is cumulative over time.
The Centers for Medicare & Medicaid Services (CMS) provides model notices for employers – click here.
Employers are encouraged to send the notice via first-class mail, by hand, or post electronically if all plan participants have easy access to computers.