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Each year, employers are required to provide a written notice to Medicare-eligible employees who are covered under their group health plan. This notice should include information about the creditable coverage status of the prescription drug benefit. In other words, the notice tells employees if the prescription drug benefit on the group health plan is at least as good as the standard Medicare Part D plan.
Medicare is broken up into four parts—Part A, B, C, and D. Medicare Part D is the part of Medicare that covers most outpatient prescription drugs, and covers approved medication prescribed by a doctor.
Unless they have creditable coverage elsewhere, anyone who is eligible for Medicare but delays enrollment in a Part D plan is subject to a late enrollment penalty. This penalty amounts to 1% of the base beneficiary premium for every full month a Medicare-eligible person is without creditable coverage and foregoes enrollment in Part D.
The type of notice an employer must provide to Medicare-eligible employees depends on whether or not the prescription drug benefit in their current group plan is as good as Part D.
A creditable coverage notice should be provided when the drug benefit is at least as good as the standard Medicare Part D plan.
A non-creditable coverage notice should be provided when the drug benefit is not as good as the standard Medicare Part D plan. Most prescription drug benefits included under a group health plan are creditable, but to know for sure, refer to this Simplified Determination document provided by the CMS. This document makes it easy to figure out your plan’s creditable coverage status if you are unsure.
The notice must be distributed prior to October 15th, Friday—meaning it must be distributed by October 14th. October 15 is when the Medicare Advantage and Part D annual enrollment period begins. The annual enrollment period will run through December 7th.
The notice must also be distributed at other times, such as when going on a new or different group plan that does not have a drug benefit that is as good as Medicare Part D, or when a Medicare-eligible employee first joins the group plan.
Additionally, the notice should be provided to any covered dependents who are eligible for Medicare, including those who become eligible for Medicare due to a disability. COBRA beneficiaries and covered retirees who are eligible for Medicare should also be provided a notice. As a best practice, employer may want to provide this notice to everyone covered under their group plan.
Model Part D notices have been provided by the CMS here, and are available in English and Spanish.
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IXSolutions brings over 30 years of combined experience to the market as Employee Benefits Consultants. We’ve been bringing creative solutions and alternatives to the market since the inception of the Affordable Care Act.
Today, we work with companies, individuals, and Medicare eligible individuals to provide solutions to the complex insurance industry. We are a trusted partner to thousands of clients, brokers, and associations across the country.
