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| Posted on: Thursday, October 12, 2006 |
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Ever since Oct. 1, 2005, Americans have encountered a blitz of promotional TV, radio and print ads intended to create awareness and educate Medicare eligible individuals on the opportunities of enrolling in the new Part D prescription drug benefit. Medicare eligible individuals who enroll in Part D are given a wide range of prescription plan choices to choose from.
The advent of Medicare Part D coverage also impacts employers who offer a prescription drug plan to Medicare-eligible plan participants. Such employers are required by the Centers of Medicare and Medicaid Services (CMS) to determine their health plan’s prescription drug plan creditability status ("creditable" or "non-creditable") and then communicate that determination via a written Disclosure Notice to all Medicare-eligible individuals by no later than Nov. 15th each year, to coincide with the annual Medicare Part D Open Enrollment period (Nov 15-Dec 31). An employer plan sponsor’s insurance carrier can provide the results of their internal testing as to whether the employers’ plans are creditable or non-creditable. Self-funded plan sponsors may use the determination criteria listed below to determine their prescription drug plan’s creditability status.
In addition to the Disclosure Notice to Medicare-eligible plan participants, employers must also submit disclosure of their plan’s creditable or non-creditable coverage status to CMS on an annual basis (or more frequently upon any change in the Plan’s creditability status).
What is the Purpose of the Disclosure Notice to Medicare-eligible Plan Participants?
Medicare-eligible plan participants need to know if their current prescription drug coverage is creditable in order to decide if they wish to enroll in Medicare Part D. The first-ever Medicare Part D open enrollment period was Nov. 15, 2005 to May 15, 2006. Thereafter, open enrollment will be Nov. 15 - Dec. 31 of each year, unless an individual qualifies for a special enrollment period. Individuals without creditable coverage could be subject to a late enrollment penalty of 1% per month if they go 63 days or more without creditable coverage and subsequently enroll in a Part D plan. This penalty remains in effect as long as the individual is enrolled in a Part D plan.
What is Creditable Coverage?
Coverage is considered creditable if, on average, it is at least as good as standard Medicare prescription drug coverage (see below for details). For purposes of the disclosure requirement, an employer can determine that its prescription drug coverage is creditable if it meets all four of the following standards. The determination does not require an attestation by a qualified actuary if it is used solely for purposes of meeting the disclosure Notice requirement.
1. Brand and generic prescriptions are covered by the plan; and
2. Members of the plan have reasonable access to retail providers and,
optionally, for mail order coverage; and
3. The plan is designed to pay on average at least 60% of participants’
prescription drug expenses; and
4. Satisfies at least one of the following:
a. The prescription drug coverage has no annual maximum benefit or a
maximum annual benefit payable by the plan of at least $25,000, or
b. The prescription drug coverage has an actuarial expectation that the
amount payable by the plan will be at least $2,000 per Medicare eligible
individual in 2006.
c. For integrated Medical-Rx health coverage (meaning the terms of plan
coverage, medical and Rx combined, are integrated), the integrated
health plan has no more than a $250 deductible per year, has no
annual benefit maximum or a maximum annual benefit payable by the
plan of a least $25,000 and has no less than a $1,000,000 lifetime
combined benefit maximum.
If a plan sponsor offers more than one prescription drug plan, the determination as to creditable coverage is required to be made separately for each prescription drug plan.
When Must an Employer Provide the Notice?
CMS dictates that, at minimum, the Notice must be given to Medicare-eligible plan participants at the following times:
1. Before November 15th of each year
2. Before an individual’s initial enrollment period for Part D benefits
3. Before the effective date of coverage for any Medicare eligible individual
who joins the employer-sponsored group health plan
4. Whenever the employer’s prescription drug coverage ends or changes
status as creditable or non-creditable
5. Upon an individual’s request
However, employers can satisfy the requirements that Notices be provided before the events listed above if Notices are provided to all eligible individuals every twelve months before Nov. 15th, upon any change to the prescription drug coverage under the plan, and upon a beneficiary’s request.
Are Model Notices Available?
Yes, CMS has provided model Notices for both Creditable and Non-Creditable coverage that employers may use. We have also provided a condensed version of both model Notices Creditable and Non-Creditable that can be customized prior to distribution to the Medicare Part D Eligible Individuals.
Retiree Health Plan Sponsors - Deciding Whether to Pursue the Part D Subsidy
If an employer has a qualified retiree prescription drug plan that has been determined to be creditable, the employer may apply for a 28% subsidy, meaning an employer may receive an amount equal to 28% of allowable retiree drugs costs between $250 and $5,000 per qualifying covered retiree in 2006, net of any rebates or other price concessions.
In general, a qualifying covered retiree is defined as a Part D eligible individual who is not enrolled in a Medicare Part D plan but who is covered (as the participant, or as the participant’s spouse or dependent) by employment-based retiree health coverage that meets the standards in 42 CFR §423.884 deeming it a qualified retiree prescription drug plan. A participant is presumed not to be covered under retiree health coverage if the participant is receiving health coverage based on current employment status from the plan sponsor.
For additional information regarding the Part D Retiree Drug Subsidy, See these FAQs prepared by CMS.
Features of Standard Medicare Prescription Drug Coverage
While there are dozens of plan designs available to Medicare participants, the standard Medicare prescription drug coverage has the following plan terms:
• Monthly premium of approximately $32 (in 2006)
• $250 deductible
• From $251 to $2,250, Medicare pays 75% of drug costs and plan enrollee
pays 25%
• From $2,251, plan enrollee pays 100% until true out-of-pocket spending
reaches $3,600
• After plan enrollee reaches $3,600 in true out-of-pocket spending,
Medicare pays approximately 95% of drug costs
All Medicare Prescription Drug Plans will cover both brand-name and generic drugs. Some plans may offer enhanced coverage for an additional premium.
Should you have any additional employee benefit questions or would like to discuss this material in detail, please don’t hesitate to call the Denman Team.
Denman does not offer legal or actuarial advice. The final decision as to the creditable or non-creditable status of a group health plan’s prescription drug coverage rests with the plan sponsor. |
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