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Ghosts and Goblins are Scary, Employer Medicare Part D Requirements Don’t Have to be…

Insights | Ghosts and Goblins are Scary, Employer Medicare Part D Requirements Don’t Have to be…

It’s that time of year! The leaves are changing, the days are getting shorter, and (for better or for worse) pumpkin spice everything is hitting the shelves! Halloween is right around the corner which means the deadline to provide Medicare Part D notices is quickly approaching, but you don’t have to be scared or spooked. This blog post will help you understand what employer plan sponsors need to know to comply.

Each year employers must disclose whether the prescription drug coverage they offer is creditable or non-creditable to Medicare eligible participants before the Medicare annual enrollment period which begins on October 15th. “Creditable” means the actuarial value of the coverage is expected to be (on average) equal to or greater than Medicare’s standard prescription drug coverage. This information is important because if individuals fail to enroll in Part D or other creditable coverage when first eligible (and for a continuous period of 63 days or more), they will have to pay higher premiums on a permanent basis when they do enroll in Part D coverage.

From a practical standpoint, employers don’t always know which individuals are “Medicare eligible.” For this reason, “best practice” is to provide the annual notice to all individuals enrolled or seeking to enroll in the employers’ plans to ensure compliance. Because the annual Medicare enrollment period runs from October 15 through December 7, employers must distribute notices no later than October 14, 2020. Other times employers are required to provide a Medicare Part D notice include:

  • Before an individual’s initial Medicare enrollment period;
  • Before the effective date of coverage for Medicare eligible individuals that enroll in the employer’s prescription drug coverage;
  • Whenever any change occurs affecting the “creditable” status of the coverage or the employer ceases to provide prescription drug coverage; and
  • Upon request.

An employer is considered to have met the requirement to provide a notice before an individual’s initial enrollment period if they provide the notice to all eligible participants at least once per year. This is another reason providing the notice to all employees prior to the Medicare annual enrollment period is a good idea.

Employers are required to disclose the creditable status for the plan currently in place.  This creates some confusion for employers who are also holding their plan’s annual enrollment period.  While a literal interpretation of federal regulations might require the employer to send a notice both prior to the Medicare open enrollment period and again if the creditable status of the plan changes, it is likely that providing a single combined notice would suffice.  Employers that wish to provide a single, combined Medicare Part D Notice should include i) the status of the current plan in place (i.e., for 2020); ii) how the plan is changing; and iii) the effective date of the change (i.e., for 2021).

In addition to notifying individuals, employers must report the status of their drug coverage each year to the Centers for Medicare and Medicaid Services (CMS):

  • No later than 60 days after the start of the plan year;
  • Within 30 days of termination of the prescription drug plan; and
  • Within 30 days of a change impacting the creditable status of the plan.

Disclosure of a plan’s status to CMS can be completed here.

For questions or additional information, please contact your HORAN account representative.

The information contained in this document is informational only and is not intended as, nor should it be construed as, legal or accounting advice. Neither HORAN nor its consultants provide legal, tax nor accounting advice of any kind. We make no legal representation nor do we take legal responsibility of any kind regarding regulatory compliance. Please consult your counsel for a definitive interpretation of current statute and regulation and their impact on you and your organization.