Medicare Part D Creditable Coverage Notice Requirements
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The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) created a voluntary prescription drug program for Medicare Part D eligible individuals. Under the MMA, group health plans — or entities that offer prescription drug coverage on a group basis to active and retired employees and to Medicare Part D eligible individuals — must provide, or arrange to provide, a notice of creditable or non-creditable coverage.
The creditable or non-creditable coverage notice must be provided to Medicare Part D eligible individuals who are covered by, or who apply for, the plan’s prescription drug coverage. This includes active, retired, disabled, and COBRA beneficiaries and dependents. The creditable or non-creditable coverage notice alerts the individuals as to whether or not their plan’s prescription drug coverage is at least as good as the Medicare Part D coverage. Medicare beneficiaries who are not covered by creditable prescription drug coverage and who choose not to enroll in Medicare Part D before the end of their initial enrollment period will likely pay higher premiums if they enroll in Medicare Part D at a later date.
There are no specific penalties for employers that fail to comply with the Medicare Part D disclosure requirements, except for employers that are claiming the Retiree Drug Subsidy. However, by not providing creditable coverage disclosure notices, employees may make uninformed decisions regarding Medicare Part D which could lead to late enrollment penalties.
At a minimum, creditable or non-creditable coverage notices must be provided at the following times:
- Prior to the Medicare Part D Annual Coordinated Election Period which runs from October 15th through December 7th of each year (i.e. by October 14th);
- Prior to an individual’s Initial Enrollment Period for Part D;
- Prior to the effective date of coverage for any Medicare eligible individual that joins the plan;
- Whenever prescription drug coverage ends or changes so that it is no longer creditable or becomes creditable; and
- Upon a beneficiary’s request.
If the creditable or non-creditable coverage notice is provided to all plan participants annually, before Oct. 15 of each year, items (1) and (2) above will be satisfied. The notice can be provided to the covered employee on behalf of its Medicare eligible dependents unless it is known that any spouse or dependent resides at a different address.
Because it may be difficult to identify all Medicare Part D participants in the group health plan, it may be prudent to provide the disclosure to all plan participants annually, prior to October 15th as well as to all new hires prior to initial enrollment in the group health plan.
CMS has provided model creditable coverage notices for plan sponsors to use. Plan sponsors are not required to use the model notices; they can choose to draft their own notices as long as it contains all of the legally required elements. The CMS model Individual Creditable Coverage Disclosure Notice should be used when prescription drug coverage is creditable. When prescription drug coverage is not creditable, the model Individual Non-Creditable Coverage Disclosure Notice should be used.
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.
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