All group health plans that provide prescription drug coverage must send a notice each year to individuals eligible for Medicare Part D. This notice must state whether the group health plan's coverage is "creditable" or not- whether it is as good as Medicare Part D coverage. The notice has to be sent by October 15 each year.
Coverage is "creditable" if it is as generous as, or more generous than, the standard coverage under the Medicare Part D prescription drug benefit. Basically, the value of claims paid under the employer's plan must be as much as the value of claims paid under Medicare Part D to be considered creditable. If the value of claims paid is less than what is paid under Medicare Part D, the coverage is not creditable.
The Centers for Medicare and Medicaid Services' website provides a simple tool for determining if coverage is creditable. A plan could alternatively engage an actuary to make the determination. For an insured plan, the insurance company may have the information readily available as to whether coverage is creditable or not.
The Notice of Creditable Coverage is used by Medicare-eligible individuals to determine if they should remain in their current employer-provided prescription drug plan or if they should enroll in a Medicare Part D plan. If coverage is not creditable and the person does not enroll in Medicare Part D, the individual will be charged a penalty for each month the person does not enroll in Medicare Part D. The penalty is 1% of premium for each month not enrolled. This is a cumulative penalty and lasts for the duration of Medicare Part D coverage. If coverage is creditable, the individual can use the employer's Notice as evidence of coverage and Medicare will waive the late enrollment penalty if the individual enrolls in Part D at the end of a plan year or upon expiration of the group coverage.
The Notice of Creditable Coverage technically has to be provided only to employees and dependents who are eligible for Medicare. However, many employers send a Notice to everyone enrolled in the plan, since it is difficult to know if a dependent is eligible for Medicare (particularly eligibility due to disability).
The Notice should be provided
- Before October 15 each year,
- Before an individual's Initial Enrollment Period for Medicare Part D,
- Before the effective date of coverage for a Medicare-eligible individual,
- When the coverage changes between creditable and non-creditable, and
- Upon request.
The Notice can be included as part of plan materials, so long as the Notice is "prominent." It may be mailed as a separate mailing, or sent electronically in accordance with the Department of Labor electronic notice distribution rules.
BAS can assist employers in distributing the required Notice of Creditable Coverage. For more information on distribution assistance, please contact Sales@BASusa.com.