April 26, 2005
Medicare Part D: Not Just About Retirees
Virtually all employers that sponsor group health plans need to comply with key Medicare Part D requirements.
Disclosure Obligations
To Whom. Medicare Part D imposes a disclosure obligation to certain participants and beneficiaries (“Part D eligible individuals”) under the employer-sponsored group health plan.1
“Part D eligible individuals” include those (1) entitled to Medicare (actually covered by Medicare), and (2) covered by the employer-sponsored group health plan (whether through current employment, past employment, or a relationship to someone that does). No distinction is made between employees, former employees (e.g., COBRA, retirees), and other non-employees (e.g., spouses, dependents).
“Group health plan” means each entity that offers prescription drug coverage, including:
– Private sector, public sector, church programs
– Collectively bargained programs
– Individual account programs (HRA, medical FSA)
– Stand alone prescription drug programs
NOTE: NO SMALL EMPLOYER OR SMALL PLAN EXCEPTIONS
What. The disclosure must identify whether the prescription drug coverage provided under the employer–sponsored group health plan is “creditable coverage.”
“Creditable Coverage” means prescription drug coverage made available through the employer-sponsored group health plan must be at least the actuarial equivalent of the prescription drug coverage made available through Medicare Part D.
In addition where the coverage is not creditable coverage, the disclosure must describe Medicare Part D enrollment limitations, including late enrollment penalties (i.e., higher premiums).
Observation: It is unfortunate that the disclosure is termed “credible coverage.” This raises the potential of confusion between Medicare Part D and HIPAA portability rules that also use the term “creditable coverage.”
Why. The disclosure provides Part D eligible individuals with the information necessary to determine whether to enroll in Medicare Part D.
When. Disclosures must be provided at least upon the following times:
Prior to Part D eligible individual’s initial enrollment period for Medicare Part D;
Prior to the Part D eligible individual’s effective date of enrollment for Medicare Part D;
Prior to commencement of annual coordinated election period (begins each November 15th); and
Upon request by the Part D eligible individual.
Because the first initial enrollment period under Medicare Part D begins November 15 of 2005, the first disclosure must have been made on or before that date.
Coordination of Benefits Obligations
Employer-sponsored group health plans providing prescription drug coverage must coordinate benefits with Medicare Part D. Those covered under Medicare Part D must provide information to the employer-sponsored group health plan for coordination of benefits purposes.
Action Steps for Initial Implementation of Medicare Part D Requirements
- Identify group health plans that provide prescription drug coverage. Keep in mind the broad definition of group health plan; include individual account programs that include prescription drug within definition of reimbursable expense.
- Identify who can assist in the actuarial equivalence determination (insurance carrier, TPA, accounting firm, separately retained actuary).
- Identify who must receive disclosure.
- Identify who will prepare and distribute the disclosure notice (in-house, attorney, insurance carrier, TPA, accounting firm, consulting firm).
- Amend service provider contracts to reflect responsibilities (and probably cost) for Medicare Part D compliance.
- Amend plan documentation (e.g., written plan document, summary plan description) to reflect coordination of benefits requirements.
- Determine ongoing responsibilities for Medicare Part D compliance.
If you would like our assistance with Medicare Part D compliance, please let us know.
The law also imposes a disclosure obligation to the Centers for Medicare and Medicaid Services (CMS), which is similar to the disclosure obligation to participants and beneficiaries.
1The law also imposes a disclosure obligation to the Centers for Medicare and Medicaid Services (CMS), which is similar to the disclosure obligation to participants and beneficiaries.