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NEW MEDICARE PART D NOTICE REQUIREMENT
For the first time ever, Medicare beneficiaries will soon have access to
outpatient prescription drug benefits through Medicare Part D. This upcoming change to Medicare coverage
options will require employers to send notices to both active and
retired Medicare-eligible participants currently covered by employer-sponsored health plans that include prescription drug coverage. This issue of
Insight reviews what employers need to know and do about the new Medicare Part D notice requirement.
Overview
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 gives Medicare beneficiaries access to prescription drug benefits for the first
time beginning in January 2006. Medicare Part D benefits will be offered through private insurance companies, but the benefits will follow a standard structure (described alongside). Costs for Medicare Part D coverage will vary by insurer; for 2006, the costs are estimated to be around $37 per month.
The enrollment period for this new benefit begins November 15, 2005
and ends May 15, 2006. Those who do not enroll during the initial
enrollment period may be subject to late fees unless they are, and
remain, covered by another source of prescription drug coverage that is “as good as” Medicare Part D coverage. The notice information you provide to your Medicare-eligible employees will help them understand whether to apply for Medicare Part D coverage or remain covered under the group benefits. |
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Medicare Part D:
Standard Structure
Through Private Insurance
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What Employers Need to Consider
- Notices must be provided to all active and retired employees, dependents and COBRA beneficiaries who are eligible for Medicare due to age, disability, or end-stage renal disease.
- Notices may be provided by the insurance carrier, but at this time not many carriers have communicated their intent to distribute notices on behalf of the employer.
- Notices may be distributed electronically, but the plan sponsor must first obtain the individual’s consent.
- Notices may be included with other plan communications
(SPDs, enrollment materials, etc.).
- One notice may be provided to an employee or retiree on behalf of the family members covered by the same plan, unless it is known that the spouse or dependent resides at a different address.
- At a minimum, notices must be provided at the following times:
- prior to the annual Medicare Part D enrollment period beginning November
15;
- prior to an individual’s Medicare Part D initial enrollment
period;
- prior to a Medicare beneficiary’s enrollment in the group health plan providing prescription drug
coverage;
- whenever prescription drug coverage ends or creditable status
changes; and
- upon request.
What is “Creditable Coverage”?
Creditable coverage is coverage that is actuarially equivalent or better than the base Part D benefit. Centers for Medicare and Medicaid Services (CMS) has defined several “safe harbor” criteria to determine if the equivalence threshold has been met. Coverage is creditable if it:
- is designed to pay, on average, at least 60% of
participant's prescription drug expenses;
- covers both brand and generic prescriptions;
- provides reasonable access to retail providers and, optionally, to mail order coverage; and either of the
following:
- has a maximum annual benefit for prescription drug coverage that is at least $25,000; or
- for health plans whose prescription drug coverage is integrated with medical coverage, the plan must have:
1. no more than a $250 deductible per year;
2. maximum annual benefit of at least $25,000; and
3. no less than a $1,000,000 lifetime combined benefit maximum.
Most group health plans will meet this safe harbor because they tend to have generic/brand /non-formulary benefit schedules that are more generous than those required in the safe harbor. CMS has provided model notices for plans that meet and do not meet the actuarial equivalence tests.
What Do Employers Need to Do?
- Determine whether your group health plan prescription drug coverage is creditable.
- Determine whether your vendors will be providing notices to your participants.
- If not, customize the appropriate model notice provided by CMS and distribute to participants before November 15, 2005.
- Calendar ongoing distribution of creditable coverage notices.
Other Resource Link
This document is not intended to provide any legal advice or analysis. Please
consult your own legal counsel for further information on the topics discussed in this
issue of Insight.
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