Employers have plenty to do for Medicare Part D benefit
As published in the Nashville Business Journal.
Medicare Part D has introduced prescription drug coverage for Medicare-eligible individuals and imposes new requirements on health plan sponsors. Employers who sponsor health plans that provide prescription drug coverage to individuals who are entitled to Medicare Part A or enrolled in Medicare Part B are required to take a number of immediate actions, including the distribution of a notice that informs participants whether their prescription drug coverage under the plan is "creditable" or "non-creditable."
Since the notice must be delivered to participants by Nov. 15, now is the time for plan sponsors to determine what steps must be taken to ensure compliance.
Although Medicare Part D participation is voluntary, generally, if a plan providing prescription drug benefits covers any Medicare-eligible individuals, the sponsor has the duty to disclose to the individual whether the coverage under the plan is creditable or non-creditable (that is, whether it's at least the actuarial equivalent of Part D coverage). Creditable coverage for Part D is different from creditable coverage for HIPAA purposes. This requirement applies even if the employer-sponsored plan doesn't provide retiree health benefits. It applies regardless of the size of the employer and covers church plans and governmental employers. A separate part of the law allows sponsors of a plan providing retiree coverage equivalent to Part D to apply for and receive a federal subsidy to defray prescription drug costs.
The new disclosure is important because it provides eligible individuals with information about Part D enrollment. More specifically, individuals who don't have creditable prescription drug coverage and who choose not to enroll before the end of their initial enrollment period for Part D will ordinarily pay a higher premium on a permanent basis if they later decide to enroll in Part D. However, it's not always easy to determine whether a plan provides creditable coverage. For insured plans, insurers will hopefully take the lead in providing information on actuarial equivalence, although the employer - not the insurer - has the disclosure obligation. For self-funded plans, the determination may require the services of a consultant or actuary.
Generally, coverage under a prescription drug plan that's not applying for the retiree drug subsidy is deemed to be "creditable" if the plan: (1) provides coverage for brand and generic prescriptions; (2) provides reasonable access to retail providers (mail order coverage optional); (3) is designed to pay on average at least 60 percent of participants' prescription drug expenses; and (4) satisfies at least one of the following: (i) for a "non-integrated" plan, the prescription drug coverage has no annual benefit maximum benefit or a maximum annual benefit payable by the plan of at least $25,000, or the prescription drug coverage has an actuarial expectation that the amount payable by the plan will be at least $2,000 per Medicare-eligible individual in 2006; and (ii) for entities that have "integrated" health coverage, the integrated health plan has no more than a $250 deductible per year, has no annual benefit maximum or a maximum annual benefit payable by the plan of at least $25,000 and has no less than a $1 million lifetime combined benefit maximum. A "non-integrated" plan is likely to be one providing prescription drug benefits whether the deducible is met.
The Centers for Medicare & Medicaid Services has issued model notices of creditable and noncreditable coverage for use prior to Nov. 15. However, these notices need to be customized to reflect the specific provisions of a particular plan. The required notice must be provided at several points.
First, it must be provided before the beginning of the initial enrollment period for Part D (i.e., Nov. 15 through May 15, 2006). Second, it must be provided before the Medicare Part D annual coordinated election period beginning Nov. 15 each year and any annual open enrollment. Third, the notice must be provided before the effective date of coverage for any Medicare-eligible individual who joins the plan. It also must be provided whenever prescription drug coverage ends or changes so that it's no longer creditable or becomes creditable. Lastly, it must be provided upon a beneficiary's request. The sponsor also is required to provide an annual notice to CMS.
Most immediately, every employer sponsoring employee health plans must ensure the appropriate notice is provided to Medicare-eligible individuals in the employer's health plans no later than Nov. 15.
Since it may be impractical for an employer to determine exactly which members of its work force are eligible for benefits under Medicare, many may decide the best way to comply with initial disclosure requirements is to provide the notice to every participant in their health plans. This may be the case especially for large employers. Employers with smaller work forces may find it more efficient to target distribution of the notice to those individuals who are actually eligible for Medicare Part D.