Pursuant to the Regulations promulgated in conjunction with the introduction of Medicare Part-D benefits (drug coverage), Plan Sponsors must distribute a Medicare Part-D Notice to group health plan participants (who are or might be eligible for Medicare) annually and at other specific occasions. Last year the Centers for Medicare and Medicaid Services (CMS) originally released guidance, including sample notices for employers to send to plan participants on or before November 15, 2005. CMS has now issued a new set of sample notices and additional guidance for the period following May 15, 2006 (the date Medicare Part-D open enrollment ended. We have enclosed model notices to be used for these disclosures as Attachments A, B and C. We have also enclosed a copy of the CMS guidance for your reference. (Attachment D).

The guidance and the notice requirement apply to all group health plans that provide prescription drug coverage to employees or retirees (including family members) covered by Medicare.  The notice must be given not only to retirees or their spouses over age 65 covered by a retiree health plan, but also to active employees or their spouses who are covered by the group health plan and who also are covered by Medicare because of their age, disability, or end-stage renal disease.  Only employers that contract with a prescription drug plan (PDP) or that applied to the CMS to become a PDP to provide prescription drug benefits to their own retirees are exempt from the notice requirement.

Background

As we all know, Medicare began offering prescription drug coverage under Part D as of January 1, 2006.  Group health plans sponsored by an employer or union that provide prescription drug coverage that is at least “as good as” the benefits under the Medicare Part D standard benefit is considered creditable. Those plans with more limited benefits may be considered non-creditable. The creditable and noncreditable coverage notices give Medicare beneficiaries the information they need to determine whether they need to enroll in a Medicare Part D plan to avoid a late enrollment penalty.

Discussion

1.       New Guidance. The new guidance clarifies several issues, including:

a.       Late Enrollment Penalty. The 1%-per-month higher premium charge to Medicare beneficiaries who enroll in Part D after going without creditable coverage for 63 days or more is based on the national benchmark beneficiary premium set annually by CMS.  Therefore, while the percentage will apply for the period the individual remains enrolled in Part D, the higher premium charge will actually increase each year because the percentage increase will be applied to each subsequent year’s base premium.

b.       COBRA-Covered Medicare Beneficiaries. The disclosure notices must be provided to all Part D eligible individuals who are covered under, or who apply for, the sponsor’s prescription drug coverage, regardless of whether that plan is primary or secondary to Medicare Part D.  Specifically, the disclosure notice must be given to Medicare beneficiaries who are on COBRA coverage.

c.       Integrated Plan. For purposes of qualifying for the simplified method of determining whether a plan provides creditable coverage, an “integrated plan” that combines prescription drug benefits with other coverage (e.g., medical, dental, vision) must have combined plan year deductibles, annual benefit maximums, and lifetime benefit maximums for all benefits under the plan.

2.       Notice Obligation. Employer/Plan Sponsors of health plans with prescription drug coverage must provide an Annual Notice to plan participants disclosing whether the drug benefits are creditable or not creditable. They must also provide the Notice at other times as shown below.

3.       Notice Content. The revised model disclosure notices include reorganization of information, several clarifications, and some new language.  The CMS recommends that additional language be inserted in the model notices for both creditable and noncreditable coverage. Entities can continue to prepare their own notices rather than use the models; if an employer prefers to develop its own notices, the employer should refer to the required and recommended language provides by CMS for customized notices.

As an alternative, CMS has prepared sample language for a personalized Notice that plan sponsors may tailor according to whether their plan provides creditable or noncreditable coverage for an individual. You will find a sample of that Notice in the revised disclosure guidance.

4.       Timing of Disclosures. Plan sponsors must comply with requirements relating to the timing of disclosures in accordance with the following schedule: 

a.       Prior to the Part D annual Medicare open enrollment election period (November 15-December 31) for each year;

b.       Prior to an eligible individual’s initial enrollment period for Part-D coverage;

c.       Prior to the effective date of coverage for any Medicare-eligible individual who joins the plan;

d.       Whenever the entity no longer offers prescription drug coverage or changes the coverage offered so that it is no longer creditable or it becomes creditable; or

e.       Upon the request of a beneficiary.

5.       Method of Delivery. The update guidance continue to provide that notices may accompany other documents, or be incorporated into other disclosures, as long as there is a prominent first-page, 14-point reference to the incorporated notice language.  If certain additional requirements are met, the notices may be delivered electronically.  Furthermore, a single notice may be provided to a Medicare individual and Medicare eligible dependents covered under the same plan, but a separate notice is required if it is known that any spouse or dependent resides at a different address than the participant. 

While the entity that covers the Medicare beneficiary is required to provide the Disclosure Notice, nothing in the regulation prevents the entity from delegating this function to a third party.

Action Plan

Group health plan sponsors affected by the disclosure rules should prepare to provide the revised notices.  Plan Sponsors should also revise their new hire enrollment packages to include the notices (tailored, as appropriate, to the terms of each employer’s retiree medical prescription drug plan) and be certain to distribute the notices to all participants on an annual schedule, such as with their annual enrollment material.  Plan sponsors should consider using the model notices while assessing the feasibility of personalized disclosures.  The revised disclosure guidance and model notices are also available on the CMS website, at: http://cms.hhs.gov/CreditableCoverage/02_CCafterMay15.asp#TopOfPage.