What you need to know about creditable coverage
Under the Medicare Modernization Act of 2003, a plan sponsor is required to notify Medicare Part D-eligible health benefit plan participants, whether employed or retired, if the drug coverage provided under the plan is creditable. Many plan sponsors without retiree prescription drug programs mistakenly assume they do not need to take action under Part D, overlooking the creditable coverage certification needed for Medicare-eligible active employees. A plan sponsor's plan has creditable coverage if its actuarial value is equal to or greater than the standard Medicare prescription drug plan available to individuals.
Determining creditable coverage
The data necessary to test for creditable coverage will vary depending on the complexity of the pharmacy benefit, the interaction with the medical program, and the number of eligible members. In some cases, only minimal information is necessary. However, in other cases, such as those that have large eligible populations with complex designs, more information is required to test for creditable coverage. Centers for Medicare and Medicaid Services (CMS) did provide a safe-harbor rule that may be used if the benefit plan qualifies and if the employer is not intending to file for the retiree drug subsidy (RDS). There are no shades of gray with creditable coverage—a plan is either creditable or it is not.
Communicating credible coverage to plan participants and CMS
Plan sponsors must notify participants of a plan's creditable coverage status at least annually. The notice must be provided to all Part D-eligible individuals who are covered under, or who apply for, the plan sponsor's prescription drug coverage. These individuals include Medicare beneficiaries who are active employees, disabled, on COBRA, and those individuals who are retired, as well as Medicare beneficiaries who are covered as spouses or dependents (including those spouses or dependents who may be disabled or on COBRA) under active employee coverage and retiree coverage.
This is especially important if a plan is not creditable, because participants in a noncreditable plan will pay a penalty if they later enroll in Medicare Part D. In addition, plan sponsors must provide notice of creditable coverage annually, when a beneficiary first becomes eligible for Part D, when plan changes are made, or when a beneficiary requests it. Failure to properly inform plan participants of creditable coverage status could cost participants significantly if they later elect to enroll in Medicare Part D instead of the plan sponsor offering. Finally, the plan sponsor is required to disclose the creditable coverage status of the plan to CMS via the Disclosure to CMS form on the CMS Web site. The disclosure must be made to CMS on an annual basis, and upon any change that affects whether the coverage is creditable.
Have you tested your plan for creditable coverage?
Milliman's tools, models, and expertise enable us to perform the most complicated testing for actuarial equivalence and creditable coverage, allowing you to know decisively whether your plan is creditable or not.
Contact us to arrange for testing today.