- On September 13, 2023
Each year, group health plans that offer access to pharmacy benefits must notify all plan participants who are eligible for Medicare about whether their benefits are as extensive as the standard Medicare prescription drug plan before Medicare’s annual election period begins on October 15th.
If the group plan’s benefits are as generous, it is considered to be “creditable coverage,” and if not, it is “non-creditable” (CMS published model notices for employers to use). There is no requirement that an employer offers Medicare creditable coverage, and there is no penalty to any group that doesn’t. Each employer group plan sponsor simply needs to send an accurate notice reporting their coverage status to all active employee plan participants, COBRA beneficiaries, and covered retirees that could be Medicare-eligible. Since it may be hard for employers to determine which participants may be Medicare eligible, the best practice is to notify all employees, COBRA beneficiaries, and retirees on the plan. This notice can be provided via individual delivery or through the U.S. mail.
People on the plan who are Medicare-eligible need to know if their coverage is creditable because Medicare has an enrollment penalty for people who did not have “creditable coverage” for 63 days or longer before they initially enroll in a Medicare prescription drug plan. So, the “creditability status” of an employer-sponsored plan should factor into any person’s decision about whether to stay in the group health plan or enroll in a Medicare Part D prescription drug plan.
Each employer group needs to independently assess the creditability status of every plan option they offer that includes prescription drug benefits. There are a few ways a group plan sponsor can determine if their benefits cover, on average, as much as the standard Medicare Part D plan. If the employer offers fully-insured coverage, then the insurance carrier should be able to verify if the drug benefit is creditable or not. An employer can also use the simplified determination guidance from CMS to assess the status of most prescription drug plan options. If the simplified determination does not work for the group’s plan design, then an independent actuary should value the benefits.
