- On March 26, 2024
Federal law requires all group health plans with prescription drug coverage to undergo an annual actuarial test. This test compares their coverage to the average Medicare Part D prescription drug plan. Group coverage is considered as good as or better than the typical Part D plan and is called “creditable” prescription coverage. Less generous coverage is deemed “non-creditable.”
Until recently, most group prescription drug coverage was considered “creditable.” However, recent changes to Medicare prescription drug cost-sharing requirements, such as the cap on insulin costs and the elimination of the Part D coverage gap (“doughnut hole”), are starting to affect creditability testing. This is especially true for some qualified high-deductible health plans. By 2025, when the full impact of these changes takes effect, even more group plans will likely lose their “creditable” status.
While there is no requirement for group health plan sponsors to offer creditable prescription drug coverage, many employers have done so historically. They may be surprised to learn that benefits they’ve provided for years are no longer considered “creditable.” If a group plan only offers “non-creditable” coverage options, it will affect Medicare-eligible plan participants.
Impact on Medicare-Eligible Participants
If a Medicare-eligible person lacks access to other “creditable” prescription drug coverage, they must enroll in a Medicare Part D or Medicare Advantage plan within 63 days. Failure to do so can result in a lifetime penalty on their Medicare premiums. This is why all group health plans with prescription drug coverage for Medicare beneficiaries must report their annual creditability test results to the Centers for Medicare and Medicaid Services (CMS) within 60 days of each plan year. They must also notify all Medicare-eligible plan participants about their plan’s status.
What This Means for Brokers
Brokers need to be prepared to explain why some groups’ prescription benefits are no longer “creditable” even though they seem similar to, or even better, coverage offered in the past. Finding out plan creditability status from all carriers you work with as early as possible is crucial. Since creditability testing is a plan-specific actuarial calculation, carriers and Pharmacy Benefit Managers (PBMs) should conduct the testing and provide timely information to each group. Some carriers have been reluctant to provide this information, pushing groups to do their own “simple” actuarial tests. However, the CMS resource for simple testing is outdated and may not be accurate. Therefore, getting the information directly from the source is critical.
Options for Employers and Compliance
While employers are not required to offer a “creditable” prescription plan, those with “non-creditable” benefits may consider offering multiple coverage options to employees and explaining the differences upfront. If a Medicare-eligible plan participant loses access to creditable coverage, they qualify for a Medicare special enrollment period and must enroll in a Medicare prescription plan within 63 days. Plans must, therefore, alert any Medicare-eligible beneficiaries of any plan status changes in a timely manner. All plans must notify all potentially Medicare-eligible beneficiaries about the status of their coverage before the Medicare annual election period, which runs from October 15th to December 7th.
For questions about a group plan option’s prescription drug coverage creditability status, please contact your ExpressLink representative for more information.