Medicare Part D Creditable Coverage Disclosure Notices
Model Personalized Individual Disclosure Notice
The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) made changes to the existing Medicare program and created a voluntary prescription drug program, called Medicare Part D, for Medicare eligible individuals. Medicare beneficiaries receive subsidized prescription drug coverage through the Medicare Part D program.
Medicare beneficiaries who have other sources of drug coverage, for example, through a current or former employer, may decide to keep their current coverage and to not enroll in the Medicare Part D plan if the other plan is at least as good as the Medicare drug benefit. If the actuarial value of the employer-sponsored coverage is equal to or exceeds the actuarial value of the Medicare Part D prescription drug coverage, the employer-sponsored coverage is generally considered "creditable coverage."
Under the Medicare Part D program, group health plans - or entities that offer prescription drug coverage on a group basis to active and retired employees and to Medicare Part D eligible individuals - are required to provide, or arrange for providing, a notice of creditable prescription drug coverage at least annually to those Medicare Part D eligible individuals who are covered by, or who apply for, prescription drug coverage under the group health plan. The MMA also requires plan sponsors to provide notices of creditable coverage to the Centers for Medicare & Medicaid Services (CMS) on an annual basis.
The below information provides an overview of the requirements plan sponsors must meet for providing Disclosure Notices to Medicare Part D eligible individuals and to CMS.
DISCLOSURE TO MEDICARE PART D ELIGIBLE INDIVIDUALS
In order for Medicare Part D eligible individuals to make informed and timely enrollment decisions, group health plan sponsors must disclose the status (creditable or non-creditable) of the planís prescription drug coverage. If an individualís enrollment in Part D is to be considered timely, the individual must enroll before the end of his or her Initial Enrollment Period.
The Initial Enrollment Period for Part D is concurrent with the individualís Initial Enrollment Period for Part B. The Initial Enrollment Period is 7 months long. It includes the month in which an individual first meets the eligibility requirements for Parts A & B, as well as the 3 months before and after the month of first eligibility. After the Initial Enrollment Period, the individual may only enroll in a Part D plan during the Annual Coordinated Election Period. Beginning in 2011, health care reform changed the Annual Coordinated Election Period to the period beginning on Oct. 15 and going through Dec. 7 of each year. Prior to 2011, the Annual Coordinated Election Period was from Nov. 15 to Dec. 31 of each year.
An eligible individual who fails to enroll in Medicare Part D during the Initial Enrollment Period must maintain "creditable coverage" or pay a late enrollment penalty. The late enrollment penalty will be imposed after a break in creditable coverage that lasts for a period of 63 days or longer (after the Initial Enrollment Period) and will apply for as long as the individual remains enrolled in Part D. Thus, the Disclosure Notice is essential to an individualís decision regarding whether to enroll in a Medicare Part D prescription drug plan.
Determination of Creditable Coverage
Coverage is creditable if the actuarial value of the coverage equals or exceeds the actuarial value of standard prescription drug coverage under Medicare Part D, as demonstrated through the use of generally accepted actuarial principles and in accordance with CMS actuarial guidelines.
In general, the actuarial equivalence test measures whether the expected amount of paid claims under the plan sponsorís prescription drug coverage is at least as much as the expected amount of paid claims under the standard Part D benefit. Plans with multiple benefit options must apply the actuarial value test for each benefit option.
The determination of creditable coverage does not require an attestation by a qualified actuary, unless the plan sponsor is electing the retiree drug subsidy.
Who Must Receive a Disclosure Notice?
Disclosure Notices must be provided to all Part D eligible individuals who are covered under, or who apply for, the planís prescription drug coverage, regardless of whether the prescription drug coverage is primary or secondary to Medicare Part D. The Disclosure Notice requirement applies to Medicare beneficiaries who are active or retired employees, disabled, or on COBRA, as well as Medicare beneficiaries who are covered as a spouse or dependent.
An individual is eligible for Medicare Part D if:
- The individual is entitled to Medicare Part A and/or is enrolled in Part B, as of the effective date of coverage under the Part D plan; and
- The individual resides in the service area of a prescription drug plan or of a Medicare Advantage plan that provides prescription drug coverage.
To simplify plan administration, group health plan sponsors often decide to provide the Disclosure Notice to all plan participants.
Content of Disclosure Notices
CMS has provided Model Disclosure Notices for plan sponsors to use when disclosing their creditable coverage status to Medicare beneficiaries. Plan sponsors are not required to use the CMS Model Disclosure Notices. If a plan sponsor does not use the CMS Model Disclosure Notices, its notices must meet the content standards described below.
To download the Model Disclosure Notices, visit: www.cms.gov/CreditableCoverage/Model%20Notice%20Letters.asp#TopOfPage.
Content of Creditable Coverage Disclosure Notices
When the prescription drug coverage offered by a plan sponsor is creditable, the Creditable Coverage Disclosure Notice must contain the following information:
- A statement that the plan sponsor has determined that its prescription drug coverage is creditable;
- An explanation of creditable coverage (i.e., that the amount the plan expects to pay on average for prescription drugs for individuals covered by the plan in the applicable year for which the disclosure notice is being provided is the same or more than what standard Medicare prescription drug coverage would be expected to pay on average); and
- An explanation of why creditable coverage is important, and advice that even though coverage is creditable, an individual could be subject to higher Part D premiums if the individual subsequently has a break in creditable coverage of 63 continuous days or longer before enrolling in a Part D plan.
CMS also recommends the following additional content be included in the Creditable Coverage Disclosure Notice:
- A description of the beneficiaryís rights to a notice (i.e., when a beneficiary can expect to receive a notice and when a beneficiary can request a copy of the notice).
- An explanation of the option(s) available to beneficiaries when the Medicare Part D benefit becomes available, including, for example:
- Individuals can retain their existing coverage and choose not to enroll in a Part D plan;
- Individuals can enroll in a Part D plan as a supplement to, or in lieu of, the other coverage; or
- Individuals cannot have both a Medigap prescription drug policy and a Part D plan.
- An explanation that if the current prescription drug program is integrated with other health coverage (e.g., medical or dental), whether the covered individuals will still be able to receive all of their current health coverage if they choose to enroll in Medicare Part D.
- A description of the circumstances (if any) under which an individual could get prescription drug coverage back if the individual drops the current coverage and enrolls in Medicare Part D. (For Medigap insurers, a clarification that the individual cannot get his/her prescription drug coverage back under such circumstances.)
- Information about receiving financial assistance for Medicare Part D, including the contact information for the Social Security Administration.
Content of Non-Creditable Coverage Disclosure Notices
When the prescription drug coverage offered by a plan sponsor is determined to be non-creditable, the Non-Creditable Coverage Disclosure Notice must contain the following information:
- A statement that the entity has determined that its prescription drug coverage is not creditable;
- An explanation of non-creditable coverage (i.e., that the amount the plan expects to pay on average for prescription drugs for individuals covered by the plan in the applicable year is less than what standard Medicare prescription drug coverage would be expected to pay on average);
- An explanation that an individual may only enroll in a Part D plan from Oct. 15 through Dec. 7 of each year; and
- A clarification of the importance of creditable coverage, and that the individual may be subject to higher Part D premiums if the individual fails to enroll in a Part D plan when first eligible.
CMS also recommends that the Non-Creditable Coverage Disclosure Notice include the additional content outlined in items 1 Ė 5 in the paragraph above.
Personalized Disclosure Notices/Statements
CMS recommends that entities complete the personalized box on the Model Creditable and Non-Creditable Disclosure Notices if an individual requests a copy of a disclosure notice. Individuals may submit a copy of a personalized disclosure notice as proof of prior creditable coverage when enrolling in a Part D plan.
If the plan sponsor chooses not to use the Model Disclosure Notices, the sponsor can provide a personalized statement of creditable coverage which contains all of the following elements:
- Individualís first and last name;
- Individualís date of birth or unique member identification number;
- Entity name and contact information;
- Statement that the entityís plan was determined by the entity to be creditable or non-creditable coverage; and
- The date ranges of creditable coverage.
Form and Manner of Delivering Disclosure Notices
Plan sponsors have flexibility in the form and manner of their Disclosure Notices.
Disclosure Notices do not need to be sent in a separate mailing. Disclosure Notices may be sent with other plan participant information materials, for example, enrollment and/or renewal materials. If a Disclosure Notice is incorporated with other participant information, the disclosure must meet specific requirements for being prominent and conspicuous within the materials.
As a general rule, a single Disclosure Notice may be provided to the covered Medicare beneficiary and all of his or her Medicare eligible dependent(s) covered under the same plan. However, if it is known that any spouse or dependent that is Medicare eligible lives at a different address than where the participant materials were mailed, a separate notice must be provided to the Medicare eligible spouse or dependent residing at a different address.
Disclosure Notices may be provided through electronic means only if the plan sponsor follows the requirements set forth in Department of Labor regulations addressing electronic delivery.
Timing of Disclosure Notices
At a minimum, Disclosure Notices must be provided at the following times:
- Prior to the Medicare Part D Annual Coordinated Election Period Ė Oct. 15 through Dec. 7 of each year, effective beginning in 2011;
- Prior to an individualís Initial Enrollment Period for Part D;
- Prior to the effective date of coverage for any Medicare eligible individual that joins the plan;
- Whenever prescription drug coverage ends or changes so that it is no longer creditable or becomes creditable; and
- Upon a beneficiaryís request.
If the Disclosure Notice is provided to all plan participants annually, prior to the Annual Coordinated Election Period, CMS considers items 1 and 2 to be met. Further, "prior to" means that the individual must have been provided the Disclosure Notice within the past 12 months.
DISCLOSURE TO CMS
Plan sponsors are also required to disclose to CMS whether their prescription drug coverage is creditable or non-creditable. The disclosure must be made to CMS on an annual basis, or upon any change that affects whether the coverage is creditable. At a minimum, the CMS Creditable Coverage Disclosure Notice must be provided at the following times:
- Within 60 days after the beginning date of the plan year for which the entity is providing the form;
- Within 30 days after the termination of the prescription drug plan; and
- Within 30 days after any change in the creditable coverage status of the prescription drug plan.
CMS has released additional guidance for making such disclosures (i.e., timing, format and model language). Plan sponsors are required to provide the disclosure notice to CMS through completion of the disclosure form on the CMS Creditable Coverage Disclosure webpage at:
www.cms.gov/CreditableCoverage/40_CCDisclosure.asp#TopOfPage. This is the sole method for compliance with the CMS disclosure requirement, unless a specific exception applies.
The CMS Creditable Coverage Disclosure Notice lists required data fields that must be completed in order to generate the notice to CMS, such as types of coverage, number of options offered, creditable coverage status, period covered by the disclosure notice, number of Part D eligible individuals covered, date the Creditable Coverage Disclosure Notice is provided to Part D eligible individuals and change in creditable coverage status.
For more information regarding employer responsibilities under Medicare Part D, visit the CMS Creditable Coverage Disclosure webpage at: