Q&A: Medicare Part D Coverage

From: Benefits

Q&A: Medicare Part D Coverage


Can you provide me with more information about employer notification requirements for Medicare Part D coverage and any penalties for noncompliance?


Plan sponsors of group health plans offering prescription drug coverage to Medicare eligible individuals have been responsible for issuing notices to Medicare Part D eligible individuals for several years now. The annual notice deadline is before October 15 of each year. The following explains the employer notice requirements.

The Medicare Modernization Act (MMA) requires employers with policies including prescription drug coverage to notify Medicare eligible policyholders whether (or not) their prescription drug coverage is creditable coverage, which means that the coverage is expected to pay, on average, as much as the standard Medicare prescription drug coverage. For these employers, there are two disclosure requirements:

  1. The first disclosure requirement is to provide a written disclosure notice (see link below for model notices) to all Medicare-eligible individuals annually who are covered under the employer’s prescription drug plan, prior to October 15th each year and at various times as stated in the regulations, including to a Medicare-eligible individual when he or she joins the plan. This disclosure must be provided to Medicare-eligible active working individuals and their dependents, Medicare-eligible COBRA individuals and their dependents, Medicare-eligible disabled individuals covered under the employer’s prescription drug plan, and any retirees and their dependents. The MMA imposes a late enrollment penalty on individuals who do not maintain creditable coverage for a period of 63 days or longer following their initial enrollment period for the Medicare prescription drug benefit. Accordingly, this information is essential to an individual’s decision whether to enroll in a Medicare Part D prescription drug plan.
  2. The second disclosure requirement is for employers to complete the online Disclosure to CMS Form to report the creditable coverage status of their prescription drug plan. The Disclosure should be completed annually no later than 60 days from the beginning of a plan year (contract year or renewal year), within 30 days after termination of a prescription drug plan, or within 30 days after any change in creditable coverage status.

Employer Penalties

The MMA does not include a specific penalty for failure to provide the required notices. If, however, the employer is requesting the retiree drug subsidy (RDS) from Centers for Medicare and Medicaid Services (CMS), then the required attestation that all applicable rules will be followed would require that the appropriate notices are sent to Medicare affected members. If the Medicare member can prove that he or she did not get adequate notice that his or her employer plan was not creditable, then CMS may not apply the premium penalty when the member enrolls in Part D. However, employee relations issues may arise if employers fail to properly notify Medicare Part D eligible employees of the plan’s creditable status. For example, if employees do not know whether their coverage is creditable or noncreditable, this might prevent them from making an educated choice in coverage options and could possibly result in an individual having to later pay higher Medicare Part D premiums. More information about this requirement can also be found on the CMS website along with the sample disclosure notices at http://www.cms.gov/Medicare/Prescription-Drug-Coverage/CreditableCoverage/Model-Notice-Letters.html.