Medicare Part D Disclosure Notice Requirements, Employer Online Reporting Requirements, and Medicare Primary/Secondary Payer Calculations
Medicare’s Annual Election Period (AEP) begins on October 15, 2017, and ends on December 7, 2017.
Employers providing group prescription drug coverage to Medicare-eligible individuals – including both employees and dependents – must distribute notices to such individuals indicating whether their employer-sponsored prescription drug coverage is creditable or non-creditable.
When prescription drug coverage is “creditable,” the prescription drug benefit is equivalent to (or richer than) the prescription drug coverage provided by Medicare Part D. That is, the prescription drug coverage provided by the employer-sponsored plan is expected to pay, on average, as much as the standard Medicare Part D prescription drug coverage. “Non-creditable” prescription drug coverage is the opposite; “non-creditable” coverage is less rich than Medicare Part D’s prescription drug coverage. In other words, non-creditable coverage means the prescription drug coverage provided by the employer-sponsored plan is not expected to pay, on average, as much as the standard Medicare Part D prescription drug coverage.
These required notices, called Medicare Part D Disclosure Notices, must be distributed to all impacted individuals (those who are eligible for Medicare coverage) before the Medicare AEP begins on October 15, 2017. The information in these notices is essential for Medicare-eligible individuals to make a decision regarding whether or not to enroll in a Medicare Part D plan during the annual AEP. Any person who does not maintain creditable coverage for more than 62 days after his or her initial Medicare enrollment period is subject to a late enrollee penalty for the remainder of the time on Medicare Part D coverage.
Employers will certainly turn to you, their health insurance broker, for help determining whether or not the Rx coverage they sponsor is creditable – in addition to seeking an understanding of what to distribute and when. Word & Brown has you covered.
Medicare Part D Charts – Creditable or Non-Creditable Designation
We’ve surveyed our carriers and have placed creditable/non-creditable designations in easy-to-reference charts for all carriers’ Small Group plans and Large Group plans. Reference these charts to determine whether the coverage sponsored by the employer is creditable or non-creditable.
Creditable Coverage Model Notice
The Centers for Medicare & Medicaid Services (CMS) provide model notices to meet these distribution requirements, along with additional information on the required distribution. The model notices must be customized by the employer, as indicated on the model notices, before the employer releases them to Medicare-eligible individuals. There are different notices for creditable coverage and non-credible coverage. The forms are also available in Spanish.
Further CMS Online Reporting Requirement for Employers
Employers providing prescription drug coverage to Medicare-eligible individuals must also submit an online disclosure to CMS annually, and upon any change that affects creditable status – no later than 60 days from the beginning of a plan year, within 30 days after the termination of prescription drug coverage, or within 30 days after any change in creditable coverage status. This disclosure is required whether the employer-sponsored group coverage pays primary or secondary to Medicare coverage.
Determining Whether Medicare Pays Primary or Secondary to Group Coverage
Employees age 65+ commonly carry both Medicare coverage and employer-sponsored group coverage. The size of the Medicare-holder’s employer-sponsor determines whether Medicare pays primary or secondary to the group coverage.
Employers with Medicare as a primary payer on claims for working employees age 65+ are employers that have employed less than 20 employees for each working day across each of 20+ calendar weeks in the current year or preceding year.
Employers with Medicare as a secondary payer on claims for working employees age 65+ are employers that have employed 20 or more employees for each working day across each of 20+ calendar weeks in the current year or preceding year.
In both scenarios, the 20 weeks do not need to be consecutive. Furthermore, the employer may change from “Medicare Primary” to “Medicare Secondary” (or vice versa) during the year.
Internal Revenue Service (IRS) controlled/aggregate rules apply. Employer size is based on the total number of employees in an organizational structure (parent company, subsidiaries, and sibling organizations). If the employer has ownership in multiple businesses that together meet this 20+ threshold, it is important to check with a trusted tax or legal advisor to determine whether or not the employer is a controlled group as listed in Internal Revenue Code (IRC) Sections 414 (b) (c) (m) and (o).
It is critical to compute this calculation accurately; employers are receiving IRS-SSA-CMS Data Match Questionnaires, which are used to find out if another entity should be paying primary to Medicare. Carriers are also required to report this information. If the status of an employer changes so that Medicare is in a different payer order, it is important to notify your insurance carrier and your employees with Medicare coverage, so they can alert the Medicare Coordination of Benefits (COB) Contractor.
For more help on calculating group size relating to “Medicare Primary” vs “Medicare Secondary,” COBRA, and the Affordable Care Act (ACA), refer to Word & Brown’s Group Count Reference sheet (CA) or Group Count Reference sheet (NV).
Medicare ACA Tip
Medicare coverage is considered minimum essential coverage (MEC) with regard to the Individual Shared Responsibility Provision of the ACA, so any individual covered by Medicare will not be subject to the Individual Penalty. Individuals covered under Medicare are not eligible for a Premium Tax Credit (PTC) from an Individual Exchange (including Covered California and the Nevada Health Link) because these individuals have government-sponsored MEC.