HR Question:

I am getting ready to report “creditability” of my prescription plans in March of this year, but I just sent a notice in October. Are these the same notices? And if so, why do I need to send them out twice?

HR Answer:

The Medicare Modernization Act (MMA) and the Centers of Medicare and Medicaid Services (CMS) require employers to inform Medicare-eligible policyholders of the status of their prescription drug coverage. This essentially helps beneficiaries understand if their current coverage is as good as or better than the standard Medicare Part D plan.

To do this, employers must take two different actions to fulfill compliance reporting when offering prescription drug coverage to members over the age of 65 (whether primary or secondary coverage):

1. Employers must provide the Creditable Coverage Notice to Medicare-eligible employees.
2. Employers must electronically disclose the creditability of their prescription plans to CMS.

These notices and disclosures are designed to inform beneficiaries in a timely manner of the value of their prescription plan and to provide transparency on coverage options, all while maintaining compliance with CMS standards.

Creditable Coverage Notice to Employees and Beneficiaries

Employers and plan sponsors should provide a written notice to Medicare-eligible employees and their eligible dependents on whether their group prescription plans are considered creditable. In other words, does the group prescription drug coverage pay as much as the standard Medicare Part D plan? The Creditable Coverage notice should provide the group plans’ creditable coverage status, consequences of not maintaining creditable coverage, and instructions on how to obtain more information about the plans.

This notice should be provided at the following times:

• Upon enrollment in the group plan
• During the group’s open enrollment period
• Annually before October 15th
• If there are changes to the plan’s creditability

The October 15th deadline is in alignment with the Medicare open enrollment period and is intended to give Medicare beneficiaries ample time to make informed decisions before the enrollment deadline and avoid penalties.

Although the notice only needs to be sent to Medicare-eligible employees and beneficiaries, many employers send this notice out to all participants to ensure compliance.

To make things easier, the CMS provides sample Creditable Coverage notices in both English and Spanish.

CMS Online Disclosure

In addition to the Creditable Coverage notice, employers or plan sponsors must submit an Online Disclosure Form to CMS. The disclosure should be made annually, within 60 days from the start of the plan year, within 30 days of plan termination, or within 30 days following a change in creditable coverage status.

This means that:

• Plans starting January 1st, the CMS Disclosure is due by March 1st
• Plans starting July 1st, the CMS Disclosure is due by September 1st

Employers should determine if their prescription plan is creditable by either asking their carriers, their insurance broker, or use a determination method to evaluate their prescription plan with CMS standards. This information should be submitted to CMS via the online disclosure form by the appropriate deadline.

Credibility Changes in 2025

In 2025, a significant change will occur: the out-of-pocket cap for creditable coverage will be dramatically reduced to $2,000 – thus setting a higher standard. Employers should be mindful of whether the prescription coverage they offer is creditable, as this will impact whether Medicare beneficiaries may delay enrollment in Medicare Part D without penalty. Employers should also be aware that if coverage becomes non-creditable, beneficiaries have a special enrollment window to enroll without penalty.

Ensuring that Creditable Coverage reporting and notices are completed in a timely fashion will help support an employer’s compliance with the Medicare Modernization Act (MMA) and the Centers for Medicare and Medicaid Services (CMS). Additionally, by adhering to the guidelines, employers can help Medicare-eligible employees and their dependents make important and well-informed decisions about their prescription drug coverage.

Thank you to Colleen Mahoney, PHR, HR Business Advisor for contributing to this HR Question of the Week.

Strategic HR knows that keeping abreast of HR Compliance issues can be daunting, especially when the laws keep changing. We can help support your compliance by fielding your questions and offering resources to help you identify and mitigate compliance issues. Visit our HR Compliance & Recordkeeping page to learn about our auditing services which can help you identify trouble spots in your HR function.