Guidance on Medicare Notifications Issued
June 15, 2005
All employers, including colleges and universities, that provide prescription drug benefits to any Medicare-eligible individuals are required to provide them with notices comparing their plan to the new Medicare prescription drug benefits before November 15. Even employers who do not provide retiree health plans are subject to the requirements because employees or their dependents, generally those who are 65 or older, may be eligible for Medicare. The notices are intended to let people know if their prescription drug coverage is at least as good as the new Medicare coverage, known as "creditable coverage." Individuals can delay enrollment in the Medicare Part D program without becoming subject to late enrollment penalties if they have creditable coverage.
Guidance issued recently by the Centers for Medicare and Medicaid Services provides safe harbors that allow employers to more easily determine whether their coverage qualifies as creditable. The regulations define coverage as creditable if the actuarial value of the coverage equals or exceeds the actuarial value of standard Medicare prescription drug coverage. In general, the determination is based on expected amount of paid claims. Actuarial attestation is not required unless the employer is electing to receive federal subsidies for prescription drug coverage.
If the design of a prescription drug plan's coverage meets all of the following standards, it will be deemed creditable coverage:
- provides coverage for brand and generic prescriptions;
- provides reasonable access to retail providers and, optionally, for mail-order coverage;
- designed to pay on average at least 60 percent of participants' prescription drug expenses; and
satisfies at least one of the following:
- The prescription drug coverage has no annual maximum benefit or a maximum annual benefit payable by the plan of at least $25,000.
- The prescription drug coverage has an actuarial expectation that the amount payable by the plan will be at least $2,000 per Medicare eligible individual in 2006.
- For entities that have integrated health coverage, the integrated plan has no more than a $250 deductible per year, has no annual benefit maximum or a maximum annual benefit payable by the plan of at least $25,000, and has no less than a $1,000,000 lifetime combined benefit maximum.
There are specific requirements for the timing and form of the required notices in the guidance. The notices may be incorporated into other plan documents. Model notices with suggested language are provided.
The requirement to send these notices is not tied to an entity's intention to claim available subsidies for providing prescription drug coverage. Additional guidance is expected on several other notice requirements stemming from the Medicare reform legislation including a requirement to disclose annually to CMS on whether coverage provided is creditable or not.
Webcast on June 23
NACUBO, in conjunction with CUPA-HR, has scheduled a webcast for June 23, Rx for New Medicare Options in Higher Education, to help colleges and universities that provide prescription drug coverage for retirees determine what options they may want to pursue including federal subsidies. The program will be recorded and available on demand after the live broadcast.
The NACUBO contact for human resource issues is Michele Madia, senior policy analyst, at 202.861.2554.
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