Whether or not you provide retiree benefits, you must give employees disclosure notice stating whether or not your prescription drug coverage is creditable.
This disclosure notice must be accomplished by Nov. 15, 2005. The following provides information on how to determine whether your prescription plan is creditable or non-creditable and the steps you need to take to comply with this deadline.
A creditable plan is one in which the employer prescription plan provides drug coverage that, on average, is as good as Medicare Part D. The Medicare Part D coverage, effective Jan. 1, 2006, is as follows:
For 2006, the Medicare D Standard Prescription Drug Benefits
* Provides access to negotiated prices;
* cover "Part D drugs" (generic and brand);
* has a $250 deductible;
* pay 75 percent of the next $2,000 after the deductible;
* pay nothing for expenses between $2,250 and $5,100;
* and pay 95 percent of expenses above $5,100 (known as catastrophic coverage).
The following is a design-based safe harbor. For the non-integrated plan to qualify, it must either have:
* No annual benefit maximum or maximum of at least $25,000;
* an actuarial expectation that the prescription drug benefits payable by the plan will be at least $2,000 per Medicare-eligible individual in 2006.
For an integrated plan to qualify the plan must include the following:
* Annual deductible no greater than $250;
* either no annual benefit maximum or a maximum of at least $25,000 and lifetime maximum benefit of at least $1 million.
You can issue a blanket notification or distribute the notice to those who are Medicare Part D eligible using the following criteria:
* Those entitled to benefits under Medicare Part A or enrolled in Medicare Part B;
* those eligible for and granted coverage for either Part A or Part B;
* Medicare Part D eligible persons can include active, disabled and retired workers and their spouses and dependents and
* those covered under Medicare Part A or Part B due to disability or end-stage renal disease also are entitled to a notice.
Because of the variety of potentially eligible employees and the difficulty of maintaining an accurate list from year to year, it is more prudent to utilize blanket notification. The notice must be provided every year by Nov. 15 as well as during other key periods.
* Initial notice is required by Nov. 15, 2005.
* The deadline is the same for calendar-year and non-calendar-year plans.
* A notice must be sent annually prior to Medicare Part D's annual election period, which will be Nov. 15th each year.
* The notification must be given to an individual prior to their initial health-plan enrollment period.
* Notification must be given prior to the effective date of the enrollment in the employer plan.
* The notice must be given to the individual during the period they first become eligible to enroll in Medicare Part D.
* Notification must be given if there is any change in the prescription-drug plan that results in a change of creditability of the plan.
* Notification must be given upon the request of an individual.
How must the Notice be delivered?
* Regular mail service is acceptable, however it is recommended you send the notice by First Class Mail and retain a mailing list.
* A separate notice is acceptable.
* It can be combined with other notices, but a reference to the section containing the notice must be on the first page and the reference must be in a box using 14-point bold font that is offset.
Electronic delivery is OK, provided the following criteria have been met:
* Those receiving the notice have given you written consent to e-mail notification;
* you have been given a valid e-mail address; they have been informed of the right to receive a paper notice;
* and the notice must be posted on the employer's Web site.
The employer is responsible for providing the notice, however a TPA can be used. In any event, the employer is ultimately responsible.
Required Disclosure Notice Content
There are two model notices available: Creditable coverage disclosure (www.cms.hhs.gov/medicarereform/credcov-BeneDsclsreNtc.pdf) and non-creditable coverage disclosure (cms.hhs.gov/medicarereform/Non-CredCov-BeneDsclsreNtc.pdf)
Employers can customize the notice, but recognize the it must contain the following:
* Whether prescription coverage is creditable;
* meaning of creditable coverage;
* explanation of why creditable coverage is important and to avoid breaks in coverage of not more than 63 days;
* when notifications will be sent;
* how to obtain a copy of the notice;
* an employee's options when Medicare Part D becomes available;
* information indicating whether the prescription plan is integrated into the medical plan or is a stand-alone plan, and whether an employee has the option to opt out of the prescription plan;
* that an individual may only enroll in Medicare Part D from Nov. 15, 2005, through May 15, 2006, and at specified times thereafter and individuals in creditable plans can enroll when they are no longer covered by their employer plan without penalty for late enrollment.
For those on non-creditable plans, failure to enroll when first eligible for Medicare Part D can result in higher premiums.
Medicare D Subsidy
If you provide retirees with a health care plan that includes prescriptions, you may want to explore the possibility of applying for a subsidy. An actuary attestation is required to qualify for the subsidy.
Pardue is director of operations in Barney & Barney's employee benefits department. For more information call (858)587-7433 or e-mail email@example.com.>