Medicare open enrollment begins October 15th – and with this comes a participant notice requirement for employers who sponsor group health insurance that includes prescription drug coverage.

The participant notice requirement applies regardless of the employer’s size or whether the group plan is insured or self-funded.

Notices must be distributed to Medicare eligible individuals at least annually before October 15. To simplify, most employers distribute the notice to all participants regardless of age or status.

Why Do I Need to Do This?

Federal law requires employers to provide their eligible employees with information about Medicare Part D prescription drug coverage if their group health coverage offers outpatient prescription drug benefits. Individuals who fail to enroll in Medicare Part D prescription drug coverage when they’re first eligible may be subject to penalties if they go without “creditable” prescription drug coverage for 63 consecutive days or longer. As a result, both the Centers for Medicare and Medicaid Services (CMS) and individuals who are eligible for Medicare Part D coverage need information about whether an employer’s group health plan prescription coverage is creditable or noncreditable.

Creditable coverage means the group health plan’s prescription drug coverage is actuarially equivalent to Medicare’s Part D drug plans. In other words, the group plan is considered creditable if its drug benefits are as good as or better than Medicare’s benefits.

Employers should take the following actions:

• Determine whether the group health plan’s prescription drug coverage is creditable or noncreditable for the upcoming year. If the plan is insured, the carrier/HMO will confirm creditable or noncreditable status. For self-funded plans, the plan actuary will determine the plan’s status using guidance provided by the CMS.
• Distribute a Notice of Creditable Coverage or a Notice of Noncreditable Coverage, as applicable, to all group health plan participants who are or may become eligible for Medicare in the next year. “Participants” include covered employees and retirees (and spouses) and COBRA enrollees. Employers often do not know whether a particular participant may be eligible for Medicare due to age or disability. For convenience, many employers decide to distribute their notice to all participants regardless of Medicare status.
• Notices must be distributed at least annually before October 15. Medicare holds its Part D enrollment period each year from October 15 to December 7, which is why it is important for group health plan participants to receive their employer’s notice before October 15.
• Notices also may be required after October 15 for new enrollees and/or if the plan’s creditable versus noncreditable status changes.

Model notices are available on the CMS website. Start with the model notice and then fill in the blanks and variable items as needed for each group health plan:

• Model Notice for Group Plan that is Creditable Coverage (English)
• Model Notice for Group Plan that is Noncreditable Coverage (English)
• Model Notice for Group Plan that is Creditable Coverage (Spanish)
• Model Notice for Group Plan that is Noncreditable Coverage (Spanish)

Distributing the Notice(s)

You may distribute the notice by first-class mail to the employee’s home or work address. A separate notice for the employee’s spouse or family members is not required unless the employer has information that they live at different addresses.

The notice is intended to be a stand-alone document. It may be distributed at the same time as other plan materials, but it should be a separate document. If the notice is incorporated with other material (such as stapled items or in a booklet format), the notice must appear in 14-point font, be bolded, offset, or boxed, and placed on the first page. Alternatively, in this case, you can put a reference (in 14-point font, either bolded, offset, or boxed) on the first page telling the reader where to find the notice within the material. Here is suggested text from the CMS for the first page:

“If you (and/or your dependents) have Medicare or will become eligible for Medicare in the next 12 months, a federal law gives you more choices about your prescription drug coverage. Please see page XX for more details.”

Email distribution is allowed but only for employees who have regular access to email as an integral part of their job duties. Employees also must have access to a printer, be notified that a hard copy of the notice is available at no cost upon request and be informed that they are responsible for sharing the notice with any Medicare-eligible family members who are enrolled in the employer’s group plan.

CMS Disclosure

Separate from the participant notice requirement, employers also must disclose to the CMS whether their group health plan provides creditable or noncreditable coverage. To submit the plan’s disclosure, use the CMS online tool and follow the prompts. The online tool is the only method allowed for completing the required disclosure. The process generally takes 5 or 10 minutes to complete. It is due within 60 days after the start of the plan year; for instance, for calendar year plans, that will be March 1 (or February 29 if it is a leap year).