Group health plan sponsors are required to notify Medicare-eligible enrollees of the plan’s drug coverage status under Medicare Part D through an annual written disclosure notice prior to the annual enrollment period of October 15th. Group health plan sponsors need to know if their plan’s prescription drug coverage qualifies as Medicare Part D creditable coverage for eligible health plan enrollees due to these disclosure notice requirements. If Medicare-eligible employees go more than 63 days without being enrolled in Medicare or a creditable prescription drug plan, they will have to pay a late enrollment penalty when they sign up for Medicare. This penalty is lifelong.
Notifying participants of non-creditable coverage helps them avoid paying the lifelong penalty by giving them enough time to enroll in the Medicare prescription drug plan before the end of the enrollment period (October 15).
Employee benefits advisors, including many of the ones we work with, often help plan sponsors determine Medicare Part D creditability. While the plan sponsor is responsible for providing notice of creditable coverage determination to their employees prior to the enrollment period, they need assistance in determining if their plan is creditable coverage or non-creditable coverage under Medicare Part D. Benefits advisors frequently help with providing this information.
Creditable coverage is determined by the actuarial value of the prescription drug plan. A plan is considered creditable if the actuarial value of the prescription drug coverage is greater than or equal to the actuarial value of standard prescription drug coverage under Medicare Part D.
The United States Centers for Medicare and Medicaid Services (CMS) has a simplified determination document that outlines how a plan design can be considered creditable prescription drug coverage without expressly calculating the actuarial value. Simplified determination can be used when the plan’s actuarial value is not available or difficult to determine.
However, sometimes it is necessary to use the plan’s actuarial value for Medicare Part D creditable coverage instead of the simplified determination. For example, if a plan sponsor is using the Retiree Drug Subsidy, they cannot use the simplified determination method and must use actuarial value. Depending on the health plan, using actuarial value for creditable prescription drug coverage may actually be more straightforward than going line by line through the simplified determination requirements.
The prescription drug plan’s actuarial value can be determined in the following ways:
1. If the group is on a fully-insured health plan, the health insurance carrier/private insurance companies will provide this information as part of their health plan services to plan sponsors.
2. Hiring an actuary. An actuary can calculate the plan’s expected prescription drug claims and determine the actuarial value from there.
However, using consultants for a large number of plans can get expensive. Actuaries who are not using our software may not be projecting claims cost to determine actuarial value and will instead use a factor adjustment based on plan design, which could cause inaccuracies that will impact the plan’s final coverage determination.
3. If the group is on a self-funded health plan, the third-party administrator (TPA) or pharmacy benefit manager (PBM) may be able to provide this information. However, they may charge an additional fee for this information, and going back and forth for it can cause delays.
4. Using actuarial software to determine the prescription drug plan’s actuarial value. ClarosPlan includes this calculation and many others (health plan actuarial value, impact of plan changes, shadow underwriting of stop loss and fully insured quotes). Benefits advisors can quickly and proactively generate the projections they need to advise their groups throughout the year and ensure compliance.
To learn more about automating Medicare Part D creditable coverage calculations and other health plan projections, schedule a call with our team:
