EARLIER 2012 MEDICARE PART D ENROLLMENT PERIOD:
WHAT THIS MEANS FOR EMPLOYER-SPONSORED PLANS

THE ANNUAL MEDICARE PART D (PRESCRIPTION DRUG) ENROLLMENT PERIOD IS CHANGING IN ACCORDANCE WITH THE REQUIREMENTS OF THE AFFORDABLE CARE ACT. SENIORS WILL BE ABLE TO ENROLL OR MODIFY THEIR 2012 MEDICARE PART D PRESCRIPTION DRUG COVERAGE BEGINNING ONE MONTH EARLIER THAN PRIOR YEARS. THE ANNUAL PART D ENROLLMENT PERIOD WILL NOW BE OCTOBER 15^TH – DECEMBER 7^TH. AS A RESULT, PLAN SPONSORS WILL NEED TO REVISE AND ISSUE THE PLAN'S MEDICARE PART D NOTICE (INFORMING INDIVIDUALS OF THE GROUP HEALTH PLAN'S PRESCRIPTION DRUG CREDITABLE COVERAGE STATUS) PRIOR TO OCTOBER 15TH 2011.

BACKGROUND

Employers who sponsor group health plans are required to provide information about the plan’s prescription drug “creditable coverage” status to eligible individuals. An employer’s plan is considered “creditable” if the prescription drug coverage is at least “actuarially equivalent” to the Medicare Part D benefits. Seniors who are eligible for Medicare and do not maintain creditable prescription drug coverage (lapse of 63 days or more) will be charged a penalty upon enrollment into a Medicare Part D plan equal to 1% of the Medicare base premium for every month that they fail to maintain creditable prescription drug coverage.

ACCELERATED ENROLLMENT PERIOD

Employers must issue, at a minimum, a creditable or non-creditable notice to plan participants no later than the start of the Medicare Part D Annual Enrollment Period, to allow eligible individuals the ability to make an informed decision regarding prescription drug coverage. Providing this annual notice to all plan participants is a safe harbor provision that relieves employers of having to track individual Medicare eligibility for every employee and dependent.

Prior to this year, the deadline to issue the required notice was November 15^th to coincide with the enrollment period of November 15^th – December 31^st.  The annual deadline to issue the notice of creditable or non-creditable coverage will now be one month earlier, October 15th, to align with the new, earlier Annual Enrollment Period. 

IMPLICATIONS AND OTHER POINTS OF INTEREST

This annual notice is a minimum disclosure requirement and plan sponsors may need to issue a notice at other times such as:

• Prior to the effective date of coverage for Medicare eligible individuals who join the plan as new entrants.
• Upon request by the individual.
• Whenever prescription drug coverage is no longer offered or you make changes to the coverage so that it is either no longer creditable or becomes creditable.

It is also important to note that Medicare Part D prescription drug coverage is gradually being improved beginning in 2011 which will:

• Make these Medicare Part D plans more valuable each year through 2020, and
• Require careful review of employer-sponsored prescription drug plans each year to determine the creditable coverage status. 

In general, insurance carriers will determine the creditable coverage status for prescription drug coverage under an insured arrangement while plan sponsors of self-funded plans are responsible to assess the plan’s status.

If an entity is not an employer or union that is applying for the retiree drug subsidy, the Centers for Medicare and Medicaid Services (CMS) have (in the past) created a Simplified Determination (checklist) to measure the plan’s creditable coverage status. If the employer cannot use the Simplified Determination method to determine the creditable coverage status of the prescription drug plan offered to Medicare eligible individuals, then the plan sponsor must make an actuarial determination annually of whether the expected amount of paid claims under the prescription drug coverage is at least as much as the expected amount of paid claims under the standard Medicare prescription drug benefit. It is our hope that CMS will review and revise its guidance in the near future.

In addition to the notice, A Disclosure to CMS Form must be submitted to CMS on an annual basis and upon any change that affects whether the drug coverage is creditable. CMS has not suggested (as yet) whether this filing deadline will be modified. Currently, disclosure to CMS must be made at the following times:

• Within 60 days after the beginning date of the plan year.
• Within 30 days after the termination of the prescription drug plan.
• Within 30 days after any change in the creditable coverage status of the prescription drug plan.

CMS has posted revised model notices with the only change being to the Medicare Part D Annual Enrollment Period. Revised creditable and non-creditable model notices are effective April 1, 2011.

WE WILL KEEP YOU APPRISED AS MORE INFORMATION BECOMES AVAILABLE.

ADDITIONAL INFORMATION

For specific questions concerning information contained in this INSIGHTS & IMPLICATIONS, please contact your Chernoff Diamond consultant.

Information contained in this INSIGHTS & IMPLICATIONS is not intended to render tax or legal advice.  Employers should consult with qualified legal and/or tax counsel for guidance in respect of matters of law, tax and related regulation.

Chernoff Diamond provides comprehensive consulting and administrative services with respect to all forms of employee benefits, risk management and qualified and non-qualified retirement plans.

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