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| Posted on: Thursday, September 29, 2005 |
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Beginning Oct. 1, 2005, Americans will encounter a blitz of promotional TV, radio and print ads intended to create awareness and educate Medicare-eligible individuals on the opportunities of enrolling in the new Part D prescription drug benefit. Medicare-eligible individual who do enroll in Part D will be given a wide range of prescription plan choices. As of Sept. 23, 2005, Centers for Medicare and Medicaid Services (CMS), which oversees the health program for the elderly and disabled, announced that it has approved plans by 10 health insurers and pharmacy benefit managers to sell Medicare drug plans in all parts of the country.
The advent of Medicare Part D coverage also impacts employers who offer a prescription drug plan to Medicare-eligible individuals (employees, retirees and dependents over age 65). Such employers are required by CMS to determine their health plan’s prescription drug plan creditability status (“creditable” or “non-creditable”) and then communicate that determination via a written Disclosure Notice to all Medicare-eligible individuals by no later than Nov. 15, 2005. Many insurance companies have begun to notify employer plan sponsors of the results of their internal testing as to whether the employers’ sponsored plans are creditable or non-creditable. Self-funded plan sponsors may use the determination criteria listed below to determine their prescription drugs plan’s creditability status.
Additionally, employers must provide a disclosure of their plan’s creditable coverage status to CMS on an annual basis; however, to date CMS has not yet published the requirements for this disclosure. Further guidance from CMS is expected in the coming weeks.
What is the Purpose of the Disclosure Notice?
Medicare-eligible individuals need to know if their current prescription drug coverage is creditable in order to decide if they wish to enroll in Medicare Part D. The initial Medicare Part D open enrollment period is Nov. 15, 2005 to May 15, 2006. Thereafter, enrollment periods will be scheduled for Nov. 15 – Dec. 31 of each year, unless an individual qualifies for a special enrollment period. Individuals without creditable coverage could be subject to a late enrollment penalty of 1% per month if they go 63 days or more without creditable coverage and subsequently enroll in a Part D plan. This penalty is effective as long as the individual remains enrolled in a Part D plan.
What is Creditable Coverage?
Coverage is creditable if, on average, it is at least as good as standard Medicare prescription drug coverage (see below for details). For purposes of the disclosure requirement, an employer can determine that its prescription drug coverage is creditable if it meets all four of the following standards. The determination does not require an attestation by a qualified actuary if it is used solely for purposes of meeting the disclosure Notice requirement.
1. Brand and generic prescriptions are
covered by the plan; and
2. Members of the plan have reasonable
access to retail providers and,
optionally, for mail order coverage; and
3. The plan is designed to pay on
average at least 60% of participants’
prescription drug expenses; and
4. Satisfies at least one of the following:
a. The prescription drug coverage has
no annual maximum benefit or a
maximum annual benefit payable
by the plan of at least $25,000, or
b. 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.
c. For plans with integrated health
coverage (meaning the plan’s Rx
coverage is integrated with other
health coverage), the integrated
health 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 a least $25,000 and
has no less than a $1,000,000
lifetime combined benefit
maximum.
If a plan sponsor offers more than one prescription drug plan, the determination as to creditable coverage is required to be made separately for each prescription drug plan.
When Must an Employer Provide the Notice?
CMS dictates that, at minimum, the Notice must be given at the following times:
1. Before November 15th of each year
2. Before an individual’s initial enrollment
period for Part D benefits
3. Before the effective date of coverage
for any Medicare-eligible individual
who joins the employer-sponsored
group health plan
4. Whenever the employer’s prescription
drug coverage ends or changes status
as creditable or non-creditable
5. Upon an individual’s request
However, employers can satisfy the requirements that Notices be provided before the events listed above if Notices are provided to all plan participants every twelve months before Nov. 15th, upon any change to the prescription drug coverage under the plan, and upon a beneficiary’s request.
Are Model Notices Available?
Yes, CMS has provided model Notices for both Creditable and Non-Creditable coverage that employers may use.
Retiree Health Plan Sponsors – Deciding Whether to Pursue the Subsidy
If an employer has a qualified retiree prescription drug plan that has been determined to be creditable, the employer may apply for a 28% subsidy, meaning an employer may receive an amount equal to 28% of allowable costs of retirees’ drugs between $250 and $5,000 per qualifying covered retiree in 2006, net of any rebates or other price concessions.
In general, a qualifying covered retiree is defined as a Part D-eligible individual who is not enrolled in a Medicare Part D plan, but who is covered (as the participant, or as the participant’s spouse or dependent) by employment-based retiree health coverage that meets the standards in 42 CFR §423.884 deeming it a qualified retiree prescription drug plan. A participant is presumed not to be covered under retiree health coverage if the participant is receiving health coverage based on current employment status from the plan sponsor. This optional step of applying for the subsidy requires additional actuarial testing and an application must be submitted to CMS by Oct. 31, 2005.
For additional information regarding the Part D Retiree Drug Subsidy, CMS has prepared the following FAQs: http://www.cms.hhs.gov/medicarereform/pdbma/Qualifying_Covered_Retirees.pdf
Features of Standard Medicare Prescription Drug Coverage
For eligible individuals who choose to enroll in Medicare prescription drug coverage, the actual coverage will be provided through Medicare Prescription Drug Plans, Medicare Advantage Plans, and other health plans that include Medicare prescription drug coverage. Each insurance company or pharmacy benefit manager can offer several options, with different benefits and copayments. The standard Medicare prescription drug coverage is structured as follows:
Monthly premium of around $32 (in
2006)
•
$250 deductible
•
From $251 to $2,250, Medicare pays
75% of drug costs and plan enrollee
pays 25%
•
From $2,251, plan enrollee pays
100% until true out-of-pocket
spending reaches $3,600
•
After plan enrollee reaches $3,600 in
true out-of-pocket spending, Medicare
pays approximately 95% of drug costs
All Medicare Prescription Drug Plans will cover both brand-name and generic drugs. Some plans may offer enhanced coverage for an additional premium.
For more information about Medicare Part D, please refer to CMS Medicare Part D current publications.
Should you have any additional employee benefit questions or would like to discuss this material in detail, please don’t hesitate to call the Denman Team.
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