Last month, in conjunction with the new Medicare Part D prescription drug program, the Centers for Medicare and Medicaid Services ("CMS") released three new model notices for use by employers after May 15, 2006. Although use of these model notices is optional, most employers that provide prescription drug coverage to Medicare-eligible individuals will want to use them.
Medicare Part D Program
The newest part of Medicare, Medicare Part D, generally provides an opportunity for individuals to elect to receive prescription drug coverage when they become entitled to Medicare Part A or B. Individuals who elect to take the prescription drug coverage must pay for it. With one important exception, if an individual does not take the coverage when he/she is first eligible for it, or if the individual takes the coverage initially and then drops it later, the individual will be charged higher than ordinary premiums for the coverage if he/she decides to take or renew it later. The exception to the rule will apply if the individual had sufficient prescription drug coverage from another source (for example, his/her employer) during most of the period the individual could have elected, but did not elect to have, Medicare Part D coverage. For individuals with adequate coverage from other sources, the higher premiums are not charged when they begin or resume Medicare Part D coverage.
How Do These New Notices Affect Employers?
Federal law requires employers that provide prescription drug coverage to Medicare-eligible individuals to notify the individuals, periodically, regarding the sufficiency (as compared to Medicare Part D) of the employer-provided coverage. Individuals who receive this information can then make informed decisions about whether to take, drop and renew Medicare Part D coverage. If the employer-provided coverage is sufficient to enable the individuals to avoid the higher Medicare Part D premiums should they decide to take Medicare Part D coverage later, the employer must notify the individuals that its coverage is "creditable." If the employer-provided coverage is not sufficient to prevent the individuals from paying the higher Medicare Part D premiums later, the employer must notify the individuals that its coverage is "non-creditable." Last year, the CMS provided two model notices that employers could adapt and use to provide the required creditable and noncreditable coverage notices. Those two notices are being replaced by the three new model notices effective May 15, 2006.
When Should Employers Use The New Notices?
Federal law requires employers that provide prescription drug coverage to Medicare-eligible individuals to notify them regarding the status (creditable or non-creditable) of their employer-provided coverage at the following times:
- annually, prior to the Medicare Part D Annual Coordinated Election Period, or "ACEP" (which occurs from November 15 to December 31 each year);
- prior to an individual's Initial Enrollment Period, or "IEP," for Medicare Part D (generally, the period beginning three months before and ending three months after the month the individual becomes Medicare-eligible);
- prior to the effective date of the employer-provided prescription drug coverage for any Medicare-eligible individual who joins the employer's prescription drug plan;
- whenever the employer-provided coverage changes from creditable to non-creditable coverage or from non-creditable to creditable coverage; and
- whenever a Medicare-eligible individual requests it.
However, if an employer provides notice annually, the CMS will consider it to have provided notice both prior to the Medicare Part D ACEP and the Medicare-eligible individual's IEP.
An employer is not required to use the CMS model notices, but whatever notice is given must contain certain information required by law. After May 15, 2006, employers may adapt and use all three of the new CMS model notices: (1) the new creditable coverage notice to provide notice of creditable coverage, (2) the new non-creditable coverage notice to provide notice of non-creditable coverage, and (3) the new personalized notice for a Medicare-eligible individual who requests information regarding the employer-provided prescription drug coverage he has received from the employer in the past. Medicare-eligible individuals may need these personalized notices as proof to the government that they qualify for the regular Medicare Part D premiums in order to avoid paying the higher premiums.
Where Can I Find The New Notices?
The three new CMS notices can be viewed and printed from the CMS's website.