October 3rd, 2024 – Each year employers who offer health insurance benefits to employees are required to file notices of creditable coverage both with CMS and with employees by October 15th and again mid-year, if the plans are no longer creditable coverage for Medicare Part D.
While companies are not required to offer creditable coverage for Medicare Part D, they are required to let both CMS and employees enrolled in these plans know if they are creditable or not.
While this has been a requirement for years, it has particular significance this year due to recent changes brought about by the Inflation Reduction Act, which caps a $2,000 out of pocket maximum on Part D prescription drug plans starting January 1st, 2025. That new $2,000 cap on the out of pocket maximum for prescription drug benefits means that many plans that were creditable in the past, may not be in 2025.
If groups are offering multiple plans, they must identify which plans are and are not creditable. Most fully insured groups can easily find out if their plans offered to employees are creditable or not by asking their broker or contacting the carrier. Level and self funded groups should also reach out to their broker or the carrier. The determination of whether plans are creditable or not is quite complex and actuaries that work for the carriers are who make those determinations.
Once employers know if they plans are creditable or not, they simply need to let both CMS and the employees know. CMS provides a Disclosure to CMS form for employers to fill out annually by October 15th. CMS also provides model notices for employers to use for employees due by October 15th. These notices should both also be sent out again mid-year if a plan’s status changes to non-creditable.
Employers need to provide notices in a timely manner to give employees opportunity to enroll in Medicare Part D. Otherwise, employees over age 65 without creditable coverage will be subject to a Part D late enrollment penalty for every month they did not have creditable Part D coverage, that they’ll have to pay every month for the rest of their lives.
The loss of creditable Part D coverage (2024 was creditable, 2025 is not) IS a qualifying event for employees Medicare Part D enrollment.
When employees over 65 leave their employer, it’s worth noting that COBRA benefits are NOT considered creditable coverage for either Medicare Part B or Medicare Part D, which also can have result in lifetime financial penalties after their 8 month initial enrollment period.
Generally speaking, employees over 65 are wise to enroll in Medicare A, B & D as soon as they come off of Medicare and, at a minimum, within the 8 month Special Enrollment Period after the group health plan coverage or the employment ends, whichever happens first. The reason for this is that Medicare becomes primary when a person goes onto COBRA. That means the insurer may pay, as if the person was enrolled in Part B, whether or not they are enrolled in Part B. This “Medicare Estimation” payment principal also applies to groups under 20 employees, so those employees should also enroll in Medicare A, B & D when they turn 65.
As such, it’s always good advise for employees (and their enrolled spouses) over age 65 to keep copies of records of all their years of Part D creditable coverage from the time they turned 65 to when they enrolled in Medicare.
