Under the Medicare Part D program, employers in the United States have certain obligations, regardless of whether or they provide medical benefits for retirees. And it isn’t just about providing Disclosure Notices to their active and retired employees.

 

Disclosure Notice Defined

Disclosure Notice is an indication of whether or not the medical benefit that an employee provides is CREDITABLE or not. Determining if a coverage is creditable or not is critical -  if Medicare beneficiaries decide to enroll past the enrollment period, they will have to pay the penalty if they didn’t have creditable coverage.

 

Creditable coverage includes coverage under a health plan not followed by a break in coverage of 63 days. Strictly speaking, a health coverage plan only becomes creditable if the so-called “actuarial value” of the health plan coverage is equal to, or exceeds, the value of a standard Medicare Part D plan.

A Disclosure Notice must be provided to employees

(a) twelve months before the election of period of Part D,

(b) twelve months before the employee’s initial enrolment period for Part D coverage,

(c) twelve months before a Part D plan’s effective date of its coverage,

(d) whenever the creditable coverage of the individual no longer becomes creditable.

However, since calculating the actuarial value is expensive and time-consuming, the Centers for Medicare and Medicaid Services (CMS) has an alternative way of determining if an existing healthcare coverage is creditable under a Part D plan. To be determined as creditable, a drug coverage plan must meet these requirements:

• Covers generic prescription drugs and brand name prescription,

• Gives recipients reasonable access to drug retailers and optionally provide mail order coverage,

• Pays at least 60% of the beneficiaries’ expenses for prescription drugs, and

• At least satisfies one of the following:

• The prescription drug benefit does not have a maximum annual benefit or a payable annual benefit of at least $25,000,

• the plan’s payable amount is at least $2,000 for every Medicare-eligible person in 2006,

•  For healthcare providers that have integrated health coverage, the deductible amount must be no more than $250 every year, has no maximum annual benefit (or benefit payable) of at least $25,000 and has a lifetime combined maximum benefit of $1,000,000.

The Importance Of Disclosure Notice

Why should employers bother with Disclosure Notices? Aside from the fact that it is required by the CMS, it will also benefit the Medicare recipients.

Eligible person who do not enroll in a Part D plan within the initial enrollment period will pay a penalty unless they prove that they had creditable coverage for at least 63 days after the enrolment period.

There is a cost for enrolling late in a Part D plan and not having creditable coverage. You will pay at least one percent (1%) of the premium for each month you went without creditable coverage. This is on top of the premium you need to pay. Essentially, without creditable coverage, you will need to pay the premium amount plus 1% of the premium for each month without creditable coverage.