To understand more about the Medicare Part D-Rx Prescription Drug Benefits and Medi-Gap Insurance (that helps cover the “gaps” in these and other Medicare benefits), I have published an article titled: “The ABCs and Now…Ds of Medicare & Medi-Gap Private Supplemental Insurance Coverages” by Paul M. League, QFP, CFP® [Originally published in Financial Services Journal Online 12/06 & CA Broker Magazine 1/06. Partially last updated herein 2014].
Medicare Part D – Prescription Drug Benefits ~ Employer Responsibilities Under This Law
by Paul M. League, QFP — QUALIFIED FINANCIAL PLANNER · www.LeagueFinancial.com
The Government has added a new benefit to Medicare, called Medicare Part D Prescription Drug coverage. This became effective 1/1/2006, and effects you as an employer “sponsor” of Rx or Prescription Drug Benefits through your company provided Group Health Insurance, and it also effects those of your covered employee/dependents who may be “Medicare Eligible”.
As such employers have two responsibilities under this new law; namely, to learn whether or not their sponsored group Rx benefits are “creditable” (equal to or better than the new Medicare Part D Rx benefits) or “non-creditable”, and to then provide NOTICE to all of their covered and Medicare “eligible” employees/dependents (a copy of the Insurance Companies “Letter of Determination”), AND then, to go online to the CMS website and complete the online Disclosure Notice Form (a new legal and government requirement under this new Medicare Part D coverage law).
Pease note the following CMS (Centers for Medicare and Medicaid Services) Disclosure Notice requirement that you must observe regarding your current Prescription Drug/Rx Insurance benefits and/or stand alone Prescription Drug/Rx benefits.
You must take action NOW, before the first or initial deadline of March 31, 2006, to avoid any potential problems or fines.
MMA (the Medicare Modernization Act) imposes a late enrollment penalty on individuals who do not maintain Creditable Prescription Drug Coverage for a period of 63-days, or longer, following their initial enrollment period for the NEW (as of 1/1/2006 onward) Medicare Part D Prescription Drug Benefit.
MMA mandates that certain “Sponsors” offering prescription drug coverage, including employer and union group health plan sponsors, disclose to all Medicare “eligible” or sponsor plan covered individuals (employees and dependents), and/or those with prescription drug coverage under their sponsorship, or other applicable plan, whether such Rx coverage is “creditable” or not. This information is essential to an individual’s decision as to whether to enroll in the Medicare Part D prescription drug plan or not when they become “eligible”.
Who must provide the Disclosure Notice to CMS?
Group health plans, including those offered (“sponsored”) by employers
Church, Federal, State and local government and other group-sponsored plans
Governmental sponsored plans including: Medicaid; State Pharmaceutical Assistance Programs (SPAPs), and State High Risk Pools
Military coverage including Veteran’s Administration coverage and TRICARE
Individual Health Insurance
Indian Health Insurance; Tribe or other Tribal Organizations; Urban Indian Organizations
Medigap (Medicare Supplemental Insurance Plans, including standardized plans H, I or J); pre-standardized Medigap plans
waiver State Plans; and plans with “innovative” benefits.
Retiree Drug Subsidy (RDS) – for those “Sponsors” approved for this subsidy they are exempt from filing the Disclosure Notice with the CMS, but ONLY with respect to those qualified covered retirees for which the Sponsor is claiming the RDS subsidy (in such cases the Sponsors RDS application serves as its disclosure to the CMS under 42 CFR 423.56(e).
The following page provides guidance documents relating to Creditable Coverage requirements for various “Sponsors”, and model Notice Documents:
Downloads – http://www.cms.hhs.gov/PrescriptionDrugCovGenIn/
IMPORTANT DATES: The Disclosure to the CMS must be made on an annual basis, AND upon any change that affects whether the drug coverage is “creditable”, to avoid any potential problems or fines.
The INITIAL NOTICE must be provided by no later than March 31, 2006.
For plan years that end in 2007 and beyond, disclosure of creditable coverage status must be provided within 60 days after the beginning date of the plan year for which the entity is providing the disclosure to CMS.
Within 30 days after the termination of the prescription drug plan; and,
Within 30 days after any change in the creditable coverage status of the prescription drug plan.
HOW TO COMPLY & PROVIDE THE CMS WITH YOUR
DISCLOSURE OF CREDITABLE COVERAGE:
The CMS has provided a SOLE METHOD FOR COMPLIANCE FOR A SPONSOR TO REPORT TO THE CMS, and that is through the CMS online Disclosure Form at the following website address:
Online CMS Disclosure Notification Form: https://www.cms.hhs.gov/apps/ccdisclosure/default.asp
Please first contact your present Insurer and obtain from them a letter confirming whether or not the specific Rx benefits of your current Insurance does or does not represent “creditable coverage” under the new Medicare Part D Prescription Drug Benefit. Once you obtain this letter you must immediately provide this to any and all Medicare eligible and/or covered employees and/or dependents (eligible, enrolled or covered under your Rx benefits plan or that of any other), as required under law, and then you must proceed to the CMS website above and complete your online Disclosure Form filing BEFORE THE DEADLINE and as changes occur thereafter (see above “IMPORTANT DATES”).
Employers should keep copies of this letter and of the online CMS filing Disclosure Form for your files so that you are able to later prove that you timely fulfilled your initial AND ongoing requirements under this new Disclosure Notice Law.
Additional Background & Important Notes:
Q: Why do employers care about this?
A: Even if you do not now have any Medicare “eligible” employees or their covered dependents, you need to act now. Employers want to protect themselves by providing the above “creditable Rx coverage” letter to their covered employees/dependents, as is required under the Law, so that these persons don’t come back at a later date claiming against you that you failed to timely and properly notify them whether or not their Rx benefits coverage was/is “creditable” or not. Were you to fail in doing so, at least annually or more frequently as situations change, they could solidly claim financial damages against you in a court of law.
Q: Why would the employees care about this?
A: If they fail to enroll in the NEW Medicare Part D Rx benefits when they become eligible, they will be charged a cumulative penalty (1% a month until the date they do enroll), which will result in their Medicare Part D premiums being at a higher rate, from the date when they finally do enroll and for the remainder of their lives that they remain covered under Part D.
If, however, they did have “creditable coverage” (within 63-days just prior to enrolling in Medicare Part D), then the penalty does NOT apply to them. In other words, if your coverage is “creditable”, then Medicare eligible employees/dependents can opt to stay covered under your group Rx benefits and NOT be subject to any Late Enrollment Penalty if and when they later may decide to want to get onto Medicare Part D Rx coverage (i.e. this typically occurs for people who work past the typical Age 65 Medicare eligibility date and retire later, loosing their group Rx benefits, and needing to then enroll in Medicare Part D…and, who will also want to consider acquiring a Medigap plan to pick up the “gaps” in the basic Medicare Part A, B and D benefits.
The only way the CMS (Government) can monitor this is by “forcing compliance” and tracking who has and who does not have “creditable coverage”; hence, the requirement for employers, and others, to learn from their Insurance company whether or not their existing Rx benefits are “creditable” or not.
Employers and eligible employees/dependents have responsibilities under this new Law; hence, the reason for you to obtain letters from the Insurer of your present group Rx benefits, your providing of that letter of determination to each of your employees and their dependents AND your completing of the CMS online “Disclosure Notice Form”.
If your coverage is NOT CREDITABLE none of your Medicare eligible employees/dependents would likely want to remain covered under your group Rx benefits, and would instead want to timely enroll in the NEW Medicare Part D Prescription Drug Benefits, along with a Medigap plan.
If you require any assistance with this please feel free to call upon us: 1.800.482.5347
Disclaimer: The material discussed herein is meant for general illustration or informational purposes only and is not to be construed as financial advice. Although the information has been gathered from sources believed to be reliable, it is not guaranteed. Please note that individual situations can vary; therefore, the information contained herein should be relied upon only when coordinated with individual professional advice. We are not licensed for and therefore do not provide tax or legal advice.
About the Author: Paul M. League, QFP — QUALIFIED FINANCIAL PLANNER, is the Founding Principal of League Financial & Insurance Services (www.LeagueFinancial.com), which is a privately held company, established in 1984, and located in Palm Desert, CA. Paul and his company specialize in assisting clients to create, expand & preserve assets “…in a league of our own.” Contact Information: Paul M. League, P.O. Box 11800, Palm Desert, CA 92255-1800; 800.482.5347; Info@LeagueFinancial.com. © Paul M. League. All rights reserved.
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