Feb 14, 2024
Reminder - Medicare Part D Creditable Coverage Reporting Requirement to CMS is Due By March 1, 2024 for Calendar Year Plans
In addition to the disclosure requirements to individuals, plan sponsors of prescription drug plans are also required to report to CMS annually, within 60 days of the beginning of the plan year. For example, for a calendar year plan, the employer should report by early March 2024 on whether the coverage offered for 2024 is creditable or non-creditable. Note that this reporting requirement is also separate and distinct from the Medicare Secondary Payer reporting requirements under Section 111 that are due to CMS on a quarterly basis and typically handled the insurance carrier or administrator. Reporting to CMS on the creditable status of the prescription drug coverage is generally the responsibility of the employer. This reporting is done electronically. The instructions and online form for reporting creditable status to CMS can be found by clicking here.
Determining Whether Prescription Drug Coverage Is Creditable Prescription drug coverage is creditable if the actuarial value of the coverage equals or exceeds the actuarial value of standard prescription drug coverage under Medicare Part D. In other words, coverage is creditable if the expected amount of paid claims under the coverage is at least as much as the expected amount of paid claims under the standard Medicare Part D benefit. Often an insurance carrier or third-party administrator will provide information to a plan sponsor detailing whether a plan’s drug coverage is creditable. But if a plan sponsor does not receive this information from the carrier or administrator, the plan sponsor (e.g., the employer) is responsible for making the determination.
If a plan sponsor is not applying for the subsidy available to sponsors of a qualified retiree prescription drug plan, the sponsor may be able to use a “simplified method” for determining whether the prescription drug coverage in a plan is creditable. To qualify for the simplified determination and be deemed creditable, the plan must meet the following criteria:
Cover brand-name and generic prescription drugs;
Provide reasonable access to retail providers;
Pay on average at least 60% of participants’ prescription drug expenses; and
Depending upon whether the plan is stand-alone or integrated (i.e., the prescription drug benefit is combined with other coverage with a combined deductible and annual/lifetime maximums):
- A stand-alone drug plan must satisfy at least one of the following standards:
- Have either no annual benefit maximum or a minimum annual benefit of $25,000; AND
- Have an actuarial expectation that the amount payable by the plan will be at least $2,000 annually per Medicare-eligible individual; or
- An integrated plan must:
- Have a maximum annual deductible of $250;
- Have either no annual benefit maximum or a minimum annual benefit of $25,000: AND
- Have a lifetime combined benefit maximum of at least $1 million.
See the simplified method description by clicking here.
If a plan does not meet the criteria under the simplified determination method, that does not automatically mean the plan is not creditable; but in that case, the plan must obtain an actuarial determination of whether the actuarial value of the coverage equals or exceeds the actuarial value of standard prescription drug coverage under Medicare Part D.
NOTE: For high deductible health plans (HDHPs), the prescription drug coverage will typically be integrated with the HDHP (i.e., shared deductible and maximum limits, if any). When that’s the case, the HDHP will not meet the simplified determination criteria for creditable coverage status because the annual deductible will always exceed $250. If the carrier or administrator does not advise as to the creditable status of the HDHP, it may require an actuarial determination to determine creditable status. For plan sponsors with calendar year plans, the deadline to comply with the annual disclosure to CMS is March 1, 2024.
While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it. This publication is distributed on the understanding that the publisher is not engaged in rendering legal, accounting, or other professional advice or services. Readers should always seek professional advice before entering into any commitments.
