Each year, prior to Medicare’s Annual Election Period, employers must send notices of creditable coverage to all employees over age 65 (or any other employee or dependent otherwise eligible for Medicare).
What is creditable coverage? If a health insurance plan (in this case, a group policy) is expected to pay, on average, as much as a standard Medicare Part D policy, that is called “creditable coverage”. It means that the prescription drug benefits of a healthcare plan is at least equivalent in coverage to what Medicare Part D plans would offer.
What must the notice of creditable coverage communicate? Prior to October 15 each year, employers must supply written notice to all
- Medicare-eligible employees
- COBRA-covered individuals
- retirees covered by the group health plan
- and all dependents of these employees or former employees
The notice simply certifies that the prescription drug plan offered by the group health plan qualifies as “creditable coverage” for the purposes of being equivalent with Medicare Part D.
Why does creditable coverage matter? The Medicare Modernization Act imposes a late enrollment penalty on individuals who do not maintain prescription drug coverage for 63 days or longer, following their initial date of Medicare eligibility. The notice serves to inform individuals that their group health plan does provide this coverage. Otherwise, if they are not maintaining coverage they should consider enrolling in Medicare Part D promptly, in order to avoid a penalty later.
How does Medicare know whether an individual has maintained creditable coverage? The law also requires employers to file an online disclosure to certify the creditable coverage status of their group health plan. This disclosure should be filed no later than 60 days from the beginning of the plan’s contract year, within 30 days of termination of a prescription drug plan, or within 30 days of any change to the status of creditable coverage.
Again, notices of creditable coverage must be sent to all affected employees and former employees by October 15. Medicare must also be notified of your plan’s creditable coverage status. Contact us with any questions regarding these notices, so that we can assist you in properly complying with the law.