Understanding the Impact of Medicare Part D Changes on Group Health Plans: An Employer’s Guide
Susan Diamond | September 3, 2024
Get ready for significant adjustments to Medicare Part D starting January 2025 that might impact your business’s health plan. Certain high-deductible health plans (HDHPs) which were previously compatible with Medicare Part D may no longer qualify. Here’s what you, as an employer, need to know.
It’s essential for businesses providing a group health plan with prescription drug coverage to establish whether their coverage is creditable or not. Employers must then impart this information about creditable or non-creditable coverage status to employees, their families, and the Centers for Medicare & Medicaid Services (CMS) annually.
What’s noteworthy is that there’s no requirement for employers to retain creditable coverage and therefore, no penalties for having non-creditable coverage.
This information plays a crucial role for Medicare Part D eligible employees deciding to enroll in Medicare Part D or not. They may incur late enrollment penalties if they postpone enrollment and later discover that their employer’s prescription drug plan is not creditable.
WHAT’S THE BIG CHANGE?
Amendments in the Medicare Part D drug benefit, as a result of the Inflation Reduction Act of 2022, aimed at decreasing prescription drug expenses for Medicare beneficiaries.
As of January 2025, these advancements in the Part D drug benefit imply that employer-sponsored coverage, previously deemed creditable, might cease to be so. It is predicted that some high deductible health plans (HDHPs) qualifying for HSA might lose their creditable status.
ARE EMPLOYERS PENALIZED FOR LACK OF CREDITABLE COVERAGE?
No, there’s no requirement for prescription drug plans to be deemed creditable. However, employers are responsible for notifying Medicare Part D eligible employees about the credibility status of their plan.
ARE EMPLOYEES PENALIZED FOR ENROLLING IN A PLAN WITHOUT CREDITABLE COVERAGE?
If an employee’s prescription drug plan has creditable coverage, they won’t face penalties for late enrollment into Part D. However, if their plan is deemed non-creditable, they could be penalized for late enrollment.
WHAT SHOULD YOU DO NOW?
Check if your prescription drug plan retains its creditable status from the plan year starting January 1, 2025. It is advisable to issue the Medicare Part D notice at the start of the open enrollment period October 15, 2024 for the 2025 plan year to avoid any confusion.
Remember, there are specific distribution timings for the Medicare Part D notice. Issuing this notice yearly, for example, during open enrollment, will satisfy notice obligations. Exceptions apply for new enrollees or if a change in creditable status occurs.
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