Medicare Part D Overview of Options, Creditable Coverage, Required Notices, COB and Health Care Reform

Medicare Part D Objectives Today Medicare Part D Options Creditable Coverage Required Notices of Plan Sponsors Coordination of Benefits Impact of Health Care Reform Legislation Employer Response to Medicare Part D

Medicare Part D Medicare Prescription Drug, Improvement & Modernization Act of 2003 (MMA) MMA added a prescription drug program to Medicare (Part D of Medicare) available Jan. 1, 2006 Centers for Medicare & Medicaid Services (CMS) released final rules in January 2005 –CMS website: MMA provides options for plan sponsors to provide retiree prescription drug coverage

Medicare Part D Part D Options for Plan Sponsors Retiree Drug Subsidy –Retain current plan designs that are at least actuarially equivalent to standard Part D drug benefit Supplement standard Medicare drug benefit –Separate supplemental plans / coordinate benefits with Part D –Pay for enhanced coverage through Part D plan –Assist retirees in paying for Part D premium

Medicare Part D Retiree Drug Subsidy Pays 28% of retiree’s drug costs between $320 and $6500 in 2012 ($325 and $6600 in 2013) (tax-free*) Retiree Drug Subsidy Process: –Calendar year plans submit applications by 9/30 of each year; non- calendar year plans by 90 days prior to beginning of each plan year –Actuarial attestation that plan meets MMA’s actuarial equivalence standard –Disclose Creditable Coverage status of plan –Submit and update enrollment information about retirees/dependents –Electronically submit aggregate data about drug costs at year end * Employers receive Retiree Drug Subsidy payments tax-free. Employers may also take a tax deduction for their prescription drug costs, even amounts attributable to the subsidy. Under the health care reform law, effective for tax years beginning after Dec. 31, 2012, plan sponsors will no longer be able to take a deduction for the subsidy amount.

Medicare Part D Supplement Standard Medicare Drug Benefit Set up separate supplemental plans and coordinate benefits with coverage offered by Part D plans in which retirees are enrolled Pay for enhanced coverage through Part D plan to subsidize cost sharing and provide additional benefits; use waivers to allow employers to provide more flexible benefits and to limit enrollment to retirees Assist retirees in paying for some or all of Part D beneficiary premium

Medicare Part D Creditable Coverage Definition Coverage is creditable if actuarial value of coverage equals or exceeds actuarial value of standard Medicare prescription drug coverage –Whether the expected amount of paid claims under entity’s prescription drug coverage is at least as much as expected amount of paid claims under standard Medicare coverage Same as “gross test” for first prong of Retiree Drug Subsidy Plans with multiple benefits options – apply actuarial value test separately for each option

Medicare Part D Creditable Coverage Disclosure Notices: Part D eligible individuals must be provided with Creditable Coverage Disclosure Notice –Creditable or Non-Creditable –CMS model forms are available for use (not required) Must contain the following information: –Whether coverage is creditable or not, and explanation –Rights of beneficiary to notice –Coverage options of beneficiary –General information about workings of Medicare drug plan

Medicare Part D Creditable Coverage Disclosure Notices: Form and Manner of Disclosure –May be provided with other plan participant information materials (for example, enrollment or renewal materials) if disclosures are “prominent and conspicuous” –Single notice to covered Medicare individual and dependents under same plan at same address –Electronic notice only if certain detailed requirements met

Medicare Part D Creditable Coverage Disclosure Notices: Timing of Disclosure Notice –At a minimum, disclosure must be made: Prior to Medicare Part D Annual Coordinated Election Period (10/15 – 12/7) of each year* Prior to individual’s Initial Enrollment Period Prior to effective date of coverage for eligible individual Whenever prescription drug coverage ends or changes and is not creditable or becomes creditable Upon beneficiary request * Prior to 2011, the Annual Coordinated Election Period was from November 15 to December 31 of each year.

Medicare Part D Creditable Coverage Disclosure Notices: CMS must be provided with Creditable Coverage Disclosure Notice from plan sponsor –Creditable or Non-Creditable –Completion of electronic disclosure form on CMS website is sole means of compliance –Sponsor that has been approved for Retiree Drug Subsidy is exempt, as are entities that contract with Medicare directly or with a Part D plan –Notice must be provided on annual basis or upon any change that affects whether coverage is creditable

Medicare Part D Coordination of Benefits Part D plans are required to coordinate benefits with entities providing prescription drug coverage (including group health plans) Group health plans, though not required, may wish to respond to requests for information from Part D plans/enrollees to avoid adverse employee relations –Be prepared for questions from Part D eligible individuals about interaction of employer-provided plans with Part D plans –Establish procedures for responding to requests for information from Part D plans / CMS

Medicare Part D Enforcement and Penalties MMA provides no provisions for CMS to enforce penalties/sanctions against employers that fail to comply with Disclosure Notice or COB requirements (other than not qualifying for Retiree Drug Subsidy) Other laws, such as ERISA (for example, fiduciary obligations) or the Medicare secondary payer rules, may provide related penalties/sanctions Issue of lack of enforcement against employers may be reopened at later date

Medicare Part D Impact of 2010 Health Care Reform Law The Annual Coordinated Election Period will run from October 15 through December 7 of each year, starting in the fall of 2011 Part D covered drugs are expanding to include more drugs “Donut Hole” is closing – the coverage gap will decrease each year starting in 2011, until it is eliminated in 2020

Medicare Part D Impact of 2010 Health Care Reform Law Part D premium subsidy for high-income beneficiaries is reduced, starting in January 2011 – certain beneficiaries are subject to income-related premium Employers will lose ability to deduct the 28% retiree subsidy from their taxes, effective for tax years beginning after Dec. 31, 2012 Coverage gap discount program is available for drugs dispensed on or after Jan. 1, 2011

Medicare Part D Select Items to Consider in Employer Response to Medicare Part D Determine whether to pursue options to provide retiree prescription drug coverage –Consider effect of health care reform issues Plan language should be reviewed regarding plan design goals, and compliance with notice and COB Determine whether group health plan currently has (or may have) Part D eligible individuals in plan Determine whether plan sponsors are required to provide Disclosure Notices to Individuals/CMS

Medicare Part D Select Items to Consider in Client Response to Medicare Part D Determine if coverage is creditable or non-creditable and decide what notices to use Decide how to distribute notices –Third party service provider –Blanket delivery or only to Part D eligible individuals –Separate mailings or electronically Comply with COB requirements with Part D plans and respond to requests for information

Medicare Part D Model CMS Forms Two Model Notices from Entity to Beneficiary: –Creditable Coverage, or –Non-Creditable Coverage Model notices are not required to be used, but then must meet content standards provided in regulations Notice from Entity to CMS – electronic disclosure form regarding creditable coverage status only available on CMS webpage at: asp asp

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Medicare Part D Discussion

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