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Medicare Drug
Coverage Deadlines Approaching
Two important
deadlines are fast approaching for employers who offer group health
coverage regarding the new Medicare prescription drug plan, known as
Medicare Part D. The deadlines are:
- Employers who
offer health coverage to retirees may be eligible for a subsidy from
the federal government to cover part of the cost of their prescription
drug coverage. The deadline for applying for this subsidy is
October 31, 2005.
- Employers with
employees who may be eligible for Medicare prescription drug coverage
must notify these employees by November 15, 2005 if their
private health care plan has better drug coverage than what Part D
will offer, so the employees can decide whether to enroll in the
Medicare drug plan. (Part D benefits are generally available to
anyone who has reached age 65 or who is disabled).
Retirees
Subsidy
The federal subsidy
for employers that provide prescription drug benefits to their retirees
amounts to 28 percent of the actual drug expenses incurred by plan
beneficiaries. Under the tiered coverage system of the new Medicare
drug plan, those expenses can range from $250 to $5,000 annually, so the
subsidy can significantly reduce the cost of providing drug coverage to
retirees. To qualify for the subsidy, the employer-sponsored health
plan must have what is termed "creditable coverage" for prescription
drugs.
Coverage is
considered "creditable" if its actuarial value equals or exceeds the
actuarial value of standard prescription drug coverage under the
Medicare prescription drug benefit. In general, this actuarial
equivalence test measures whether the expected amount of paid claims
under the plan sponsor's prescription drug coverage is at least equal to
the expected amount of paid claims under standard prescription drug
coverage under Medicare.
To apply for the
government subsidy, employers must fill out an application form online.
The starting point for applying is at this Medicare website:
http://rds.cms.hhs.gov/
The application
process is not simple and requires that there be an attestation by an
actuary that the private health care plan's drug coverage is deemed
"creditable." Because of the actuarial tests required, employers should
begin the application process as soon as possible in order to meet the
October 31 deadline for completing the application.
Medicare
Eligible Employees
The November 15
deadline for notifying Medicare eligible employees of their options for
drug coverage will affect more employers than the retirees subsidy
deadline. Every employer that offers prescription drug coverage must
notify their Part D-eligible employees by that date whether coverage
under the employer's plan is considered creditable coverage or not. The
difficult part of the notification is that spouses and dependents of
employees who are Medicare eligible and are covered under the
employer-sponsored health plan must also receive this notice.
The November 15
notification is crucial to employees in two ways: 1) it will help the
employees decide if they should enroll in the Part D program or stick
with the employer-provided drug plan, and 2) they need to know if their
private plan has creditable coverage in order to avoid the late
enrollment penalties that Medicare imposes. If a private plan does have
creditable coverage (coverage at least as good as Medicare's) then an
employee may stay with their private plan as long as they wish and when
they do enroll in Medicare, their monthly premium for drug coverage
would be the same as if they had enrolled initially. If their private
coverage is not creditable, then they are assessed a fairly substantial
late enrollment penalty if they do not enroll in Medicare Part D during
the initial open enrollment period, which is from November 15, 2005
until May 15, 2006.
The Notice of
Creditable Coverage must explain to the affected employees whether the
plan sponsor's prescription drug coverage is creditable. If the
coverage is not creditable, this information must also explain that
there are limitations on the periods during the year in which the
individual may enroll in a Medicare drug plan and that the individual
may be subject to a late enrollment penalty. Determining if a plan's
coverage is creditable may involve the use of an actuary (although
Medicare has set some standards for what plans require to be deemed
creditable) so employers should not delay in starting the process.
A model form for
the notice to employees is available at this Medicare website:
http://www.cms.hhs.gov/medicarereform/CCguidances.asp.
In
addition to notifying Part D-eligible employees if the private plan
provides creditable coverage, the employer must also notify Medicare
whether their coverage is creditable. Also, Notices of Creditable
Coverage must be provided annually to new enrollees and upon any change
in the employer health plan that would impact whether the plan's drug
benefits are considered creditable coverage.
If your
organization offers health coverage to retirees or employs individuals
(or their spouses) who are Medicare eligible, you are affected by the
new Medicare prescription drug coverage program and need to be aware of
the notice obligations under it. The November 15 notification
requirement deadline is important because eligible employees need the
information provided by that notice to determine whether to enroll in
Medicare Part D or to remain with the employer-sponsored plan.
For
more information, please contact your HR-OneSource Consultant or Mary
Sanders -- 515.221.1718 or sandersm@hr-onesource.com
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