Alerts

Executive Summary

Group health plans that provide prescription drug coverage and cover individuals who are eligible for Medicare Part D prescription drug coverage are required to complete an online disclosure form with the Centers for Medicare & Medicaid Services (CMS) each year (and at other select times) indicating whether the plan's prescription drug coverage is creditable or non-creditable.

The plan sponsor must complete the online disclosure within 60 days after the beginning of the plan year (and within 30 days of any change in the plan’s creditable status or termination of the plan). For calendar year health plans, the deadline for the annual online disclosure is March 1, 2025. (Plans with non-calendar year plan years should adjust the deadline accordingly).

The obligation technically only applies if the employer plan covers individuals who are eligible for Medicare Part D. An employer may not be privy to all the information that would generate that eligibility (which includes disabled individuals), so it is generally a best practice to file the disclosure with CMS regardless of an employer plan population. 

MEDICARE PART D ELIGIBLE INDIVIDUALS

The group of individuals who are eligible for Medicare Part D prescription drug coverage includes active employees who are age 65 or older; some disabled employees; dependents and spouses; COBRA participants; and potentially their spouses and dependents. 

Creditable Coverage

A group health plan's prescription drug coverage is considered creditable if its actuarial value equals or exceeds the actuarial value of the Medicare Part D prescription drug coverage. That is, the coverage is creditable if the group health plan's prescription drug coverage pays at least as much as the expected amount of paid claims under the Medicare Part D prescription drug benefit.

The determination can be complex, and employers need to work with their advisors to make that determination. Fully insured plans can rely on the determination of the insurance carrier, and self-funded plans will typically rely on the determination made by the plan’s third-party administrator.  (TPA). Recent revisions to Medicare Part D, which made the benefits more generous, could make more employer plans non-creditable. Therefore, employers cannot simply rely on prior-year determinations of the value of the benefits.  

CMS Disclosure Portal 

Employers must use the online portal at the CMS creditable coverage website. The portal has a link to the online form.

The form is mostly self-explanatory and is generally easily navigated. The required information for the group health plan includes the types of coverage, number of options offered, creditable coverage status, the period covered by the disclosure, number of Part D-eligible individuals covered (which may have to be an estimate), date the creditable coverage disclosure notice is provided to Part D-eligible individuals and any change in creditable coverage status.

The portal includes additional guidance and instructions on how to complete the form.

Consequences of Missing the deadlines

There are no explicit penalties that would be assessed against a plan sponsor that fails to meet the disclosure deadlines regarding the creditable coverage notifications to CMS and the affected plan participants. However, if a plan participant is unaware that the employer coverage is not creditable and fails to enroll in Medicare Part D timely, that individual could be assessed a permanent late enrollment penalty. The penalty is 1% for each uncovered month of the “national base beneficiary premium” ($36.78 in 2025)

Timing of the Disclosure 

The disclosure must be made to CMS annually, and whenever any change occurs that affects whether the coverage is creditable. That includes:

• Within 60 days after the beginning date of the plan year for which the entity is providing the disclosure to CMS;
• Within 30 days after the termination of a plan's prescription drug coverage; and
• Within 30 days after any change in the plan's creditable coverage status.

Most group health plans retain the same coverage throughout the plan year. However, assuming the plan sponsor retained the right to make changes during a plan year, they can make changes accordingly. If a change is made, employers should take care to communicate those changes to the plan participants, so they are aware of any potential changes (and send a summary of material modifications – SMM – within 210 days of a plan year-end in which there is a material modification of the change). The change will typically permit plan participants to adjust their cafeteria plan elections accordingly (assuming their changes are made timely).

Disclosures to Plan Participants

Unfortunately, the filing with CMS is only one part of the required disclosure. Plan sponsors must also disclose to individuals eligible for Medicare Part D whether the plan's prescription drug coverage is creditable. That disclosure to the Medicare Part D eligible individuals can happen at several times throughout the year, including “prior to” the Medicare Part D enrollment period (beginning each year on October 10), an individual’s eligibility for Medicare Part D, upon the eligibility of an individual becoming eligible for the plan, upon request, and upon any change to the plan coverage where it is no longer creditable. The obligations are generally satisfied if the notice is sent each year at open enrollment or by October 15. Most employers will also include the notice with new enrollments to ensure the bases are covered.  

CMS has model disclosure notices for plan sponsors to use when disclosing their creditable coverage status to Medicare beneficiaries.

Conclusion 

Plan sponsors should be aware of all plan deadlines and work with their advisors to meet those deadlines. Although the plans are unlikely to be assessed penalties in this instance, in most cases, in addition to downsides for plan participants, the plan itself may be assessed a penalty. Employers can utilize the World Compliance Calendar to help them keep track of those deadlines.  

This Legal Update is not intended to be exhaustive, nor should any discussion or opinion be construed as legal advice. Readers should contact legal counsel for legal advice. All rights reserved.