A Q&A on Medicare Part D

When it comes to Medicare Part D, we know you have questions. Luckily, Diversified Group has answers! Below are a few of the frequently asked questions we have received regarding Medicare Part D.

How Do I Determine if Our Prescription Plan is Credible or Not?

Employers are not required to obtain an attestation by a qualified actuary when determining creditable coverage status unless they are electing the retiree drug subsidy. As an alternative to hiring an actuary, employers/plan sponsors can use the following safe harbor plan design provided by CMS:

To qualify for the simplified determination (and be deemed creditable), the plan must meet the following standards:

  • provide coverage for brand-name and generic prescriptions;
  • provide reasonable access to retail providers;
  • be designed to pay on average at least 60% of particpants’ prescription drug expenses; and
  • satisfy at least one of the following standards:
  • The prescription drug coverage either has no annual benefit maximum or has a maximum annual benefit of at least $25,000;
  • The prescription drug coverage has an actuarial expectation that the amount payable by the plan will be at least $2,000 annually per Medicare eligible individual; or
  • For integrated plans only, an integrated health plan (a) has no more than a $250 deductible per year; (b) either has no annual benefit maximum or has a maximum annual benefit payable by the plan of at least $25,000; and (c) has a lifetime combined benefit maximum limit of at least $1 million

When does Coverage qualify for the Safe Harbor?

The safe harbor requirements vary according to whether or not the prescription plan is integrated. An integrated plan would have to meet the first three bullet points in the list above, as well as meet subsection (c) of the fourth bullet point. If the plan is not integrated, it would have to meet the first three bullet points and either subsection (a) or (b) of the fourth bullet point in order to qualify.

Are Health Savings Accounts (HSA) taken into Account when Determining if Coverage is Creditable to Part D?

Under CMS guidance, HSAs are not to be taken into account when determining whether coverage is creditable. Consequently, employers will not have to send disclosure notices for them. However, notices would be required for High Deductible Health Plans (HDHP) and other non-account benefits available to participants with HSAs.

In addition, most HDHPs that are compatible with HSAs will be considered non-creditable to Part D based on the safe harbor described above. This is because the deductibles are integrated with the major medical coverage and the deductibles exceed $250 (see subsection (a) under bullet 4).

Diversified Sends Us a Medicare Part D Creditable Coverage Determination Each Year – How does Diversified Arrive at their Determination?

We make our determination based on the simplified safe harbor plan design method described above. As part of this process, we review prior prescription benefit history. Most plans will be creditable to Medicare Part D based on the safe harbor, except for HSAs, compatible HDHPs, and plans that pay less than 60% of the cost of prescription drugs based on prior claim history. In these cases, an employer may want to obtain the services of an actuary to see if the plan is actuarially equivalent to Medicare Part D.

Some of our employer groups have hired an actuary and found that their HDHP is creditable. If you decide to hire an actuary for your Medicare Part D determination, please be sure to let us know by contacing your Diversified Account Executive. This is especially important if we are mailing your Medicare Part D notices to employees and reporting your creditable coverage status to CMS.

The following is a link for actuarial organizations (Note: We cannot vouch for the credentials of any actuary listed.) https://actuarialdirectory.org/SearchDirectory/tabid/242/Default.aspx

Does Diversified Handle This For Us?

If you’ve elected to have Diversified handle the distribution of Federal Initial and Annual Notices, then you are all set! The Medicare Part D Notices and CMS reporting requirements described above are included with that service. If you are unsure or would like to elect this service, please contact your Account Executive today at (888) 322-2524!

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