Fw: EDU: Medicare Part D - Employer Requirements, Subsidy, Actuarial Equivlent Calculation, Creditable Coverage, Penalties

[Guest guest]

This is a comprehensive site that lists the various aspects of care an employer

needs to consider when compliling informatio about whether or not a policy he

offers is creditable or not. If you look it over yourself, you will know what

they are supposed to provide and how it works. Remember, knowlege is power so if

you know what you are entitled to, it helps you know when you've gotten it. LOL

This web link also discusses other programs like Cobra (health benefits if you

had insurance coverage when you left an employer), HSA (Health Savings

Accounts), HIPPA (medical information privacy AND letters of portability are

federal laws. Employers must show that you had insurance to assist you in

avoiding denials of coverage), FSA & HRA (Flexible Spending Accounts and Health

Reimbursment Arrangements) See links at top of the web page below for details on

these programs.

Smiles, Caroline

Empress of CUS

from http://www.benefits olved.com/ news/stories/ press10.asp

September 8, 2005

Medicare Part D Imposes New Requirements on Employers Many employers are aware

that, mandated by the Medicare Prescription Drug, Improvement and Modernization

Act of 2003 (MMA), Medicare adds a new prescription drug benefit (Part D) on

January 1, 2006. Not as many are aware of what they must do to comply with MMA.

This article provides a brief summary of those requirements, which will be

analyzed in depth at a September Webinar offered by Infinisource, as well as a

short description of a new Part D blanket mailing service that Infinisource will

offer to employers.

Summary of Employer Requirements Individuals covered by Medicare may enroll in

Part D, starting November 15, 2005. Employers offering group health plan

coverage with a prescription drug benefit are required to notify all Medicare

participants regarding whether the prescription drug coverage constitutes

“creditable prescription drug coverageâ€. Creditable coverage is coverage

that has an actuarial value that equals or exceeds the value of Part D. This

notice must be initially sent by November 15, 2005, annually thereafter and at

various other times. It may be included in other regular employee

communications, like Summary Plan Descriptions (SPDs) or open enrollment

materials. All group health plans must comply if they have Medicare

participants, even if the plan does not specifically cover retirees.

Additionally, employers must make certain disclosures to the Centers for

Medicare & Medicaid Services (CMS), the manner and timing of which has not been

determined by CMS.

Employers may also apply to CMS for a 28 % percent subsidy of prescription drug

costs if the application is made by September 30, 2005.

Determining who must receive the notice will be a challenge for employers. It is

more complicated than simply looking at birth dates. Individuals also become

Medicare entitled through disability, having End-Stage Renal Disease or being a

qualified railroad retirement beneficiary. Required recipients include not only

Medicare enrolled employees, but also Medicare enrolled retirees, COBRA

beneficiaries, their spouses and dependents. Thus, in order to avoid overlooking

any participants who may be eligible for Part D, prudent employers will likely

send the notice to all participants rather than engage in a time-intensive

fact-finding exercise to determine the appropriate distribution list.

This article examines various aspects of Part D, including:

Description of the Part D benefit;

What plans are subject to the Part D Notice requirement;

Employer options and the 28 percent subsidy;

How to calculate whether coverage is actuarially equivalent;

Content, delivery and timing requirements for the Notice;

Potential penalties for non-compliance; and

What Infinisource plans to do to help employers comply.

The Part D Benefit Part D does not cover over-the-counter drugs or drugs

covered by Medicare Parts A or B. An individual must be entitled to Medicare

Part A or enrolled in Part B to be eligible for Part D and must live in the

service area of a Part D plan. Under the standard Part D drug benefit:

Participants first satisfy a $250 deductible;

Participants then pay a 25 percent co-payment (Medicare pays 75 percent) for the

next $2,000 in coverage;

Participants then pay for 100 percent of the next $2,850 in costs until they

have true out-of-pocket expenses of $3,600 (i.e., $250 + $500 + $2,850, known as

Part D’s donut hole); and

Medicare then pays for remaining eligible drug expenses, subject to a co-payment

that is the greater of 5 percent of the drug’s cost or $2 for generic/$5 for

non-generic drugs.

An enhanced benefit is available to certain low-income individuals. The monthly

Part D premium for 2006 is estimated to be about $32 per month. Eligible

individuals have until May 15, 2006 to enroll in Part D. Open enrollment starts

on November 15th of each year. The catch is that eligible individuals who have

no other creditable coverage will have to pay a late enrollment penalty in the

form of higher premiums if they enroll in Part D later. Therefore, the

employer’s notice to Medicare enrollees becomes critical in their

decision-making process.

Plans that Must Provide Notice In its regulations, the CMS lists 13 types of

plans subject to the Part D requirement, including “coverage under a group

health planâ€. For employers, this includes health insurance, self-funded

plans, HMOs, stand-alone prescription drug plans, retiree drug plans and Health

Reimbursement Arrangements (HRAs). The notice obligation does not apply to

Health Flexible Spending Arrangements (FSAs), Health Savings Accounts (HSAs) and

Archer Medical Savings Accounts. The notice obligation also does not apply to

employers that contract with Medicare directly as a Part D plan or contract with

a qualified Part D plan because such plans obviously constitute creditable

coverage.

Employer Options and the 28 Percent Subsidy Employers have several options on

how to respond to Part D. First, they can continue what they currently have and

decide whether to apply for the 28 percent federal subsidy for qualifying

enrollees’ allowable prescription drug expenses (i.e., the costs between $250

and $5,000 in 2006). Second, they can contract with a licensed retiree

prescription drug plan. Third, they can drop retiree coverage altogether, but

run the risk of violating age discrimination laws based on a recent federal

court ruling. Finally, they can provide coverage that wraps around Part D.

The subsidy is available to employers whose group health plans are actuarial

equivalent to Part D. Application must be made to CMS by September 30, 2005,

along with an actuarial attestation that the benefits are equivalent to Part D

and identifying information on each retiree, spouse or dependent whom the

employer thinks is eligible. An actuary who is a member of the American Academy

of Actuaries must complete the actuarial attestation. The application process

will require the employer to disclose certain protected health information (PHI)

of participants, but CMS recently clarified that such disclosure is typically

permissible under the Health Insurance Portability and Accountability Act of

1996 (HIPAA).

The subsidy is a percentage (28 percent) of the allowable retiree costs for the

plan year for each retiree, spouse and dependent that is eligible for, but does

not enroll in Part D. The employer must also certify that it has notified all

participants that are eligible for Part D, electronically submit and

periodically update enrollment information about retirees, their spouses and

dependents and electronically submit aggregate data about drug costs incurred

and reconcile costs at year-end.

The Actuarial Equivalent Calculation To be considered creditable coverage, an

employer’s group health plan must answer a key question: on average, will the

expected claims payout by the employer’s plan equal or exceed those paid under

Part D?

As mentioned above, employers who apply for the 28 percent subsidy must have an

actuary perform the actuarial equivalent calculation. CMS has provided a

simplified approach for those who don’t apply. Under such an approach, a plan

is actuarially equivalent to Part D if it:

Covers generic and brand name prescriptions;

Offers reasonable access to retail drug providers;

Pays, on average, 60 percent or more of prescription drug costs; and

Satisfies one of the following three prongs of the Maximum Benefit Test:

For non-integrated plans (i.e., not combined with medical or dental), it has an

annual maximum benefit of at least $25,000; or

For non-integrated plans, it has an actuarial expectation to pay at least $2,000

per Medicare enrollee in 2006; or

For integrated plans, it has a(n) (i) annual deductible of $250 or less, (ii)

annual maximum benefit of at least $25,000, and (iii) lifetime combined maximum

benefit of at least $1 million.

Notice of Creditable Coverage Requirements By November 15, 2005, employers must

notify affected participants whether their plans constitute creditable coverage

(i.e., actuarially equivalent coverage). CMS provided model notices for this

year only. If the plan offers creditable coverage, the notice must so indicate,

define creditable coverage and explain why it is important. If the plan does not

offer creditable coverage, the notice must include creditable coverage notice

content as well as information about when to enroll in Part D. These notices

must be provided at the following times:

By November 15, 2005;

Before the start of each year’s election period (November 15th);

Before an individual’s personal initial enrollment period (i.e., three months

before he/she first becomes eligible for Part B and extending three months after

the month of initial eligibility) ;

Before an individual first enrolls in the employer’s plan;

If plan coverage goes from creditable to non-creditable, or vice versa; and

Upon the individual’s request.

The notice may be combined with SPDs or other benefits documents, but if so,

must be prominent and conspicuous. It can also be sent electronically, but among

other requirements, prior consent from the individual is needed. A single notice

may be sent to all Part D individuals residing at the same address. Separate

addresses require separate notices.

Potential Penalties for Employers Strangely, MMA and its corresponding

regulations provide no direct penalties for employers who fail to comply with

the Part D notice requirements. Those employers who apply for the 28 percent

subsidy could, of course, lose the subsidy for failure to provide adequate

notice. As well, an employer who shirks its notice responsibility likely runs

afoul of ERISA, which requires plan fiduciaries to ensure compliance with all

applicable federal laws. Perhaps, the biggest incentive for employers to comply

is their own participants, who would need to make a special application to CMS

for an exemption to the late penalty. If they fail to receive such an exemption,

their next likely recourse would be to look to the employer to cover the

increased premium costs, and ERISA provides a private right of action.

Infinisource’ s Role in Helping Employers Comply with Medicare Part D To

obtain more detailed information regarding this new requirement, Infinisource

will host a Webinar on September 15th (1:30 – 2:45 PM, EDT). Please contact

our Seminar Department for further details or go to https://online.

benefitsolved. com/seminars/ seminarform_ webinar2. aspx to register.

In its guidance, IRS noted that third parties might help employers satisfy the

notice requirement. Therefore, Infinisource is pleased to announce a solution to

help employers satisfy the initial notice requirement, for the November 15,

2005, deadline. Infinisource will generate a customized Creditable Coverage or

Non-Creditable Coverage Notice (whichever is applicable) that is suitable for a

blanket mailing and send it to your entire participant population. For those

employers contracting this service, we have designed a four-step questionnaire

to assist in determining whether your plan is Creditable or Non-Creditable

Coverage. Additional details on this new service will be available on our

website beginning September 8, 2005. To obtain the details go to:

www.benefitsolved. com/medicare. asp. If you prefer to call and talk to a sales

team member, please call .

More information on applying for the subsidy, including the electronic

application, is located by going to www.benefitsolved. com, clicking on the

Benefitresources tab, then the link for BenefitsLinks, and then scrolling down

to the CMS section (www.benefitsolved. com/benefit_ resources/ benefit_links.

asp).

(Beautiful Southern Oregon, USA)

We may not be able to change the direction of the wind, but we can adjust our

sails.

May you have enough happiness to make you kind, enough trials to make you

strong, enough sorrow to keep you human, enough hope to make you happy.

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