By: HUB’s EB Compliance Team

CMS recently released its updated Medicare Part D guidelines that can be used by group health plan sponsors to determine whether their plans’ prescription drug coverage is creditable for 2024 and to update the information needed for required Part D disclosures to eligible individuals and to CMS.

For group health plan’s prescription drug coverage to be considered “creditable coverage,” means the coverage is actuarially equal to or exceeds the actuarial value of standard Medicare Part D prescription drug coverage. Stated more simply, for the employer’s coverage to be creditable, it must be at least as good, if not better than what Medicare Part D would offer.

Employers that offer prescription drug coverage to Medicare Part D eligible individuals (including active or disabled employees and their spouses and dependents, retirees, COBRA participants, and beneficiaries) must disclose whether the coverage is creditable or not to (1) eligible individuals via a Medicare Part D Notice once a year by October 15 and (2) CMS within 60 days after the beginning date of the Plan Year.

To help determine whether prescription drug coverage is creditable, CMS has released the following 2024 parameters for the standard Medicare Part D prescription drug benefit:

  • Deductible: $545 (up from $505 in 2023);
  • Initial coverage limit: $5,030 (up from $4,660);
  • Out-of-pocket threshold: $8,000 (up from $7,400);
  • Total covered Part D spending at the out-of-pocket expense threshold for beneficiaries who are not eligible for the coverage gap discount program: $11,477.39 (up from $10,516.25 in 2023); and
  • Estimated total covered Part D spending at the out-of-pocket expense threshold for beneficiaries who are eligible for the coverage gap discount program: $12,447.11 (up from $11,206.28).

In a change from prior years, the minimum cost-sharing numbers under the catastrophic coverage portion of the benefit no longer apply. Cost-sharing for the catastrophic coverage portion was eliminated by the Inflation Reduction Act of 2022.

Prescription drug coverage that does not meet this standard is called “non-creditable.”

Unless beneficiaries have drug coverage from another source that is at least as good as standard Part D coverage, they face a penalty equal to 1% of the national average premium for each month they delay enrollment. Several million beneficiaries are estimated to have other sources of drug coverage, including employer plans for active workers, FEHBP, TRICARE, and Veterans Affairs (VA).

Next Steps

Employers should work with their insurance carrier, TPAs or an actuary to determine if their prescription drug coverage is creditable based on these criteria. If the employer must make the determination itself, it may use the simplified method, depending on the plan’s design. When a plan’s design is not eligible for the simplified method, an actuarial determination must be made.

As noted above, employers with Medicare-eligible plan participants are required to provide notice of the status of creditable coverage of their prescription drug plan annually by October 15. Employers may provide the notice at open enrollment with enrollment materials so long as the notice is prominently placed. Additionally, employers are required to report the prescription plan's creditable status to CMS annually within 60 days of the beginning of the plan year.

If you have any questions, please contact your HUB Advisor. You can also view more compliance articles in our Compliance Directory.

NOTICE OF DISCLAIMER

The information herein is intended to be educational only and is based on information that is generally available. HUB International makes no representation or warranty as to its accuracy and is not obligated to update the information should it change in the future. The information is not intended to be legal or tax advice. Consult your attorney and/or professional advisor as to your organization’s specific circumstances and legal, tax or other requirements.