Credible Drug Coverage When Becoming Medicare Eligible

Upon becoming eligible for Medicare, an individual must secure credible drug coverage, or face a fine. They can choose to gain credible coverage through their current employer group, an individual health plan, or through a Medicare Part D prescription plan. The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) made changes to the existing Medicare program and created a voluntary prescription drug program, called Medicare Part D, for Medicare eligible individuals.

Under the Medicare Part D program, group health plans — or entities that offer prescription drug coverage on a group basis to active and retired employees and to Medicare Part D eligible individuals — must provide, or arrange for providing, a notice of creditable prescription drug coverage to those Medicare Part D eligible individuals who are covered by, or who apply for, prescription drug coverage under the health plan.

Group health plan sponsors are required to disclose to CMS (Center for Medicare/Medicaid Services) whether their prescription drug coverage is creditable or non-creditable, only if the plan has eligible individuals. In general, 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.

The disclosure must be made to CMS on an annual basis, and upon any change that affects whether the coverage is creditable. More specifically, the Medicare Part D disclosure notice must be provided within the following timeframes:

·         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.

Those Medicare eligible employees who do not have credible coverage, like those in an HDHP plan, will incur a penalty upon enrolling in Part D later on in life. After 63 consecutive days of no credible prescription coverage, the penalty period begins. The formula for calculating the penalty is below:

1% of the national base beneficiary premium ($33.15 in 2015) times the number of full, uncovered months that you were eligible and didn’t have credible coverage.

This penalty is added to the Part D premium permanently, once the eligible individual enrolls in the program.

In conclusion, once you become eligible for Medicare, you must secure credible drug coverage, or incur a penalty. Credible coverage can be obtained through a current employer’s health plan, an individual plan, or by enrolling in Medicare Part D. Any employer with Medicare eligible employees must disclose their credible coverage status with CMS annually.

If you are interested in hearing more about this topic, or have questions relating to other insurance or employee benefits, please feel free to reach out to the professionals at Associated Financial Consultants, an Associated Group company, at 954-983-5600.