A new voluntary prescription drug benefit called Medicare Part D was established by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the “Act”). Beginning January 1, 2006, Medicare Part D plans will be available to individuals who are eligible for Medicare.

This article describes the notice obligations for plan sponsors that sponsor or maintain a group health plan that provides prescription drug coverage. The initial notice was required to be provided prior to November 15, 2005. However, as described below, a plan sponsor has continuing notice obligations under the Act. These notice obligations are both to certain individuals covered under the group health plan that provides prescription drug coverage, and to the federal government.

What are the Plan Sponsor Notice Obligations?
Entities that sponsor or maintain a group health plan that provides prescription drug coverage have three major notice obligations under the Act. The group health plans affected include employer plans, federal, state, county and local government plans, collectively bargained plans and church plans. These notice obligations are as follows:

• If the entity sponsors or maintains a plan that provides prescription drug coverage, and the plan covers active employees and/or their dependents who are eligible for Medicare (on the basis of age, disability or end stage renal disease), the entity must issue a notice to all such individuals regarding the creditable coverage status of the plan in comparison to Medicare Part D. The individuals who must receive this notice are referred to as Part D Eligible Individuals. The plan sponsor was obligated to provide the initial notice prior to November 15, 2005. However, there are continuing notice obligations, as described below.
• If the entity sponsors or maintains a plan that provides prescription drug coverage and the plan covers retirees and/or their dependents who are eligible for Medicare (on the basis of age, disability or end stage renal disease), the entity must issue a notice to all such individuals regarding the creditable coverage status of the plan in comparison to Medicare Part D. The individuals who must receive this notice are referred to as Part D Eligible Individuals. The plan sponsor was obligated to provide the initial notice prior to November 15, 2005. However, there are continuing notice obligations, as described below.
• If the entity sponsors or maintains any plan that provides prescription drug coverage and the plan covers any individual who is eligible for Medicare (i.e., Part D Eligible Individuals), the entity must file a notice of creditable coverage status with the Center for Medicare & Medicaid Services (CMS) on an annual basis. The initial deadline for this filing has not yet been set by the government.

Who Must Receive the Notice?

What Information Must be in the Notice?The plan sponsor (and not the insurance carriers or HMOs) is obligated to provide a notice to Part D Eligible Individuals. Most HMOs and insurance carriers are not sending these notices for the plan sponsor. The notice must state if the group health plan’s prescription drug coverage is creditable (i.e., the prescription drug coverage is, on average for all participants, expected to pay out as much as the standard Medicare Part D drug plan) or if the group health plan’s prescription drug coverage is non-creditable (i.e., the prescription drug coverage is NOT, on average for all participants, expected to pay out as much as the standard Medicare Part D drug plan). The notice should be sent by U.S. mail.

Part D Eligible Individuals are individuals who are entitled to benefits under Medicare Part A or are enrolled in Medicare Part B, and who live in the service area of a Medicare Part D plan. Part D Eligible Individuals are the only individuals who are required to receive the notice. However, if a plan sponsor is unable to identify all of the Part D Eligible Individuals who are enrolled or seeking to enroll in its group health plan that provides prescription drug coverage, it should provide the notice to all eligible employees, retirees, spouses and dependents. For instance, a plan sponsor may not know if an employee’s covered dependent is disabled and receiving Medicare Part A or B. If the plan sponsor has this information, it may send the notice to those individuals directly.

If you have not yet provided this notice, you should send the notice out as soon as possible.

When Must the Notice to Part D Eligible Individuals be Provided?
As stated above, the initial notice to Part D Eligible Individuals was to be provided before November 15, 2005. After that, the notice must be provided at all of the following times:

• Prior to the Part D annual election period (which begins each year on November 15);
• Prior to the individual’s initial enrollment period for Part D (for example when the individual attains age 65);
• Prior to the effective date of enrollment in the group health plan that provides prescription drug coverage;
• Upon any change that affects whether coverage is creditable coverage (i.e., either the prescription drug coverage ceases to be creditable coverage or qualifies as creditable coverage); and
• Upon request by the individual.

The plan sponsor will meet the above requirements if it provides the notice at all of the following times:

• Annually, prior to November 15 (the notice may be sent as a part of the annual open enrollment materials, if those are sent prior to November 15);
• For all new hires who are eligible to enroll in a group health plan that provides prescription drug coverage, the date of initial coverage or soon thereafter;
• If the plan’s prescription drug coverage changes from creditable to noncreditable (or vice versa), immediately upon that change; and
• Upon request by an individual.

What Annual Notice Must Be Filed With CMS?
The plan sponsor is also required to disclose to CMS whether the group health plan’s prescription drug coverage is creditable or non-creditable. This filing obligation applies to all group health plans that provide prescription drug coverage—both plans covering active employees and plans covering retired employees. The disclosure must be made on an annual basis and upon any change that affects whether the provided prescription drug coverage is creditable. CMS is to provide further guidance on the requirements of this notice within the next few weeks.

When CMS provides this information we will include the information in our monthly newsletter.

Has CMS Provided Any Guidance?
CMS has posted on its website an overview of the regulatory requirements, and model notices that can be used in 2005. The overview of the regulatory requirements can be found at http://www.cms.hhs.gov/medicarereform/CCGuidance.pdf. The 2005 model notice of creditable coverage can be found at http://www.cms.hhs.gov/medicarereform/CredCov-BeneDsclsreNtc.pdf. The 2005 model notice of non-creditable coverage can be found at http://www.cms.hhs.gov/medicarereform/Non-CredCov-BeneDsclsreNtc.pdf. Please be aware that these model notices must be tailored to your plan; not all of the information in the model notices is applicable to all plans. CMS has specifically stated that these model notices may only be used for this initial Part D enrollment period (November 15, 2005 to May 15, 2006) and that it will issue different model notices for Part D enrollment periods that begin after May 15, 2006.