What is Creditable Coverage?
Prescription drug coverage is creditable if the actuarial value of the coverage equals or exceeds the actuarial value of standard prescription drug coverage under Medicare Part D, as demonstrated through the use of generally accepted actuarial principles and in accordance with Centers for Medicare and Medicaid Services (CMS) actuarial guidelines. In general, the actuarial equivalence test measures whether the expected amount of paid claims under the employer's prescription drug coverage is at least as much as the expected amount of paid claims under the standard Part D benefit.
See the frequently asked questions for more information or visit the CMS Creditable Coverage website for more information about creditable coverage, including access to model disclosure communication templates published by CMS. Updates are made regularly, so please check the websites often for the most up-to-date information.
What do you need to do?
The Medicare Modernization Act (MMA) mandates that certain entities offering prescription drug coverage, including employer and union group health plan sponsors, disclose to all Medicare eligible individuals with prescription drug coverage under the plan whether such coverage is "creditable." This information is essential to an individual's decision whether to enroll in a Medicare Part D prescription drug plan.
If your client's business offers a prescription drug plan to Medicare eligible individuals, understand that:
- Annually, UnitedHealthcare requests Optum to perform bulk testing of our standard benefit designs to satisfy the actuarial value test of the creditable coverage determination.
- Once the plans have been tested, the data is available below.
- Determine if your client's plan provides "creditable coverage."
- Communicate the creditable or non-creditable status of your client's plan to your client so that they may communicate the status to their members.
- This is mandatory at least once a year by no later than October 15.
- The Client, NOT UnitedHealthcare, sends Creditable Coverage notices to its members.
- The Client can pay UnitedHealthcare to send Creditable Coverage Notices to members on its behalf.
If your client's coverage is creditable, they can elect to pursue a tax-free subsidy called the Retiree Drug Subsidy (RDS) Program. This optional step requires additional testing and an application process. They can apply for the subsidy by going to: www.rds.cms.hhs.gov .
They must apply for the subsidy 90 days prior to the beginning of an RDS plan year, which can mirror
a benefit plan year. For example, if their benefit plan year begins January 1, and the client wants their RDS plan year to be the same, they would apply for the subsidy by October 1. If they request an extension, CMS will grant an additional 30 days to complete the application.
CMS has clarified that if an employer is not applying for the subsidy, the employer can determine that its prescription drug plan's coverage is creditable if the plan design meets all four of the following criteria:
- Provides coverage for brand and generic prescriptions;
- Provides reasonable access to retail providers and, optionally, for mail order coverage;
- Is designed to pay on average at least 60 percent of participants' prescription drug expenses; and
- Satisfies the following:
- For employers that have a stand-alone prescription drug plan;
- The prescription drug coverage has no annual benefit maximum benefit or a maximum annual benefit payable by the plan of at least $25,000; or
- The prescription drug coverage has an actuarial expectation that the amount payable by the plan will be at least $2,000 per Medicare eligible individual.
- For employers that have integrated health coverage, the integrated health plan has no more than a $250 deductible per year, has no annual benefit maximum or a maximum annual benefit payable by the plan of at least $25,000 and has no less than a $1,000,000 lifetime combined benefit maximum.
Plans that meet these four criteria are deemed to be creditable. Your plan may be creditable even if it doesn't meet the criteria. An actuarial gross value test of your claims experience would be required to determine your status.
UnitedHealthcare Medicare Part D Creditable Coverage Test Results
Annually, UnitedHealthcare requests Optum to perform bulk testing of our standard benefit designs to satisfy the actuarial value test of the creditable coverage determination. You may use this information as a starting point for your determination whether your prescription drug plan satisfies the requirements of creditable coverage. You will need to consult your pharmacy plan document to determine your plan's description of benefits.
If your plan is creditable and you will make that plan available next year, you can tell your Medicare eligible retirees that they do NOT have to drop their coverage with you and enroll in a Medicare prescription drug plan.