June 1, 2005 (PLANSPONSOR.com) - Newly released
federal guidance will help employers comply with an upcoming
requirement that they notify Medicare-eligible workers about
whether their group prescription coverage measures up to the
new Medicare prescription drug benefit.
>The new guidance, issued by the US Centers for
Medicare and Medicaid Services, provides safe harbors under
which employers' prescription drug plans automatically
would be considered equal to Medicare coverage, according
to a Business Insurance report. That would eliminate the
need for employers to hire an actuary to
determine whether the plans are at least equal to the
>Under the requirement, by November 15, employers
will have to provide every participant in their health care
plans who is eligible for Medicare - primarily those age 65
and older - with a notice about whether the prescription
drug benefits provided by the employer are at least equal
to the drug benefits that will be available under Medicare
Part D. Coverage that is equal to Part D is considered
"creditable." If the employer coverage is creditable,
employees can delay enrolling in Part D after becoming
eligible without incurring a late-enrollment penalty,
according to the report.
>To meet the safe harbor, an employer plan would have
to offer coverage for brand-name and generic prescriptions;
provide reasonable access to retail providers and,
optionally, to mail order coverage, Business Insurance
said. The coverage would be designed to pay, on average,
60% of participants' prescription drug expenses.
>An employer plan also would have to meet at least
one of two other thresholds. To qualify under one test, the
prescription drug benefit plans would either have to cover
at least $25,000 in claims a year or not impose an annual
dollar limitation on the amount of claims covered. The
second test provides that the plan would have to have an
actuarial expectation that the amount payable by the plan
would be at least $2,000 per Medicare-eligible individual
>For prescription drug plans that are integrated with
other health care benefits, such as with medical and dental
care, the integrated health plan could not have an annual
deductible greater than $250, would have to have an annual
maximum benefit cap of at least $25,000 and no less than a
$1 million lifetime combined benefit maximum.
>The guidance also provides model notices, which
employers can adopt virtually verbatim, for informing
Medicare-eligible employees whether their employers'
prescription drug benefit program is creditable coverage,
according to the report.