Required Disclosure to CMS by March 31 Regarding Prescription Drug Coverage

Last November, employers with medical plans that provide prescription drug coverage to individuals who are eligible for Medicare Part D were supposed to disclose to those individuals whether that coverage was "creditable." Our previous Benefits Alert described the November notice requirement and explained what is "creditable coverage." By March 31, 2006, most of those employers must file a similar "Disclosure Notice" with the Centers for Medicare & Medicaid Services, informing CMS as to whether the coverage is creditable. CMS recently issued guidance on this disclosure requirement.

Who Must Submit the Disclosure Notice. Generally, employers who had to provide a notice to Medicare Part D eligible individuals in November must also provide a Disclosure Notice to CMS by March 31. However, if you claimed the Retiree Drug Subsidy, you are exempt from filing the Disclosure Notice with respect to the retirees for whom you claimed the subsidy, since CMS was already informed, in the subsidy application process, that those retirees have creditable coverage.

How to Submit the Disclosure Notice. Employers cannot satisfy this disclosure requirement by simply mailing to CMS the notice they provided to Part D eligible individuals. Rather, the notice must be submitted to CMS electronically using a form on the CMS Creditable Coverage Disclosure Web Page.

Contents of the Disclosure Notice. The form on the CMS web page requires some basic identifying information (e.g., employer's name, federal tax identification number, address, and phone number). It also requires information about the type of prescription drug coverage offered, the creditable status of that coverage, and the number of Part D eligible individuals covered under the plan(s) at the beginning of the plan year. Finally, the form asks for the date that Part D eligible individuals were notified as to whether their coverage was creditable. (This last requirement could prove difficult for employers who have not provided the required notice to such individuals.)

When to Submit Future Disclosure Notices. After the March 31, 2006 deadline, the Disclosure Notice must be submitted to CMS annually. For plan years ending in 2007 and beyond, the notice must be provided within 60 days after the beginning of the plan year. For example, an employer using a July 1 plan year will have to file its next notice by August 29, 2006, and an employer using a calendar year plan year will have to file its next notice by March 1, 2007. Additionally, a new notice must be submitted to CMS within 30 days after an employer terminates or makes any changes in the creditable coverage status of its prescription drug program.

Penalties for Noncompliance. CMS currently has not identified any penalties that would apply to employers who do not file the notice by March 31.

Next Steps. To comply with the Disclosure Notice requirement, employers first need to identify their plan(s) covering Part D eligible individuals for which CMS has not approved a Retiree Drug Subsidy Application. The form on the CMS web page would then need to be completed for those plans. Note that assembling the data required by the CMS form could take considerable time.