Category: Legislative Updates

A long-awaited Mental Health Parity and Addiction Equity Act (MHPAEA) Final Rule was issued on September 9, 2024. The Final Rule addresses the mandate set forth in the Consolidated Appropriations Act (2021) that requires group health plans’ and health insurance issuers’ compliance with “non-quantitative treatment limits” (NQTLs). The mandate also requires that the names of non-compliant plans and issuers be published in a report to Congress (see the most recent report here). The Final Rule will continue to pose significant compliance challenges for plans/issuers with new requirements related to the documentation and justification of NQTLs.

As compared to the 2023 proposed rules that we summarized in our Update here, the Final Rule appears to impose somewhat less burdensome requirements on employer-sponsored plans. However, the MHPAEA and the Final Rule requirements will continue to pose significant compliance challenges for plans/issuers related to the documentation and justification of NQTLs. Visit this DOL/MHPA webpage for links to tools and resources, including a DOL Fact Sheet and News Release.

Here are some highlights relevant to employer-sponsored plans:

• Mental Health Parity Required. MHPAEA requires parity between a group health plan’s medical/surgical (M/S) benefits and mental health/substance use disorder (MH/SUD) benefits. MHPAEA’s parity requirements apply to financial requirements (such as deductibles, copayments and coinsurance), quantitative treatment limitations or QTLs (such as day or visit limits), and non-quantitative treatment limits or NQTLs which generally limit the scope or duration of benefits (such as prior authorization requirements, step therapy requirements and standards for provider admission to participate in a network).
• NQTL Requirements. Plans may not impose NQTLs with respect to MH/SUD benefits in any classification that are more restrictive, as written or in operation, than the predominant NQTL that applies to substantially all M/S benefits in the same classification. The rule did not finalize a proposed mathematical test for defining “substantially all” and “predominant,” which means plans can use common medical management techniques rather than applying a mathematical test to NQTLs which are inherently nonquantifiable. In implementing an NQTL, the rule requires that a plan satisfy two sets of requirements. First, the plan must examine the processes, strategies, evidentiary standards, and other factors used in designing and applying an NQTL to MH/SUD benefits in the classification to ensure they are comparable to, and applied no more stringently than, those used in designing and applying the limitation with respect to M/S benefits in the same classification. Second, plans must collect and evaluate relevant data (which may vary based on the facts and circumstances) in a manner reasonably designed to assess and consider the impact of the NQTL on relevant outcomes related to access to MH/SUD benefits and M/S benefits.
• Comparative Analysis Requirement. Plans/issuers must conduct a “comparative analysis” of the NQTLs used for M/S benefits compared to MH/SUD benefits. These analyses must contain a detailed, written and reasoned explanation of the specific plan terms and practices at issue and include the basis for the plan’s/issuer’s conclusion that the NQTLs comply with MHPAEA. Plans must perform and document NQTL comparative analyses and submit them to a requesting agency within ten business days of the request. The analysis must:
  • Describe the NQTL;
  • Identify and define the factors and evidentiary standards used to design or apply the NQTL;
  • Describe how factors are used in the design or application of the NQTL;
  • Evaluate whether processes, strategies, evidentiary standards, or other factors are comparable to, and applied no more stringently than, those with respect to M/S benefits, as written and as applied; and
  • Address findings and conclusions regarding comparability and relative stringency. Plans must also prepare and make available to the agencies, upon request, a written list of all NQTLs imposed under the plan that limits the scope or duration of treatment.
• Meaningful Benefit Requirement. Plans that provide any benefits for a MH/SUD condition must provide “meaningful benefits” for that condition or disorder in every benefit classification in which meaningful M/S benefits are provided. Meaningful benefits require coverage of a core treatment for the condition or disorder in each classification in which the plan covers a core treatment for one or more medical conditions or surgical procedures.
• Fiduciary Certification. In most cases, issuers and third-party administrators will prepare the comparative analyses for employer-sponsored health plans. Comparative analyses for plans subject to ERISA must also include a certification that one or more named fiduciaries have engaged in a prudent process to select qualified service providers to perform and document the analysis and that the fiduciaries have satisfied their duty to monitor those service providers. This requirement conforms with the typical ERISA fiduciary standard for selecting plan vendors/service providers. This certification requirement will likely push fiduciaries to put more pressure on TPAs to respond to requests/testing methodology of any outside NQTL service provider performing the comparative analyses. The final rules do not require a proposed requirement that would have required the fiduciary to certify that the comparative analysis actually complies with regulatory content requirements.
• Applicability Date. In terms of the implementation timeframe, most of the Final Rule is effective for plan years beginning on January 1, 2025, while other parts, such as the new meaningful benefits standard, the prohibition on discriminatory factors, and the data evaluation requirements have a delayed effective date of the first plan year beginning on or after January 1, 2026.

What’s Next

It is anticipated that the Final Rule will strengthen MHPAEA’s requirements and provide guidance to health plans/issuers on how to comply with the law’s requirements. It is also anticipated that the Rule will result in changes in network composition and medical management techniques related to MH/SUD care, more robust MH/SUD provider networks, and fewer and less restrictive prior authorization requirements for MH/SUD care. The agencies indicate more guidance is coming. For example, they intend to provide examples of NQTLs in a future update to the MHPAEA Self-Compliance Tool (see 2020 version here). They also intend to provide additional information on the data plans/issuers should collect and evaluate. In the meantime, opposition and legal challenges to the Rule seem likely.

Conner Strong & Buckelew will continue to work with our clients to analyze and understand the complex requirements of the MHPAEA, and we can refer our clients to qualified service providers to perform and document the NQTL comparative analysis for a self-insured sponsor. We will provide alerts and updates as new information becomes available. Please contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220 with any questions. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.

Each year group health plan (GHP) sponsors that provide prescription drug coverage are required to annually disclose to Medicare (Part D) eligible individuals whether the coverage they offer is “creditable” or “non-creditable.” Plan sponsors must provide this annual disclosure before the start date of the annual Medicare Part D enrollment period which begins on October 15th of each year. This communication outlines what GHPs need to know related to the Part D notice requirements.

Who Must Receive Notice and Why It Matters

Medicare includes a voluntary prescription drug benefit for “Part D eligible individuals.” These are individuals who have coverage under Medicare Part A or B and who live in the service area of a Part D plan. Notice must be provided to all Medicare Part D eligible individuals, which may include active employees, disabled employees, COBRA participants and retirees, as well as their covered spouses and dependents. As a practical matter, GHP sponsors will often provide the notices to all plan participants. The Part D notice is important because a Part D late enrollment penalty is imposed on individuals who do not maintain “creditable coverage” for a period of 63 days or longer following their initial enrollment period for the Medicare prescription drug benefit. Accordingly, the Part D notice information is essential to a Part D eligible individual’s decision whether to enroll in a Medicare Part D plan or stay with the employer plan. Failing to provide the notice could be detrimental to these individuals because if they are not covered by creditable prescription drug coverage and do not enroll in Medicare Part D when first eligible, they may have to pay higher premiums if they enroll later.

Form of Notice and When to Provide

Medicare Part D notices must be provided prior to the Part D annual coordinated election period—beginning October 15 through December 7 of each year. This means the individual must be provided with the notice at least once annually in every 12-month period ending on October 14, which is just before the start date of the Part D annual period. Plan sponsors must also provide notice at various other times as required under the law, including to a Part D eligible individual when he/she joins the plan, upon request, and if the prescription drug benefit ever changes from creditable to non-creditable (or vice versa). CMS has provided English and Spanish model disclosure notices that can be tailored by plan sponsors to satisfy their notice obligation. See the CMS Creditable Coverage web page for general Part D notice guidance for employer and union-sponsored plans.

How Notice Must Be Provided

As a practical matter, GHP sponsors will often provide the disclosure notices to all plan participants by including the notice in the new hire and annual open enrollment materials:

• If a plan sponsor chooses to provide the disclosure notice with other plan participant information, the creditable coverage disclosure must be prominent and conspicuous. This means that the disclosure notice portion of the document—or a reference to the section in the document that contains the disclosure notice portion—must be prominently referenced in at least 14-point font in a separate box, bolded or offset on the first page of the provided plan participant information.
• As a general rule, a single disclosure notice may be provided to the covered Medicare beneficiary and all of his or her Medicare Part D-eligible dependents covered under the same plan. However, if it is known that any spouse or dependent who is eligible for Medicare Part D lives at a different address than where the participant materials were mailed, a separate notice must be provided to the Medicare-eligible spouse or dependent residing at a different address.
• The notice may be sent electronically under certain circumstances. CMS has issued guidance indicating that health plan sponsors may use the electronic disclosure standards under DOL regulations in order to send the creditable coverage disclosure notices electronically. Also, if a plan sponsor uses electronic delivery, the sponsor must inform plan participants that they are responsible for providing a copy to their Medicare-entitled dependents, and the sponsor must also post the current version of their notices on their websites.

Creditable Coverage Status Determined for Each Applicable Option

GHPs subject to the notice requirement include health plans as defined under ERISA, including certain account-based medical plans, as well as GHPs sponsored for employees or retirees by unions, churches, and federal, state, or local governments. The notice requirements apply to insured and self-funded plans, regardless of plan size, employer size, or grandfathered status. For a list of entities subject to the Medicare D disclosure requirement, see Entities Required to Provide Disclosure to All Medicare Eligible Individuals.

• For plans that have multiple benefit options (e.g., PPO and HDHP), the creditable coverage determination test and related notice obligation must be addressed separately for each benefit option.
• Before preparing the notices, a plan sponsor must first determine whether the prescription drug coverage is “creditable.” While Conner Strong & Buckelew can assist with this determination, often it is the insurance carriers and third party administrators that will determine whether or not the prescription drug coverage is creditable for purposes of Medicare Part D.
• In general, to be creditable, the expected amount of paid claims under the plan sponsor’s prescription drug coverage must be at least as much as the expected amount of paid claims under the standard Medicare prescription drug benefit. CMS guidance provides two ways to make this determination, through a simplified (safe harbor) determination or actuarially. Certain plan designs may qualify for the simplified determination of creditable coverage status without having to perform the actuarial determination. Updates will eventually be needed to this determination process as the Inflation Reduction Act of 2022 provides for enhancements to Medicare Part D that are effective in 2024 and 2025. While CMS initially considered eliminating the simplified determination safe harbor for 2025, GHPs are allowed to continue using the simplified determination safe harbor, without modification, to determine whether coverage is creditable for 2025. CMS intends to re-evaluate its continued use beyond 2025 or will establish a revised simplified method to be used in 2026 and beyond.

Related Online CMS Disclosure

A related Medicare Part D disclosure rule requires that sponsors complete the Online Disclosure to CMS Form to report the creditable coverage status of their prescription drug plan. This online disclosure should be completed annually no later than 60 days from the beginning of a plan year (contract year, renewal year), within 30 days after termination of a prescription drug plan, or within 30 days after any change in creditable coverage status. See our previous update for more information on this requirement.

Should you have questions about this or any aspect of group health plan requirements, contact your Conner Strong & Buckelew account representative toll free at 1-877-861-3220. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.

The Patient-Centered Outcomes Research Institute (“PCORI”) fee was established as part of the Affordable Care Act (“ACA”) to fund medical research through the PCORI Institute. Employers and plan sponsors who sponsored a self-insured medical plan that ended anytime during calendar year 2023 are required to report and pay the PCORI fee no later than July 31, 2024. Detailed guidance regarding how to calculate, report, and pay the fee is provided on the IRS PCORI fee webpage. A summary of key facts is below.

Applicable Plans
Plan sponsors of fully insured medical plans are not responsible for paying the PCORI fee (the obligation rests with the insurer). Plan sponsors of most self-insured medical plans (including health reimbursement arrangements or HRAs) are required to pay the PCORI fee. Special rules apply, such as multiple self-insured arrangements established and maintained by the same plan sponsor and with the same plan year are subject to a single fee. See this IRS chart for details on the different types of plans subject to the fee.

Due Date 
The PCORI fee payment deadline is July 31, 2024, for plan years that end in calendar year 2023.

Fee Amount
PCORI fees are based on the average number of covered lives under the plan or policy. “Covered lives” generally include employees (and retirees) and their enrolled spouses and dependents, as well as individuals who are receiving COBRA or other continuation coverage. The PCORI fee due differs based on the employer’s plan year(s):

1. For plan years that ended on or after January 1, 2023 through September 30, 2023, the fee is $3.00 per covered life.
2. The fee payable for plan years ending on or after October 1, 2023 through December 31, 2023, is $3.22 per covered life.
3. Plan sponsors of self-insured medical plans must use one of three existing permissible methods to determine the average “covered lives” used for reporting and paying the PCORI fee. See Q&As 4-6 in the PCORI Fee FAQs.
4. Plan sponsors who made a change to their funding arrangement/plan offering during the 2023 calendar year (for example, moved to self-insured plan or added an HRA mid-year) may need to pay a PCORI fee for that plan year ending in 2023. And plan sponsors who made a change to their plan year causing there to be two plan year ending dates within the 2023 calendar year (short plan years) may need to pay a PCORI fee for both plan years. See Q&As 12-14 in the PCORI Fee FAQs.

Remittance
The PCORI fee is paid using the June version of IRS Form 720, Quarterly Federal Excise Tax Return, and completing Part II, Number 133(c) and (d) of Form 720. Note that we expect the IRS to shortly issue the second quarter 2024 June version of the Form which will reflect the correct 2023 fee amounts. Specific instructions regarding PCORI can be found on page 9 of the Form 720 Instructions. Plan sponsors who are not required to report any other liabilities on a Form 720 will be required to file the Form only once per year. Note that in the header of the Form, the quarter ending date should be completed as “June 30, 2024”, to indicate the Form is being filed for the 2024 second quarter. Plan sponsors are not required to pay the fee electronically, but if paid through the Electronic Federal Tax Payment System, the payment should be indicated as applied to the second quarter. If paid by mail, it is very important that the Payment Voucher (720-V) indicate the tax period for the fee is for the “2nd Quarter” (otherwise IRS may send a late notice).

Should you have questions about this or any other aspect of healthcare reform, please contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.

The IRS has issued an alert reminding taxpayers and health FSAs, HRAs, HSAs, and MSAs administrators that personal expenses for general health and wellness cannot be deducted or reimbursed under these arrangements because they are not considered expenses for medical care under the Internal Revenue Code. The IRS provided this alert to warn of companies misrepresenting when personal health expenses can be reimbursed by these tax-favored accounts.

What are Qualified Medical Expenses?
Health FSAs, HRAs, HSAs, and MSAs can be used to pay out-of-pocket costs for “qualified medical expenses” that are not covered by a health plan. Qualified medical expenses are the costs associated with diagnosis, cure, mitigation, treatment, or disease prevention, and for the purpose of affecting any part or function of the body. These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. They include the costs of equipment, supplies, and diagnostic devices needed for these purposes. They also include the costs of medicines and drugs prescribed by a physician. Medical expenses must primarily alleviate or prevent a physical or mental disability or illness. The Code generally allows a deduction for qualified medical expenses paid during the taxable year. Qualified medical expenses that have not been covered by a health plan or used for a deduction are eligible to be paid or reimbursed under an FSA, HRA, HSA, or MSA.

What are NOT Qualified Medical Expenses?
Expenses that are merely beneficial to general health are not “qualified medical expenses.” The IRS maintains a set of FAQs addressing when costs related to nutrition, wellness, and general health are qualified medical expenses. These FAQs clarify that these costs are qualified medical expenses only in narrow circumstances and provide many helpful examples of what is and is not a qualified medical expense. For example, some products, such as fitness trackers, might qualify as a qualified medical expense if a person with a medical condition is advised by their doctor to purchase it. But only in “rare” circumstances can things like food or supplements be considered a medical expense. This reminder is important because some companies misrepresent nutrition, wellness, and general health expenses as “qualified medical expenses” that can be reimbursed by a health FSA, HRA, or HSA. According to the IRS, some companies mistakenly claim that notes from doctors based merely on self-reported health information can convert nonmedical food, wellness, and exercise expenses into qualified medical expenses.

Even though these notes may be written by doctors, the IRS is questioning the validity of their advice and suggesting that these notes may not be adequate. The IRS is encouraging review of the FAQs on medical expenses related to nutrition, wellness, and general health to determine whether a food or wellness expense is a medical expense. See IRS details and requirements for the tax treatment of medical expenses below:

• Can I deduct my medical and dental expenses?
• Publication 502, Medical and Dental Expenses

Taxpayers and plan administrators should be careful to follow the rules and be mindful that personal expenditures on things like food for weight loss and other general health expenses will typically not qualify as tax-preferred medical expenses. Please contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220 with any questions. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.

The Centers for Medicare and Medicaid Services (CMS) is now accepting Prescription Drug Data Collection (RxDC) submissions for “reference year” 2023. Data must be submitted through the RxDC Health Insurance Oversight System (HIOS) module. As background, plans and issuers must submit annual spending, premium, and enrollment information based on the “reference year” (i.e., the calendar year immediately preceding the calendar year in which the data submission is due). See our prior update for more background on this reporting requirement. Plans and issuers must submit these reports by June 1 of each year, covering information for the prior calendar year. The first round of reporting (for 2020 and 2021) was due December 27, 2022, and the second round (for 2022) was due June 1, 2023. The next RxDC report (for 2023) is due by Saturday, June 1, 2024. Employers should confirm they are taking steps to comply with this reporting deadline, such as submitting certain plan data on their own through the HIOS portal and providing information to third-party vendors on a timely basis.

Self-Insured Plans Responsible for Reporting
The RxDC reporting requirement applies to both fully insured and self-insured plans, however, fully insured carriers will handle the reporting for their clients. Self-insured plans are responsible for their own reporting and will generally look primarily to their broker for guidance regarding the employer’s compliance and reporting. Self-insured employers will typically use third-party administrators (TPAs), pharmacy benefit managers (PBMs), or other third parties to submit RxDC reports on their behalf. There could be multiple reporting entities involved in compiling and submitting data for an employer self-insured plan, and various vendors are taking different approaches. Some may report aggregated data directly to CMS and others may provide the data to the employer for submission. For example, some vendors will submit all files except the D1 file which includes membership data, employer/employee contributions, and administration and stop-loss costs. If an employer/plan is required to submit any data themselves, they must first set up their organization with a HIOS account. CMS has issued detailed and easy-to-follow instructions which can be found on a CMS RxDC website where FAQs, templates for the data files, and much more information is posted. The CMS help desk is available to assist with the RxDC reporting/submission process (access them by email or telephone at 855-267-1515).

Employer Next Steps
Employers with fully insured medical plans should confirm with their insurance carriers that they will be timely processing the RxDC reporting. Self-insured employers should confirm that their TPA or PBM will be completing an RxDC report on behalf of the plan, and promptly respond to any questionnaires received from the vendors to assist with compiling some of the basic plan information needed in addition to the main content handled by the vendor. Self-insured employers should also be sure to timely submit any plan data themselves as needed through the HIOS portal. Being proactive and communicating with vendor partners to coordinate reporting responsibilities is an essential aspect of this process. A health plan’s submission is considered complete if CMS receives all required files, regardless of who submits them.

Conner Strong & Buckelew is working directly with our health insurance carriers and vendor partners to monitor guidance and confirm approaches to assisting our clients in remaining compliant with these RxDC requirements. As compliance-related questions and issues continue to surface from vendors and employers, we are hopeful that the vendor industry will continue to evolve its processes to provide maximum assistance to the employer community and also that the Departments will continue to provide further guidance, clarifications, and support.

We will provide alerts and updates as new information becomes available. Please contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220 with any questions. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.

Employer provided dependent care assistance under an Internal Revenue Code section 129 Dependent Care Assistance Program (DCAP) has historically been subject to Pennsylvania (PA) personal income tax. PA income tax law has previously provided that only health care related contributions (health, dental vision) to cafeteria plans are excludable from PA tax (i.e., dependent care and adoption assistance has historically been treated as taxable). Under PA Act 34, effective on December 14, 2023, amounts paid or incurred by an employer for DCAP provided to an employee are now excludable from the employee’s PA personal income tax obligation.

Due to the timing of this PA law change, employers have presumably been withholding tax on this type of assistance throughout the 2023 tax year.  This could create an issue when a PA employee who has received a DCAP benefit from an employer files their 2023 PA Personal Income Tax Return (PA-40).  In this case, employees will have received a W-2 that does not account for this update to PA law for the 2023 year pertaining to DCAPs.  Therefore, we understand affected employees can file their 2023 PA-40 with the corrected W-2 amounts and receive a refund for the over-withholding. In that case, they are instructed to:

1. Decrease the box 16 wages indicated on their 2023 W-2 by the amount of their 2023 dependent care benefits (up to $5,000), and use that amount for line 1a of their PA-40, and
2. Include their 2023 W-2 along with a written statement from their employer to verify why the amounts on the W-2 do not match the amount reported on line 1a.​

We have created a template written statement that an employer may consider providing to their affected PA employees to meet this requirement. Note too that payroll should also stop PA withholding for tax year 2024 on DCAP benefits. See this PA Department of Revenue page for more information.

As always, employers are advised to confer with their qualified tax advisers on all tax related withholding issues. Please contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220 with any questions. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.

Employers and plan sponsors have a new issue to be mindful of in light of a lawsuit filed this week in a federal court in Camden, New Jersey, against Johnson & Johnson (J&J). In a nutshell, an employee is suing their employer, J&J, claiming that under their self-funded benefit plan J&J did not exercise their fiduciary obligation to ensure costs for pharmacy care were properly managed. In the same way an employer/plan sponsor has a fiduciary obligation that its 401(k)-retirement plan is managed correctly, this case argues the same obligation exists for a health plan.

In this case, the employee alleges that over the past several years, J&J’s mismanagement of the employee’s health plan, evidenced by the price it agreed to pay its Pharmacy Benefits Manager (“‘PBM”), led to employees being overcharged for many generic drugs that are widely available outside the J&J plan at drastically lower prices. It’s alleged that this cost the ERISA plan and the employees millions of dollars in the form of higher payments for prescription drugs, higher premiums, higher deductibles, higher coinsurance, higher copays, and lower wages or limited wage growth.

The suit claims that the burden for the alleged overpayment falls on J&J’s ERISA plan, which has a duty of prudence to the plan and its plan assets, and to the beneficiaries of the plan who generally pay out-of-pocket for a portion of the price. Hence, the suit alleges that J&J failed to protect plan assets and beneficiaries’ interests by not taking available steps to ensure that the PBM fees/services rendered were reasonable. ERISA requires Plans to engage in a prudent and reasoned decision-making process. The suit alleges that if J&J had engaged in a prudent and reasoned decision-making process, they would have known of, and adopted, any of numerous options that would have drastically lowered the cost of prescription drugs in general and generic-specialty drugs in particular and would have resulted in other cost savings for the plans and their beneficiaries.

The claim of “fiduciary responsibility” over health plans has long been theorized as a looming issue. For example, is there now an expectation that employer/plan sponsors will have to measure the real effectiveness of a carrier’s network discounts? If a network discount is, for example, equivalent to 250% (or more) of Medicare will that be considered reasonable enough? This case and other similar challenges based on fiduciary oversight and transparency have gained significant attention, and the speculation is more cases like this will follow. While the outcome of the challenge is still uncertain, what is clear is that this type of case will lead to calls for more transparency and accountability in the industry, and further press issues like pay for performance, Mark Cuban-like pharmacy models, reference/index-based pricing programs, and other solutions that are disruptors, but pose the potential to reduce costs.

Conner Strong & Buckelew has long recognized that our client’s group health plans have significant fiduciary responsibilities and further burdens related to managing the financial viability of their group health plans and the prudent disposition of the plan’s assets. We recognize that their health care spend is one of the largest and most steeply increasing line items in their budgets. Toward that end, we have and will continue to push our carrier and TPA partners to provide all cost and claims data to support our client’s efforts to prudently fulfill their fiduciary oversight obligations under the law.

We are watching this case closely and will share more updates as they become available. Please contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220 with any questions. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.

Group health plan (GHP) sponsors that offer prescription drug (Rx) coverage must, at least annually, notify Medicare Part D eligible individuals and the Centers for Medicare & Medicaid Services (CMS) of their plan’s creditable coverage status. Both disclosures (to Medicare Part D eligible individuals and to CMS) must meet specific form, content and timing requirements as prescribed by CMS. This update addresses the required disclosure to CMS and reminds plan sponsors that online disclosure should be completed annually no later than 60 days from the beginning of the plan year. This means that an employer with a calendar year plan that began January 1, 2024, must complete the CMS online reporting no later than February 29, 2024, and an employer with a plan year that begins July 1, 2024, must complete the reporting no later than August 29, 2024. (For more information on the Medicare Part D disclosure requirement for individuals, please see our update Medicare Part D Notices Due Before October 15th).

Medicare Part D Notice to CMS Rules
Medicare Part D rules generally require that GHPs with an Rx benefit must disclose to CMS whether the Rx coverage offered is “creditable” or “non-creditable”. Individuals who fail to enroll in Medicare Part D Rx coverage when first eligible may be subject to late enrollment penalties if they go 63 consecutive days or longer without creditable Rx coverage. Because of this potential penalty, both Medicare Part D eligible individuals and CMS need to know whether the GHP’s Rx coverage is creditable or non-creditable. Rx coverage is “creditable” when it is at least actuarially equivalent to Medicare Part D Rx coverage. “Non-creditable” Rx coverage is actuarially less in value (expected to pay out less) than the coverage offered under Medicare Part D. An Rx plan must use the online CMS Disclosure Form to report its “creditable” or “non-creditable” Rx status at the times noted below. Guidance and instructions are provided to assist Rx plan sponsors with completing the form.

Disclosure Timing
The CMS disclosure must be made annually and whenever any change occurs that affects whether the Rx plan’s coverage is creditable. CMS should receive a creditable coverage disclosure:

1. Within 60 days of the beginning of the plan year for which the disclosure is being reported.
2. Within 30 days of a change in creditable coverage status.
3. Within 30 days of the Rx plan’s termination.

A GHP is not required to submit the online disclosure form to CMS for any plan year where the plan does not offer Rx benefits to any Medicare Part D eligible individuals as of the beginning of the plan year. Also, plan sponsors approved for the retiree drug subsidy are exempt from filing the CMS disclosure notice with respect to those qualified covered retirees for whom the sponsor is claiming the subsidy. Note that this creditable coverage reporting is in addition to the mandatory CMS Medicare Secondary Payer (MSP) reporting typically handled by an insurer or third-party administrator for a GHP (see the CMS site on Mandatory MSP Reporting for more information).

Should you have questions about this or any aspect of GHP requirements, please contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220 with any questions. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.