Each year, entities providing prescription drug coverage to Medicare Part D eligible individuals must disclose to Centers for Medicare and Medicaid Services (CMS) whether the coverage is creditable prescription drug coverage.  Creditable coverage means that the coverage is expected to pay, on average, as much as the standard Medicare prescription drug coverage. This disclosure is required whether the entity's coverage is primary or secondary to Medicare.

For these entities, there are two disclosure requirements:

The first disclosure requirement is an annual written notice to all Medicare eligible individuals under the prescription drug plan. The disclosure must be provided prior to October 15 each year and in other circumstances stated by the regulations, including sending a notice when an individual joins the plan.

The second disclosure requirement is to complete the Online Disclosure to CMS Form to report the creditable coverage status of the prescription drug plan. The disclosure should be completed annually no later than 60 days from the beginning of a plan year (for calendar year plans, this would be by March 1), within 30 days after termination of a prescription drug plan, or within 30 days after any change in creditable coverage status.

This requirement does not relate to the Medicare beneficiaries for whom entities are receiving the Retiree Drug Subsidy (RDS).

Note:  The term group health plan for the CMS disclosure purpose specifically includes account-based medical plans, that provide medical care and are subject to the Employee Retirement Income Security Act of 1974 (ERISA). This includes health reimbursement arrangements (HRA) and health flexible spending accounts (FSA).

Employers who offer HRAs that include coverage for prescription drugs must provide disclosure notices to Part D-eligible individuals that advise whether the HRA’s prescription drug coverage, either on a stand-alone basis or combined with a major medical plan, is creditable.

CMS has informally stated that a single, combined disclosure notice can be used if the individual must be enrolled in the employer sponsored group health plan in order to be eligible to participate in the HRA. As a result, if all of the employer’s HRA participants are also participants in their major medical plan, an employer could avoid separate notices for their HRA entirely. An HRA offered in connection with another group health plan (e.g., an HRA that is integrated with a major medical plan) should be combined with the other plan to determine whether the combined prescription drug benefit meets the actuarial equivalence test for creditable coverage.

Employers who sponsor health FSAs are not required to provide disclosure notices to Part D-eligible individuals because of a specific exception in CMS guidance. The guidance states that health FSAs are considered when determining whether employer-provided prescription drug coverage is creditable.