Understanding Medicare Part D Notice Requirements for 2025
The Centers for Medicare & Medicaid Services (CMS) has announced the 2025 parameters for the Medicare Part D prescription drug benefit, marking significant updates that will affect group health plan sponsors. If you manage a group health plan that offers prescription drug coverage to Medicare Part D eligible individuals—such as active or disabled employees, retirees, COBRA participants, and beneficiaries—it’s crucial to understand these changes and how they impact group health plan sponsor obligations.
What is Medicare Part D?
Medicare Part D is a federal program providing prescription drug coverage to Medicare beneficiaries. Under Part D regulations, plan sponsors must disclose to both the covered individuals and CMS whether their prescription drug coverage is creditable or non-creditable. Simply put, “creditable” means that the plan’s actuarial value matches or exceeds that of standard Medicare Part D coverage as defined by CMS. The creditable or non-creditable notice is due by October 15th of each year, when a Medicare eligible individual joins the plan, if the drug benefits change from creditable to non-creditable (or vice versa), and upon request.
2025 Updates to Medicare Part D
The updates to the Medicare Part D structure reflect changes instituted by the Inflation Reduction Act, coming into effect on January 1, 2025.
Removal of the 25% Coverage Gap Share (the doughnut hole): Enrollees will no longer have to pay 25% of the cost during the coverage gap phase. A maximum $2,000 out-of-pocket cap will take effect in Medicare D in 2025 (a steep $6,000 reduction from 2024).
These adjustments are designed to lower out-of-pocket expenses for members and are expected to significantly reduce member cost-sharing in the standard plan benefit. However, with a richer plan benchmark to compare against, passing the creditable coverage testing will become more complex for employer plans.
Implications for Group Health Plan Sponsors
With these changes, plan sponsors must evaluate their prescription drug coverage against these new parameters to ensure it remains creditable. This evaluation is essential for compliance with disclosure requirements to both CMS and eligible participants.
- Disclose Non-Creditable Coverage: Notify employees that their plan no longer meets the creditable coverage standard; or
- Modify Plan Benefits: Adjust the plan’s benefits to improve its design and meet the new standards for 2025.
Typical plan adjustments may include lowering copays, coinsurance, deductibles, and out-of-pocket maximums to ensure the plan remains creditable. Employers who offer retiree drug coverage and receive a retiree drug subsidy may also need to evaluate their contribution strategy.
Who should receive the Medicare D notice?
Notice should be sent to all Part D-eligible participants, including active employees, COBRA qualified beneficiaries, retirees, spouses, and other dependents of the employee covered by the plan.
In many cases, the employer will not know whether an individual is Medicare eligible or not.
What does late enrollment mean to members?
The late enrollment penalty is an amount that can be added to their Medicare drug coverage (Part D) premium. They may have to pay a late enrollment penalty if at any time after Initial Enrollment Period is over, there’s a period of 63 or more days in a row when you don’t have Medicare drug coverage or other creditable prescription coverage.
Example of the Part D Penalty.
Learn how members can avoid the late enrollment penalty.
Bottom Line
These newly defined parameters are crucial for group health plan sponsors as they prepare for 2025. Understanding whether a plan’s coverage is creditable is not just about compliance; it’s about ensuring that plan participants have adequate prescription drug coverage.
By staying informed and acting promptly, plan sponsors can ensure that they meet all necessary requirements and continue to offer competitive and compliant benefits to their covered individuals.
Conclusion
With the 2025 Medicare Part D updates, staying informed and prepared is key for plan sponsors. These changes present an opportunity to reassess your current plan offerings and ensure they align with federal standards. Take proactive steps now to meet disclosure obligations and provide your participants with the best possible coverage.
