All sponsors of group health plans, including private employers, unions, government entities and other group health plan sponsors, must comply with this notice requirement. Traditional health plans, including HMOs and PPOs, providing prescription drug coverage are subject to the notice requirements. However, flexible spending accounts, health savings accounts and Archer Medical Savings Accounts are not taken into account in determining whether prescription drug coverage is creditable and employers do not have to send the Medicare Part D notice for these types of plans.
What Is the Purpose of the Notice? The notice explains whether coverage under the employer's prescription drug program is creditable or non-creditable so that Medicare Part D eligible individuals do not unknowingly incur late enrollment penalties due to a break in creditable prescription drug coverage. Individuals who are not covered under a creditable prescription drug program and who elect not to enroll before the end of their initial enrollment period for Medicare Part D will face higher premiums on a permanent basis when they subsequently enroll in Medicare Part D. Individuals who do not get the required notice and who do not apply for Medicare Part D coverage when they first become eligible for those benefits may face late enrollment penalties. However, the Centers for Medicare and Medicaid Services may waive those penalties if the individual can establish that his or her employer failed to provide the proper notification. Although there are no penalties imposed on employers who do not send out the notice, employers who do not send out the notice will not qualify for the retiree drug subsidy.
