- Posted by Jessica Waltman
- On February 14, 2019
If your company’s health insurance plan meets all of the following three criteria, then you have an important deadline coming up from the federal Centers for Medicare and Medicaid Services:
- Your group health insurance benefits include coverage of prescription drugs.
- There is at least one person eligible for coverage on your plan (including active employees, spouses, dependents, and retirees) who may also qualify for Medicare, even if the person(s) is not signed up for Medicare as their primary source of health coverage.
- Your new benefit plan year began on January 1, 2019.
All businesses that offer prescription drug coverage to Medicare Part D-eligible beneficiaries have to make annual disclosures to both plan participants and the federal Centers for Medicare and Medicaid Services (CMS). For calendar year plans (January 1 renewals), the deadline for submitting the 2019 disclosure to CMS is March 1st, so you might need to act soon! If you aren’t sure if you need to comply or if you need help with this process, please contact your Kistler Tiffany Benefits Consultant right away.
Each year, most employer plan sponsors have to tell beneficiaries and the federal government if the drug benefits they offer are “creditable,” meaning that the group coverage covers as much, in average terms, as the standard Medicare Part D prescription drug plan. These rules apply to any employer that may offer prescription drug coverage to any Medicare Part D-eligible individual. Since employee and dependent populations change regularly and it can be hard to track if any spouses or dependents are Medicare-eligible, it makes sense for all employers who offer prescription drug benefits to get in the habit of annually notifying both plan beneficiaries and CMS about the status of the prescription drug coverage. Notices need to be distributed to plan participants each year before the Medicare annual election period begins on October 15th, but employer plans also need to submit an online disclosure form to CMS no later than 60 days after the start of the group plan year.
If your company’s new benefits plan year began on January 1, 2019, then your CMS disclosure deadline is March 1, 2019, but if your plan renews later in the year, then your deadline is 60 days after the start date of your company’s plan.
The procedure for notifying CMS about a plan’s creditable coverage status is quick and painless—it just needs to be done on time. To complete the disclosure, the plan sponsor should access the online form, and enter the plan’s contact information and the employer’s federal tax identification number. Then the plan sponsor needs to attest if all or some of the plan’s prescription drug offerings are creditable or not and submit the form. If your company offers multiple prescription drug offerings, then the plan sponsor needs to test each benefit option to make sure it covers as much as the average Part D plan. It doesn’t matter if your plan is creditable or not—there is no penalty for offering coverage that is less generous than Medicare Part D, you need to tell CMS what kind of benefits your plan provides.
Most employer-sponsored prescription drug benefits are about as good as the average Medicare Part D plan, but there is a simple test to know for sure. As long as your company is not applying for a CMS subsidy for a retiree prescription drug benefit plan, then your group prescription drug benefit plan will be considered by CMS to be “creditable,” if it:
- Provides coverage for brand and generic prescriptions;
- Provides reasonable access to retail providers;
- The plan is designed to pay on average at least 60% of participants’ prescription drug expenses; and
- The plan satisfies at least one of the following criteria:
- The prescription drug coverage has no annual benefit maximum, or if there is a yearly limit, it must be greater than $25,000.
- The prescription drug coverage has an actuarial expectation that the amount payable by the plan will be at least $2,000 annually per Medicare eligible individual.
- If your plan combines its prescription drug coverage with its major medical coverage and uses a combined deductible and lifetime and annual maximums for all benefits under the plan, then the plan’s overall deductible can be no more than $250 per year, and the plan can either have no annual maximum limit or one that is greater than $25,000. If the plan includes a lifetime benefit maximum, then it has to be at least $1,000,000 combined.
Once you’ve completed your plan’s drug coverage benefits testing for the year and submitted their form to CMS online, it is also an excellent time to take an additional 15-30 minutes and update your Medicare Part D Creditable Coverage Notice for plan beneficiaries. This notice must be distributed to Medicare-eligible plan participants before October 15th each year, so most groups give it out to all employees in the fall. However, it also has to be distributed to any Medicare-eligible individual that joins the employer plan mid-year before their effective date of coverage, or upon the request of any beneficiary. So it makes sense for you to update the notice simultaneously with your CMS disclosure report. Fortunately, CMS makes notice creation easy, by providing templates and instructions.
If you need any help with the plan testing process, submitting your disclosure to CMS or preparing your employee notice, please let your Kistler Tiffany Benefits Consultant know, and we will be glad to assist you.
Keep These Tips In Mind As You Finish Up Employer Reporting Season
Many businesses are in the final stages of completing their annual Affordable Care Act (ACA) health coverage information reporting requirements. Here are some things to keep in mind as you finalize your reporting statements for employees and your documentation for the Internal Revenue Service (IRS). If your business needs help with your employer reporting obligations, or are unsure if your business needs to report, please reach out to your Kistler Tiffany Benefits consultant right away so we can help!
- Even though the individual mandate penalty is now $0, employer reporting is still required! The change to the individual mandate penalty did not affect reporting requirements for self-funded plan sponsors outlined in IRC §6055. Nothing has changed the requirement for applicable large employers (ALEs) to report coverage information to the IRS in IRC §6056.
- Small group self-funded or level-funded plans have to report too! Employers of any size that offer a self-funded or level-funded health plan that operates independently of any other source of fully-insured coverage, as well as businesses that sponsor standalone self-funded health plans for retirees, must abide by the federal reporting requirements codified under IRC §6055. These businesses need to submit Form 1094-B to the IRS and send Form 1095-B statements to all covered individuals.
- Controlled groups stand together! Business owners cannot shield themselves from qualifying as an ALE by splitting up their companies with separate tax ID numbers since the employer shared responsibility requirements and related reporting requirements depend on a company’s controlled group status according to the IRS. If you own multiple companies, or if your business has common ownership with other entities, make sure that you have discussed your common employer mandate and reporting liability.
- Double-check all forms before sending! The IRS is currently using information on employer reporting forms submitted in 2016 and 2017 to enforce the employer shared responsibility requirements. Missing data and unchecked boxes on 2015 and 2016 employer reporting forms are some of the most common reasons an employer might get an IRS Letter 226-J signaling potential penalty liability. An employer is ultimately responsible for the accuracy of its Form 1094 and 1095 submissions and statements, even if you use a vendor to help you.
- Good faith compliance relief doesn’t protect against late fees! The deadline to give employees and covered individuals Form 1095 statements is March 4, 2019, and the deadlines to get Form 1094 and Form 1095 information to the IRS are February 28, 2019, for paper submissions and April 1, 2019, for electronic submissions. The IRS has extended good faith compliance relief to covered entities for the 2018 tax year, but that only provides employers and self-funded plan sponsors with limited protection against honest reporting errors. The penalties for late filing range from $50-$260 for every late statement and return, so it is critical to get employer reporting done on time!