Understanding Credible Coverage Notices During Open Enrollment: Key Liabilities for Employers, Carriers, and Third-Party Administrators

As open enrollment approaches, employers, carriers, and third-party administrators (TPAs) need to ensure that credible coverage notices (https://www.cms.gov/medicare/employers-plan-sponsors/creditable-coverage/model-notice-letters) are provided correctly and on time. These notices inform Medicare-eligible employees whether their employer-sponsored health plan is considered creditable or non-creditable, helping them avoid penalties for delayed Medicare Part D enrollment.

However, the responsibility for compliance doesn’t lie with employees—it’s shared between employers, carriers, and TPAs. Failure to comply can lead to significant liability and penalties.

What Are Credible Coverage Notices?

Credible coverage refers to employer-sponsored health plans that are at least as good as Medicare Part D. Employers must provide these notices annually, either before October 15th or alongside open enrollment materials, to Medicare-eligible individuals. These notices help individuals decide whether to enroll in Medicare Part D to avoid penalties.

Additionally, employers are required to submit a disclosure to the Centers for Medicare & Medicaid Services (CMS) annually to report the creditable or non-creditable status of their prescription drug plan. This online submission must be completed within 60 days of the start of the plan year when there is any change in the plan’s status, and upon plan termination.

Employer Liabilities: Fully Insured vs. Self-Funded Plans

The type of health plan an employer offers significantly impacts their liability when issuing credible coverage notices:

1. Fully Insured Plans:?

? ?- For employers offering fully insured plans, insurance carriers often provide the necessary credible coverage information. However, ultimate responsibility for ensuring employees receive these notices still rests with the employer. Employers should confirm with their carrier that notices are being sent and ensure they are included in all open enrollment materials.

? ?- Failure to distribute these notices properly, or to complete the required CMS disclosure, can expose the employer to penalties, employee dissatisfaction, and potential legal action if employees miss Medicare Part D deadlines.

2. Self-Funded Plans:?

? ?- In self-funded plans, employers bear a greater responsibility for both administering the plan and ensuring compliance. While the TPA may assist, the employer is legally responsible for issuing credible coverage notices and submitting the CMS disclosure. This means employers must work closely with their TPA to ensure notices are sent and the CMS disclosure is completed accurately and on time.

? ?- Non-compliance with either requirement can lead to penalties from CMS and may expose the employer to claims from employees who incur late enrollment penalties.

Carrier and TPA Liabilities

Carriers and TPAs have distinct roles, but they are not immune from liability:

- Carriers: In fully insured plans, carriers often assist with credible coverage documentation. If a carrier fails to provide accurate information or misses deadlines, they could face compliance penalties or litigation from employers seeking to mitigate their own liability.

- TPAs: In self-funded arrangements, TPAs handle much of the plan administration, including the issuance of credible coverage notices. However, the employer remains responsible for CMS disclosures. TPAs must ensure their processes are compliant with CMS regulations and outlined clearly in contracts with employers. Failure to fulfill these obligations could result in contractual disputes or legal actions.

CMS Disclosure Requirement

Employers must complete an annual online disclosure to CMS (https://www.cms.gov/medicare/employers-plan-sponsors/creditable-coverage/disclosure-guidance-instructions) regarding the creditable or non-creditable status of their prescription drug plan. Key points include:

- Submission is due within 60 days of the beginning of each plan year.

- If there is a change in coverage status or the plan is terminated, an updated disclosure must be submitted.

- The CMS disclosure helps Medicare track whether employees have access to creditable drug coverage through their employer.

Failure to submit the CMS disclosure on time could lead to penalties and issues for employees who rely on the creditable coverage information to make Medicare Part D decisions.

Best Practices for Employers

1. Confirm Compliance with Carriers and TPAs: Whether fully insured or self-funded, verifying with your carrier or TPA that credible coverage notices are being sent and that the CMS disclosure is submitted on time is crucial.

2. Include Notices in Open Enrollment Packets: Ensure credible coverage notices are included in open enrollment materials for Medicare-eligible employees. This reduces the risk of missing deadlines and keeps your workforce informed.

3. Submit the CMS Disclosure: Employers must not overlook the online disclosure requirement to CMS. This step is critical to ensure compliance with federal regulations. Consider adding this as a recurring task in your compliance calendar.

4. Keep Clear Documentation: Document the issuance of credible coverage notices and submission of the CMS disclosure. This provides a defense against potential penalties or disputes.

5. Monitor Compliance Deadlines: Mark important dates, such as October 15th for notice distribution and the 60-day window for CMS disclosure, and work with your carrier or TPA to meet them.

Conclusion

Credible coverage notices and CMS disclosures are a critical part of open enrollment, carrying significant liability for employers, carriers, and TPAs. Understanding the differences between fully insured and self-funded plans, and ensuring compliance with CMS regulations, helps avoid legal or financial penalties. By staying proactive and maintaining clear communication with your partners, you can protect your organization and ensure employees are informed and compliant.

If you need guidance on navigating credible coverage notices or the CMS disclosure process, consider partnering with a benefit broker and/ or compliance firm to ensure your compliance during open enrollment.

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