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Guest Article

(From the January 19, 2010 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

CMS Updates Creditable Coverage and Late Enrollment Penalty Guidance

Effective April 1, 2010, updated guidance will go into effect for Medicare Part D Plans regarding the determination of creditable coverage and late enrollment fees.

Recap of Late Enrollment Penalty

On December 21, 2009, the Centers for Medicare and Medicaid Services (CMS) released an updated Chapter 4 of its Medicare Prescription Drug Benefit Manual, which addresses the determination of creditable coverage and late enrollment fees. Briefly, Medicare beneficiaries may incur a late enrollment penalty (LEP) if, after their initial enrollment in Medicare Part D, they have a continuous period of 63 days or more during which they were eligible but not enrolled in a Medicare Part D Plan or covered under any creditable prescription drug program. Creditable prescription drug coverage is coverage that meets minimum Medicare standards and is expected to pay on average at least as much as Medicare's standard drug coverage. Once the LEP applies, it will generally remain and apply to the beneficiary's Medicare Part D premiums for as long as he or she has Medicare prescription drug coverage.

CMS Tightens Procedures

The recent changes by CMS reflect a tightening of the procedures that apply in determining creditable coverage and the Part D plan sponsor's obligation to collect the LEP. Key changes include:

Attestation of Creditable Coverage -- The Part D plan sponsor must follow up with the beneficiary by phone or in writing if the beneficiary fails to provide creditable coverage information or return a completed attestation form. The creditable coverage determination must be reported to CMS within 14 calendar days even if the Part D plan sponsor is unable to obtain the beneficiary's creditable coverage information after the required follow-up.
Reporting Creditable Coverage to CMS -- Part D plan sponsors must notify the beneficiary by phone or in writing that the completed attestation will not be reviewed if it is received more than 60 days after the return deadline. A new model notice, Creditable Coverage Information Received after Deadline, is available for plans to notify beneficiaries of the 60-day cut off.
Notification of LEP Adjustment -- The sponsor can receive a late attestation up to 60 days after the return deadline on the attestation form, and must make an adjustment to any previously reported number of uncovered months to CMS. Where the adjustment impacts the beneficiary's LEP, the plan must notify the beneficiary that it either owes the beneficiary a refund or that the beneficiary owes the plan an additional payment as a result of the adjustment. Another new model notice, Beneficiary Notice of Late Enrollment Penalty Adjustment, is available for plans to use in this regard.
Collection of LEP -- CMS clarified that the LEP is part of the Part D premium and the plan sponsor must make a reasonable attempt to collect it, even where the beneficiary has a zero premium or has requested a reconsideration of the LEP. Although it can be billed on a separate invoice, the LEP must be billed and due at the same time as the non-LEP premium. Similarly, where the sponsor has a policy of involuntary disenrollment for non-payment of premiums, it must disenroll the beneficiary for failure to pay the LEP (although the sponsor can set a threshold amount prior to disenrollment).
Information Retention -- Consistent with the new regulatory authority, the revised Chapter makes clear that Part D plan sponsors are required to retain all information collected concerning creditable coverage determination in the same manner as enrollment records (i.e., the information must be kept for the current contract period and the ten prior periods). Part D plan sponsors are required to retain copies of any evidence of creditable coverage, including attestation forms, and any information regarding LEP reconsideration decisions.

The updated Chapter 4 provisions are effective for enrollment applications that are received on or after April 1, 2010. Part D plan sponsors may elect to implement the changes earlier, however.

The CMS webpage on Creditable Coverage and Late Enrollment Penalty provides a brief overview of the general requirements, together with links to the updated Chapter 4 and to a brief Summary of Significant Changes.

The information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations.

If you have any questions or need additional information about articles appearing in this or previous versions of Washington Bulletin, please contact: Robert Davis 202.879.3094, Elizabeth Drigotas 202.879.4985, Mary Jones 202.378.5067, Stephen LaGarde 202.879-5608, Bart Massey 202.220.2104, Mark Neilio 202.378.5046, Tom Pevarnik 202.879.5314, Sandra Rolitsky 202.220.2025, Deborah Walker 202.879.4955.

BenefitsLink is an independent national employee benefits information provider, not formally affiliated with the firms and companies who kindly provide much of the content and advertisements published on this Web site, including the article shown above.