HDHPs and Medicare's Simplified Determination of Creditable Coverage Status

[Debb]

Does anyone know if CMS would consider an HSA-qualified HDHP to be an integrated plan (as defined by the Creditable Coverage Simplified Determination safe harbor)? I have been looking for an authoritative source that tells me how to apply the safe harbor criteria when lifetime and annual limits for EHBs are no longer allowed by the ACA. Is it safe to entirely disregard the integrated plan criteria solely because two of the three plan provisions are no longer valid for most plans? In other words, can an employer rely on the yellow-highlighted instructions and apply the non-integrated plan criteria to a plan with a combined plan year deductible if that plan no longer has combined annual and lifetime maximums per the ACA?

Per CMS simplified determination method:

Integrated Plan - An integrated plan is any plan of benefits that is offered to a Medicare eligible individual where the prescription drug benefit is combined with other coverage offered by the entity (i.e., medical, dental, vision, etc.) and the plan has all of the following plan provisions: 1) a combined plan year deductible for all benefits under the plan, 2) a combined annual benefit maximum for all benefits under the plan, and 3) a combined lifetime benefit maximum for all benefits under the plan.

A prescription drug plan that meets the above parameters is considered an integrated plan for the purpose of using the simplified method and would have to meet steps 1, 2, 3 and 4(c) of the simplified method If it does not meet all of the criteria, then it is not considered to be an integrated plan and would have to meet steps 1, 2, 3 and either 4(a) or 4(b).

[Brian Gilmore]

I've seen many interpretations of that provision.  The way I read it is that a plan not meeting the integrated standard in 4(c) can follow the 1, 2, 3, and either 4(a) or 4(b) approach.

As you noted, an HDHP will not meet the integrated standard because its deductible by definition is higher than the 4(c) $250 limit.  So HDHPs (even if they have a prescription drug benefit combined with the medical), will use the alternative  the 1, 2, 3, and either 4(a) or 4(b) approach.  

That approach basically makes the entire point of emphasis on meeting the 60% Rx standard in 3.  The others generally are not in question or irrelevant since ACA. 

Here's my take in more detail:

https://www.newfront.com/blog/ira-changes-affect-notice-of-creditable-coverage-considerations

Determining Part D Creditable Status of Employer’s Health Plan 

There are currently two permitted approaches to determine a group health plan’s creditable status: 

1. Simplified Determination; or  
2. Actuarial Equivalence Determination 

Simplified Determination: May Not Be Available After 2025 

Though the simplified determination is not as “simple” as the title might suggest, it at least avoids the need to work with an actuary.  Initial draft CMS guidance stated the simplified determination would no longer be available starting in 2025 because the IRA changes provide that “it will no longer be a valid methodology to determine whether an entity’s prescription drug coverage is creditable or not.”    

Fortunately CMS backtracked on this approach in the final guidance after receiving a wave of upset commenters at the approach, and perhaps also in part because they “received no comments supporting the elimination of the simplified methodology.”  Commenters appropriately “opined that, without a simplified methodology…plans would be required to make an annual actuarial determination…which would represent a substantial new burden on these plan sponsors.”  

Nonetheless, CMS has not pledged to maintain the simplified determination beyond 2025.  The final guidance states that CMS will “permit use of the existing creditable coverage simplified determination methodology for CY 2025 and will re-evaluate the continued use of the existing or a revised simplified determination methodology for CY 2026 in future guidance.”  

Under the simplified determination as it currently stands at least through 2025, different tests apply depending on the plan’s structure and deductible. In most situations, employer’s prescription drug coverage is considered “integrated” for purposes of the simplified determination because it is combined with medical coverage.    

These typical employer plans that are integrated but have a deductible in excess of $250 must meet the following requirements to be considered creditable under the simplified determination: 

1. Provides coverage for brand and generic prescriptions; 
2. Provides reasonable access to retail providers; 
3. The plan is designed to pay on average at least 60% of participants’ prescription drug expenses; and 
4. The prescription drug coverage has no annual benefit maximum benefit or a maximum annual benefit payable by the plan of at least $25,000, or 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. 

In most situations, the only aspect of this criteria in question is whether the plan is designed to pay on average at least 60% of participants’ prescription drug expenses.  Employers often are aware of that the plan’s overall actuarial value for purposes of determining is at least 60% for purposes of meeting the ACA minimum value standard (i.e., at least as rich as Bronze-level plan on the Exchange), which is also specified in the plan’s SBC.  It is often not as clear whether the prescription drug component by itself meets that 60% standard.  

• Bottom Line: In many cases, the plan’s insurance carrier or third-party administrator will perform the creditable status determination and notify the employer of that determination.  However, such access and expectations can vary regionally, and may be in jeopardy more broadly if the simplified determination is no longer available or more burdensome in 2026 and beyond. 

Actuarial Equivalence Determination 

This approach requires the assistance of an actuary to perform an analysis as to whether the cost of prescription drugs under the employer’s plan is at an actuarial value that equals or exceeds the actuarial value of Part D coverage.  Again, employers often have the ability to rely on a determination performed by their insurance carrier or TPA that avoids the need to directly engage with an actuary.  However, that access may be in jeopardy going forward, particularly as creditable status becomes more difficult to achieve and determine.  

CMS Commentary on HDHP Creditable Coverage Status 

The most common type of employer-sponsored coverage to face challenges meeting the Part D creditable standard are high deductible health plan (HDHP) options designed to be HSA-compatible.  Such coverage must impose a minimum deductible to qualify for HDHP status, which is $1,650 for individual coverage and $3,300 for family coverage in 2025.  

In the 2025 Part D Redesign Program Instructions addressing the changes made by the IRA, CMS responded as follows to a concerned commenter that Part D eligible individuals may have reduced access to creditable HDHP coverage:  

“We agree that it may be more difficult for high deductible health plans to qualify as creditable coverage. Sponsors of group health plans can address this by offering plan choices that do meet creditable coverage requirements…Part D eligible individuals that choose not to enroll in Part D or a plan that provides creditable coverage may face a Part D late enrollment penalty (Part D LEP) later if they do enroll in Part D.”  

Accordingly, HDHP plan options will be less likely to meet the creditable coverage standard in 2025 and beyond under the higher bar set by the IRA.  

• Bottom Line: Employers sponsoring creditable HDHP plan options in 2024 should not assume the plan option will remain creditable in 2025.  Employers should be working with their vendors to ascertain the creditable status of their plans—and particularly their HDHP plan options—early this year to be aware of any potential changes heading into 2025.