Speaker 1: 0:00

Medicare has lots of health plans scratching their heads about creditable coverage calculations and reporting. What's that all about? What do you need to know and why does it matter to your clients and their employees? We'll find out on this episode of Shift Shapers.

Speaker 2: 0:17

Change either energizes or paralyzes the choice is yours. Or paralyzes, the choice is yours. This is the Shift Shapers podcast, bringing the employee benefits industry interviews with individuals and companies who are shaping the industry's shifts. And now here's your host, David Saltzman.

Speaker 1: 0:39

And to help us answer that question, we've invited Marissa Ruffo, jd MBA subject matter expert and our sponsor for today's podcast, mzq Consulting've invited Marissa Ruffo, jd MBA subject matter expert and our sponsor for today's podcast, mzq Consulting. Welcome, marissa.

Speaker 3: 0:49

Hi, david, thanks for having me.

Speaker 1: 0:52

So, in a nutshell, which may be where it belongs, what is Medicare creditable coverage?

Speaker 3: 1:00

Yeah, I don't even know if a nutshell, a nut bag, a nut case, medicare creditable coverage in kind of the easiest way we can explain it for compliance purposes is whether plans offered by regular group health plan sponsors are comparable to an average Medicare Part D plan. It's a requirement that came about way back in 2003, but has really kind of got a lot more media attention lately following a lot of different changes and news coming around Medicare and out-of-pocket spending and negotiations and everything in that in the news. But credible coverage really just has to do with the group health plans and whether they are comparable to your average Medicare Part D plan.

Speaker 1: 1:50

Okay, so you said it's been around for a long time, since 2003. Why is all of the consternation and confusion happening now? Why is it all of a sudden a hot topic?

Speaker 3: 2:01

Oh boy, there's a lot of things going on. So you had the Inflation Reduction Act in 2022. That put a lot of different pieces in motion, so this has been going on for a couple of years now. They mentioned getting rid of one of the calculation methods for credible coverage determinations the out-of-pocket maximum amount to $2,000 annually for Medicare Part D plans. And then you also have kind of a sociological overlap you have significantly more Medicare eligible, over 65 individuals still working full-time. So this is something that maybe got a lot less attention because it just didn't really pertain to as many full-time employees in the past, and now it pertains to a lot more. And then, on top of it, medicare premiums have gone up exponentially, and if you mess up compliance-wise, you as an individual end up with a lifetime penalty on top of your Medicare premium if you don't enroll properly. So there's a lot going on and overlapping here.

Speaker 1: 3:07

Is this part of an employer's?

Speaker 3: 3:09

fiduciary duty A hundred percent. This is also the fiduciary duty kind of hot topic but an issue. Everyone is going back and looking at their compliance checklist saying am I doing what I'm supposed to be doing every year? And Medicare credible coverage notices, which is one of the parts of requirements for compliance. Here is one that should have been going out every year but kind of hyper zooming in with that lens groups are noticing they A weren't determining what their plan was, whether creditable or non-credible. B maybe we're not sending out a notice. And now, c they have a lot of employees asking questions and saying do I need to bring a lawsuit, like these other groups have to say you're not fulfilling your fiduciary responsibilities.

Speaker 1: 3:54

We'll talk in a little bit about how employees could become aggrieved, for lack of a better word. But let's assume that we have some folks who have gotten caught in the penalty trap, which we'll explain in a bit. All it would take would be one of those to sue an employer, wouldn't it? Just as we're seeing in some of the other lawsuits about pharmacy costs and pharmacy spending?

Speaker 3: 4:16

Correct. It really only takes one. Now. That's any lawsuit really. So any plan participant that's aggrieved at enough of a level can file a lawsuit. However, in this day and age keep in mind I just talked about more Medicare, eligible age individuals still working where you may have had one to two employees that something would have gone wrong and they wanted to suit. Now you may have 10 to 20. That's now a class suit. That's a whole different ballgame. It's a whole different lawsuit, whole different cost, not only in court, but PR for a company you don't want to be known as a company that has really unhappy employees because you have, almost like an age discrimination problem going on or you are not taking care of their health and benefits plans properly. You are not taking care of their health and benefits plans properly.

Speaker 1: 5:05

So let's go back to nuts and bolts. Is an employer required to have creditable coverage?

Speaker 3: 5:18

No, that is one of the biggest misnomers around this rule. You are not required to have actual creditable coverage. What you are required to do is a pretty easy three-step process. What you are required to do is a pretty easy three-step process. One determine what the prescription drug plans you offer are, whether they are creditable or non-creditable. There's a couple ways to calculate you mentioned. We'll get a little more detail in there.

Speaker 3: 5:35

Part two you have to provide a notice to your Medicare-eligible plan participants as to what type of coverage you have, that kind of creditability determination. That notice gives them a lot of details on how they can enroll in Part D, what kind of plan options they have help they can seek. And then the third requirement is reporting to CMS annually what kind of status of credibility you have as an employer plan sponsor. Now, that one's kind of the one that we've gotten a lot of questions about. A lot of plans I think, missed. You will not get in trouble until you get in trouble kind of a scenario. You definitely want to catch up on a lot of these things, but it's a pretty simple process and even CMS has online fillable forms now for that reporting. It's really just the easiest thing that a lot of plans missed, I think.

Speaker 1: 6:29

The penalty is really more on the liability side from an employee. So let's talk a little bit about why an employee would care about this. Why would any employee? Or why would Medicare eligible employees? What does it matter?

Speaker 3: 6:44

It matters because this is a little bit different than our regular compliance discussion. You're not getting a penalty from the DOL or HHS or CMS to the employer plan sponsor, but if you're the employee who delays enrolling in Medicare Part D because you were under the impression that you had creditable coverage from your employer and now you have a lifetime penalty that you have to pay and repeat that lifetime on top of your Medicare premium monthly, this is a huge financial cost to that employee. They A may be on the wrong prescription drug plan for their needs. That's probably the first problem, potentially, if they don't know accurately what their options are. And then the second part is, if they do actually end up with that late enrollment penalty, they're gonna have an extra 20 to $55 on top of their Medicare premium every month until they die, which is a very lengthy amount of dollars accruing there. So that's kind of the important part on the employee perspective.

Speaker 1: 7:50

And now a word from our sponsor. This episode is sponsored by MZQ Consulting, a concierge compliance firm that excels at making the complex simple. Have you seen the news lately? Johnson Johnson is being sued because J&J's health plans failed to negotiate lower prices for prescription drugs. In the case of one drug, the plan paid $10,000 for a drug that regularly is available for under $80. Not only were the members of the benefits committee named personally, but their benefits advisor was also named in the suit.

Speaker 1: 8:26

And that, dear listeners, is why you need a top-flight compliance firm. Yes, mzq handles all the usual compliance stuff, from ACA reporting and tracking to RAP documents, 5500s, mental health, nqtl and QTL analysis and a whole lot more. But the heat is being turned up on fiduciaries who don't act like it. In this environment, using an ERISA attorney-led compliance consulting firm is your best strategy, your clients too, and MZQ Consulting is where you should go For more information. Go to wwwmzqconsultingcom or email them today at engage at mzqconsultingcom. Now back to our conversation. So let's take a couple of scenarios. Let's say an employer offers two different variations of a drug plan. They do the testing which we'll talk about in a minute, and one comes back as creditable and one comes back as not creditable. What do they have to do with that information?

Speaker 3: 9:30

They have to make sure that they have a notice for every prescription drug plan option that they're giving out. So if I as employee am in the kind of high rich prescription drug plan some groups call it gold or plus or something like that maybe that one's the creditable plan. I see that and I go okay, I can stay on that and I don't have to go on Medicare Part D and I'll still get the same kind of coverage. I won't get a late enrollment penalty. But then I have the lower options that are a little less of a prescription drug plan option. You need to make sure those non-creditable coverage notices coincide there. So the employees that were maybe on those plans before know that it may be in their best interest to either upgrade to a higher, richer plan offered from the employer or leave and go enroll in Medicare Part D as well as A and B, if they haven't already.

Speaker 1: 10:25

So if you're Medicare eligible and you're on your employer's group health plan and you're just tooling along being a happy little camper and then at some point you decide that you want to go enroll in Medicare one of the things if you're beyond age 65 and have not yet enrolled in Part D one of the things your employer has to give you. It's almost like a COBRA notice. They have to say yes, you have had creditable coverage up until this point. If the employers can't provide that form, do they have liability? Or again, is it just on an individual basis?

Speaker 3: 10:55

So that's the kind of nuanced conversation. They're not going to get a penalty assessed for not having it. However, when that individual goes over to that Medicare marketplace, that's one of the first questions those Medicare brokers and Medicare themselves are asking. Those Medicare brokers and Medicare themselves are asking May we see copies of those notices with dates, maybe some SPDs and plan documents that coincide with them? They are really checking accuracy because options happen along the way.

Speaker 3: 11:24

If you have a late enrollment penalty assessed against you as an employee to actually say I think it was my employer's fault, and here's all the documentation. They haven't given me a correct notice or any notice in two years. So you never want a lens turned and zoomed in on you as an employer plan sponsor, especially when it comes to agencies like CMS that can then refer you for DOL audit. They can do their own assessment for audit with CMS and you never want to kind of open the can of worms there. You want to make sure that those employees see them. They have them and it's really honestly I've talked to Medicare brokers. One of the very first questions they ask may we see the notices that your employer has given to you?

Speaker 1: 12:10

Yeah, it was one of the first questions that I was asked when I went on to Medicare and I asked my broker. I said you know, okay, well, if I didn't have this, what would happen? And the answer was too bad. So sad, you're stuck, you're going to pay a penalty.

Speaker 3: 12:24

Yep.

Speaker 1: 12:24

I said you know, can I go back to my employer? You can sue anybody you want to, but you're stuck with the penalty. Have a nice day.

Speaker 3: 12:33

And you have to apply to get out of it.

Speaker 1: 12:37

Correct. So it's just, it's a mess. So let's talk. Now that we've talked about what it is, let's talk a little bit about how it's calculated. You mentioned earlier that there were a couple of methods, one of which might have been going away, et cetera, et cetera, et cetera. Let's talk about those two methods, and who needs to avail themselves of which, and who needs to avail themselves of which.

Speaker 3: 12:57

So there's two overarching methods and they've both been around since about 2009 in full detail and directions from CMS. Mind you, the rule's been around since 2003, but they kind of hashed out some guidance around 2008, 2009. You have two methods available for calculating whether your plan is creditable or non-creditable. You have the methods available for calculating whether your plan is creditable or non-creditable. You have the simplified determination method or you can go get an actuarial analysis. If you know anything about that buzzword, you know the actuarial analysis is going to be a far harder process and a far more expensive process and I'll get into kind of the pros and cons of each and why you maybe don't need to do one over the other. The simplified determination the first one I offered is a great kind of easy testing point that CMS has a finite testing criteria for. It's very. If you meet one, two, three ABC congrats, you're creditable. It's based solely on design of the plan, which is very different from option two that we'll get into. But it's really just looking at those plan documents and whether the plan was designed to pay on average, at least 60% or so of out-of-pocket prescription drug expenses and is offering a comparable option when it talks to brand and preferred drugs and different kind of pharmacy options, as a Medicare Part D program would. So that one's a little easier. It's based solely on design, all information you would have readily available, very easy test to understand versus.

Speaker 3: 14:33

The actuarial analysis is going to be based off of actual plan claims data and whether they paid 60% or more of those claims in comparison to a Medicare Part D plan. And you have to have a licensed actuary sign off and complete it. Which spoiler? There are not a lot of them and they are hard to get a hold of and they are very expensive. But what's kind of the pro? If you are not seeking the retiree drug subsidy from CMS annually as an employer, you do not have to use the actuarial analysis and you can use that simplified determination method that you can have completed by any outside vendor that can do it. That can be done by any data team or anyone who looks at plan documents and employee benefits compliance. That one's the low-hanging fruit, so to say, a little bit easier to meet and you can avoid that very expensive option B there.

Speaker 1: 15:32

It's easier, but it still requires knowledge of an awful lot of facts in the background about what Medicare pays, what the employer pays, et cetera, doesn't it?

Speaker 3: 15:41

Yes. So I guess I said it's easier because for me maybe it's easier and that's something I need to be better about using. It's easier for me, who would be maybe an expert on a day-to-day basis, but it's not necessarily the easiest thing to do if you're an employer plan sponsor and you don't have a data team. I happen to have a whole data team backing me up, so I kind of have secret weapons ready. It is based off of actual Medicare Part D spending habits, which, if you are at a level that you can figure that out and there's certain carriers that kind of have their own tools in the background as well that they do these calculations with based on the same method. But it really comes down to doing a little bit of math, understanding that cost sharing parameter within prescription, drug planning and design, which is confusing in and of itself for most people. But there is a lot that you have to go into and it's simple in comparison to being an actuary, but not simple on paper.

Speaker 1: 16:47

So is there a deadline by which employees need to be provided this notice in the law?

Speaker 3: 16:52

There is by October 14th annually. This notice has to go out to Medicare eligible employees. However, it's most of the time included in kind of the annual beginning of the plan year notices packet and you can certainly do it sooner than October 14th. You just want to make sure that if you do any changes that change the design of your prescription drug plan that might affect creditability, that you update that, if you need to, before October 14th every year.

Speaker 1: 17:24

Now I know one of the things that MZQ suggests that clients do is send that notification to everyone, not just to people who are over 65, assuming you know who those people are in the plan. What's the reason for that?

Speaker 3: 17:46

The reason for that comes down to Medicare eligibility. So a lot of folks think that everyone over 65 is Medicare eligible and that's it, that's the only population it applies to, which is actually wrong. There's a lot of individuals under 65 who are also Medicare eligible and would still fall in that bucket of eligible for A, b and then enrolling in a Part D plan. So it's really much, much safer to just send that notification out to every plan participant in that regular notices packet, because it's better safe than sorry there and it's much easier than having to actually go in and do an audit to see if everyone that's enrolled is Medicare eligible, regardless of age, and you certainly don't want to make age assumptions ever when it comes to benefits and design as well.

Speaker 1: 18:32

Right, you also have spouses enrolled who may be eligible also. I mean, for example, to your point if you've been on social security disability for a protracted period of time, you become Medicare eligible. Same thing if you are in an ESRD program, an end-stage renal dialysis program. So there are other people who could be much younger than 65 and still be Medicare eligible. So you want to get that notice out to everybody, I guess, right.

Speaker 3: 19:02

Yeah, you want to get it out to everyone because you don't want to end up making an assumption and having to pay for it later, because you only gave it out to everyone who was over 65, which was not actually the whole bubble of Medicare eligible individuals.

Speaker 1: 19:12

MCQ takes care of an awful lot of employers and plans and whatnot, working mostly through brokers. What's your advice to brokers and how can they use tools that are available to help their clients?

Speaker 3: 19:26

I think, from the broker perspective, you want to be a really good partner in this whole especially changing landscape when it comes to Medicare and employee benefits compliance landscape. When it comes to Medicare and employee benefits compliance. You want to make sure that you're helping those employer plan sponsors either find a way to calculate, find a tool, like MCQ does, to figure out creditability status. Make sure plans are doing all of their annual notice requirements maybe bringing someone in an expert to give some compliance education webinars. Make sure that you're really sending them to the right place.

Speaker 3: 20:02

Brokers don't need to know this right. That's not kind of how they make their money day to day. They need to know where to send their clients so that, at the end of the day, everyone's compliance is taken care of and the brokers get a gold star for sending them in the right direction really, and we want that right. Mcq loves partnering with brokers to say let us handle the compliance behind the scenes and you can go do what you do best and handle kind of the day-to-day administration and not handle all this kind of paperwork and documentation on the back end.

Speaker 1: 20:36

And for the employers it doesn't have to be a terribly expensive process either, does it?

Speaker 3: 20:40

No, mcq does it fairly affordable. It's about $300 per plan design testing, which is a drop in the hat compared to some other compliance obligations out there, and it's based on plan design. So you can certainly, if you're on a budget, start with your least rich prescription drug option and work your way up from there and eventually maybe you hit a credible status. And everything above that is probably credible as long as nothing else has changed in the design at that point. So there's a way to do it affordably and it's definitely more affordable than ending up in a lawsuit or ending up in a problematic area. $300 is how much an attorney might cost just to go for a consultation. So it's a drop in the hat, really when you talk about cost.

Speaker 1: 21:29

Anything else that folks should know as we wrap up here, anything that we've omitted.

Speaker 3: 21:36

I think, really just focusing and hammering home the fact that you do not have to offer creditable coverage. And if you are really, really unsure and none of this made any sense, of course, reach out to your kind of compliance partners, reach out for resources, read a little material, make sure you're getting your plans tested going into the fall before we have to put out those notices, and just reach out for help if you need to. Don't feel like this isn't a hot topic. It's the hottest topic, arguably, of the summer right now in employee benefits compliance. So don't feel like any question is a stupid question, because it's really important that you're doing everything you can for your plans.

Speaker 1: 22:17

Yeah, and I know MZQ has a pretty big frequently asked questions document. We'll link to it in the show notes. So if you're looking at the website, which is shiftshapersonlinecom, and go to the description of the podcast, you'll see a link there and you can link right to it. You can grab up those for no cost and help educate yourself and your clients. Marissa Ruffo, JD, MBA, subject matter expert at MZQ Consulting. Marissa, thanks for a really, really interesting conversation.

Speaker 3: 22:44

Thank you so much, David. I'm so ready for everyone to hunker down on compliance.

Speaker 2: 22:50

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