Compliance Corner: Major Change to Affect Medicare Part D Credibility That Employers Need to Think About
Beginning in 2025, Medicare beneficiaries will pay no more than $2,000 out-of-pocket for prescription drugs covered under Part D, Medicare’s outpatient drug benefit. This also affects Medicare Advantage plans and supplements that cover prescription drugs.
Here is a summary of the enhancements of the Medicare Prescription Benefit rules:
- The maximum out-of-pocket spend for prescription drugs is capped at $2,000 for 2025.
- There is no more “donut hole” or gap where prescriptions aren’t covered.
- The additional 5% for medications after the donut hole has been eliminated.
- Certain insulin products for diabetics were mandated at a $35 copay or less.
- Medicare products covering prescriptions must offer enrollees the option to pay out-of-pocket costs in the form of capped monthly payments instead of all at once at the pharmacy.
By contrast, the current maximum out-of-pocket for group plans in year 2024 is $8,000.
What This Means for Employers:
- Some group plans will be considered “non-creditable” for Part D in 2025. If your plan is a PPO with copays, you’re likely still creditable. This isn’t a big deal for most employees; however, for those at or near Medicare-entitlement age, this change could impact their decisions for the Medicare Annual Enrollment Period, which begins October 15th and ends December 7th of each year.
- If you have or hire Medicare-eligible workers, your options are to: (a) offer a “Creditable” plan option if permitted by your carrier; or, (b) provide some educational opportunities to employees on their options. This could also impact those Medicare-aged employees who have younger spouses or covered dependents.
- If your medical coverage renews any time other than January 2025, the Part D creditability that applied to your plan in 2024 will remain the same until your 2025 renewal. If your coverage renews January 2025, and you have a very high deductible HSA plan, please contact your ARC client advisor to review if your current or renewing plan will be creditable for 2025 so that you can notify affected employees before October 15.
What This Means for Medicare-Entitled Employees (age 65+):
- Employees at or near age 65 should be reviewing whether Medicare products, including Part D plans, will be a better deal for them than their employer’s plans.
- Medicare-eligible employees will pay more for Part D coverage if, at any time after turning 65, they are covered by a plan that is considered “NOT creditable” for 63 days or more. Below is from Medicare.gov’s Part D Enrollment Penalty page:
The cost of the late enrollment penalty depends on how long you went without Part D or creditable prescription drug coverage. Medicare calculates the penalty by multiplying 1% of the “national base beneficiary premium” ($34.70 in 2024) times the number of full, uncovered months you didn’t have Part D or creditable coverage. The monthly penalty is rounded to the nearest $.10 and added to your monthly Part D premium. The national base beneficiary premium may increase or decrease each year, so your penalty amount may also increase or decrease each year [source].
Learn more: 3 Ways to Avoid the Part D Late Enrollment Penalty
- For groups with less than 20 employees total, Medicare pays its portion first. Many carriers reduce payments to providers assuming the member has both Medicare Part A and B but your employees may not be aware of this obscure rule until they are hit with big bills. Now, with the likelihood that more plans could be considered “not creditable” and the Part D penalty for late enrollment, more employees should look into enrolling in Medicare products (Medicare Advantage or supplements to Part A, B, and/or D) during this open enrollment season.
What can employers do?
ARC Benefit Solutions has a variety of resources to help you and your employees. Here are a few ways we can help:
- Licensed health insurance agents to help you or your employees shop around. ARC has a team of helpful agents who specialize in Medicare products and individual coverage and provide one-on-one assistance. Members can call 1-833-342-5272 to speak with an experienced, licensed agent.
- Webinars. ARC periodically hosts educational Medicare 101 webinars. Click here to access a link to a recent webinar we hosted that can be shared with employees.
- Educational flyer. We offer customers a communication piece that can be provided to employees nearing Medicare-entitlement that outlines Medicare products and what should be considered when staying on a group coverage plan. Click here to download the flyer.
