February 2025 HR Update

Medicare Part D Disclosures due by March 1, 2025, for Calendar Year Plans

Group health plan sponsors must complete an online disclosure form with the Centers for Medicare & Medicaid Services (CMS) annually and at other select times, indicating whether the plan’s prescription drug coverage is creditable or non-creditable. This disclosure requirement applies when an employer-sponsored group health plan provides prescription drug coverage to eligible individuals under Medicare Part D.

The plan sponsor must complete the online disclosure within 60 days after the beginning of the plan year. For calendar year health plans, the deadline for the annual online disclosure is March 1, 2025.

Medicare Part D Disclosure to CMS

Group health plan sponsors must disclose to CMS whether their prescription drug coverage is creditable or non-creditable. This disclosure is required regardless of whether the health plan’s coverage is primary or secondary to Medicare.

A group health plan’s prescription drug coverage is creditable if its actuarial value equals or exceeds the actuarial value of the Medicare Part D prescription drug coverage. In general, this actuarial determination measures whether the expected amount of paid claims under the group health plan’s prescription drug coverage is at least as much as that of paid claims under the Medicare Part D prescription drug benefit.

Employers can determine whether their prescription drug coverage is creditable in a few different ways. Employers should remember that the Inflation Reduction Act may affect the analysis of whether their prescription drug coverage is creditable. Employers with insured plans should ask their health insurance carriers if they have made this determination for the insured product. If an employer must make the determination itself, it may be able to use a simplified method, depending on the plan’s design. When a plan’s design is not eligible for the simplified method, an actuarial determination must be made.

• Compliance Tip: If an employer’s group health plan does not offer prescription drug benefits to any Medicare Part D eligible individuals (including active employees, disabled employees, COBRA participants, retirees, and their covered spouses and dependents) as of the beginning of the plan year, the group health plan is not required to submit the online disclosure form to CMS for that plan year.

Timing of Disclosures to CMS

The disclosure must be made to CMS annually, and any changes may affect whether the coverage is creditable. The Medicare Part D disclosure notice is required as follows:

• Within 60 days after the beginning date of the plan year for which the entity is providing the disclosure to CMS;
• Within 30 days after the termination of a plan’s prescription drug coverage; and
• Within 30 days after any change in the plan’s creditable coverage status.

Online Disclosure Method

Plan sponsors must use the online disclosure form on the CMS creditable coverage website. This form is the sole method for compliance with the disclosure requirement unless the entity does not have internet access.

The disclosure form lists the required data fields to generate the disclosure notice to CMS, such as types of coverage, number of options offered, creditable coverage status, the period covered by the disclosure notice, number of Part D-eligible individuals covered, the date the creditable coverage disclosure notice is provided to Part D-eligible individuals, and change in creditable coverage status.

CMS has also provided instructions and guidance on how to complete the form.

Disclosures to Individuals

In addition to the annual disclosure to CMS, group health plan sponsors must disclose to individuals eligible for Medicare Part D whether the plan’s prescription drug coverage is creditable. At a minimum, creditable coverage disclosure notices must be provided to individuals at the following times:

If the creditable coverage disclosure notice is provided to all plan participants annually before Oct. 15 of each year, items (1) and (2) above will be satisfied. “Prior to,” as used above, means the individual must have received the notice within the past 12 months. In addition to providing the notice each year before Oct. 15, plan sponsors should consider including the notice in plan enrollment materials provided to new hires.

CMS has provided model disclosure notices for plan sponsors when disclosing their creditable coverage status to Medicare beneficiaries. The model disclosure notices are available on CMS’ website.

Employer Takeaway

To determine if the CMS reporting requirement applies, employers should verify whether their group health plans cover any Medicare-eligible individuals (including active employees, disabled employees, COBRA participants, retirees, and their covered spouses and dependents) at the start of each plan year.

Employers reporting to CMS should work with their advisors to determine whether their prescription drug coverage is creditable or non-creditable. They should also visit CMS’ creditable coverage website, which includes links to the online disclosure form and related instructions

ERISA Fiduciary Breach Claims Dismissed in J&J Lawsuit On Jan. 24, 2025, a U.S. District Court for the District of New Jersey dismissed two claims in a class-action lawsuit filed against Johnson & Johnson (J&J), which alleged that the company breached its fiduciary duties under the Employee Retirement Income Security Act (ERISA) by mismanaging its prescription drug benefits plan, costing the plan and its participants millions of dollars due to higher out-of-pocket costs for prescription drugs and higher premiums, among other things. Legal Landscape For employers, the J&J lawsuit highlights the importance of adhering to their fiduciary duties when managing their health plans. Under ERISA’s strict fiduciary standards, employers must prudently select and monitor third-party service providers, including pharmacy benefit managers (PBMs). After the J&J lawsuit was filed, similar fiduciary litigation involving the management of prescription drug benefits followed. These cases are still making their way through the court system as scrutiny of the PBM industry intensifies. Court Ruling In dismissing the two fiduciary breach claims, the court ruled that the plaintiff (an employee of J&J) lacked standing to bring a lawsuit. To have standing, a plaintiff must show that: They suffered an injury in fact that is concrete, non-hypothetical, particularized, and actual or imminent; the defendant likely caused the injury; and There is a substantial likelihood that a judicial decision can remedy the injury. Court Dismissal The court found the plaintiff’s first claim, that she paid more in premiums due to the defendants’ purported breach of fiduciary duty during the plans’ negotiation process, did not sufficiently show evidence of an injury and was “at best, speculative and hypothetical.” Further, the lawsuit’s outcome would not affect the plaintiff’s future benefit payments, and the plaintiff failed to show that the defendant’s specific conduct resulted in higher premiums. Regarding the plaintiff’s second claim that she paid higher prices for drugs under the plans and thus paid more out of pocket, the court acknowledged that she suffered an injury that was traceable to the defendants’ alleged ERISA violations. Notwithstanding, the plaintiff lacked standing based on this injury because a favorable decision would not be able to compensate her for the money she already paid, given that she had reached her prescription drug cap for each year asserted in the complaint. The court reasoned that, even if the defendants were to reimburse her out-of-pocket costs on a given drug, that money “would be owed to her insurance carrier to reimburse it for its expenditures on other drugs that same year.” Employer Takeaway Employer plan sponsors, as fiduciaries, should continue to exercise caution and care in executing their fiduciary duties to the plan. Since the court’s opinion doesn’t wholly preclude plaintiffs from establishing standing on another set of facts, the decision will likely not end the wave of fiduciary breach lawsuits. Therefore, group health plan sponsors should continue to review their own ERISA fiduciary governance practices to ensure they are prudently fulfilling their fiduciary obligations to their plans and participants, including responding timely to written requests for plan documents and engaging in a prudent process when selecting and monitoring plan service providers.