Big changes are coming to Medicare Part D in 2025, and it’s important to be prepared, especially with the October 14 deadline for Medicare Part D notices approaching.

What’s New for Medicare Part D in 2025?

The Inflation Reduction Act has introduced changes to Medicare Part D aimed at lowering prescription drug costs. One of the most significant changes coming in 2025 is the reduction in the maximum out-of-pocket (OOP) expense for Medicare Part D from $8,000 to $2,000. While this is great news for Medicare beneficiaries, it may impact whether some plans are considered "creditable" under Medicare Part D standards.

A plan is considered “creditable” if it is expected to cover, on average, at least as much as the standard Medicare Part D Rx plan. With the OOP limit decreasing, certain plans may no longer meet the threshold to be deemed creditable. This change will require some employers to review their health plans and issue updated notices if their plan's creditable status changes. Remember, there is no mandate that an employer offers creditable coverage, just that they provide a notice if there is a change in creditable coverage status.

Medicare Part D Notices Deadline: October 14

Employers must notify Medicare-eligible individuals whether their prescription drug coverage is creditable. The annual deadline for distributing these notices is October 14, right before the start of Medicare's Open Enrollment Period on October 15. These notices are crucial for employees to make informed decisions about their healthcare coverage, especially to avoid penalties for late enrollment in Medicare Part D, which are lifelong penalties. Employers should use the same distribution method that applies to SPDs (including the DOL’s electronic distribution safe harbor rules).

Employers should also provide this notice:

• Before an individual’s initial enrollment period for Medicare Part D.
• Before coverage becomes effective for any Medicare-eligible individual.
• Upon request by an employee or beneficiary.
• When Rx coverage is discontinued or the creditability status changes.

Reporting to CMS

Aside from distributing notices to employees, employers also have a responsibility to report their creditable or non-creditable coverage status to the Centers for Medicare & Medicaid Services (CMS) by completing the Disclosure to CMS Form (Form CMS-10198) posted on the CMS Creditable Coverage web page. This report is typically due within 60 days after the start of the plan year or if there is a change in creditable status.

What Happens If You Fail to Comply?

While there are no specific penalties for failing to distribute notices or report to CMS, failure to disclose creditable coverage could be considered a violation of fiduciary duty and can also affect Medicare-eligible employees and their beneficiaries. In addition, employers won’t qualify for the Retiree Drug Subsidy unless proper disclosures are made.

Medcom is here to help employers stay compliant with our health and welfare compliance solutions, which can assist employers in ensuring they meet these critical requirements. Contact us for more info. Don’t forget: October 14 is just around the corner, so make sure your notices are ready to go, and take the time to review your health plans to confirm their creditable status for the upcoming year.