Medicare Changes Could Affect Your Group Health Plan

New Centers for Medicare and Medicaid Services rules that take effect Jan. 1, 2025 will significantly affect employees’ decisions on whether to continue staying with your group health plan while eligible for Medicare.

Under changes in Medicare Part D drug plan rules for 2025, once a beneficiary pays more than $2,000 out of pocket for prescription medications, Medicare will fully cover their prescription costs for the rest of the year.

Due to the rule changes, if your drug plan’s maximum out-of-pocket employee cost-sharing surpasses that amount it will not be deemed “credible” under CMS rules, and that would have long-term repercussions for your senior employees.

Why? If someone doesn’t purchase a Part D plan when they are first eligible for Medicare, they will face a 10% penalty on their annual premiums in perpetuity. That penalty increases for each year they fail to enroll in a Part D plan.

There is a provision in the law for Medicare-eligible workers to stay on their employer’s group health plan if that plan provides at least as thorough a level of coverage as Medicare does. Those that do are considered “credible” coverage.

However, if an employee’s plan does not meet the new Part D rules, it may be considered “non-credible” and they would be subject to Part D penalties for failing to enroll in a credible plan.

What you should do

Employers are required to inform affected employees if their plan is credible or non-credible before Medicare Annual Open Enrollment starts on Oct. 15. This way, the worker is given time to elect or decline Medicare Part D coverage based on their employer’s group benefit plan’s prescription benefits and avoid possible penalties. You can find templates of those notices here.

If your current plan doesn’t meet their needs, please contact us to discuss strategies for designing one that caters to affected workers and fits with your company needs and budget. The second option is not to make a change, and to inform your Medicare-eligible staff that your plan is non-credible.

Finally, you should hold a meeting with affected staff to inform them of the changes and if any of the plans you offer comply with the new rules.

Call us so that we can gauge if your health plan, or plans, offer credible or non-credible drug coverage for your Medicare-eligible staff.