Upcoming Changes for HDHP Plan Sponsors under Medicare Part D
The Inflation Reduction Act of 2022 (IRA) made changes to Medicare Part D to enhance benefits and enrollee cost savings, which may significantly impact whether employer sponsored prescription drug benefits continue to qualify as creditable coverage under Medicare Part D. Creditable coverage means that the employer’s prescription drug coverage is at least as good as Medicare Part D coverage.
Employer Action Items
Contact your carrier, TPA, ASO, or PBM.
The determination that prescription drug coverage is creditable is an actuarial determination and employers will generally not be able to make that determination without third party assistance. Reach out to these third parties or ask your broker to do so on your behalf. Employers must ensure that their prescription drug offerings are being evaluated in light of the new requirements for 2025 and that they will be informed of the determination in time to allow for 2025 benefit planning.
Evaluate deductibles in your prescription drug coverage.
The plans at most risk of being deemed non-creditable are HSA compatible HDHPs. HDHP
deductibles are adjusted annually and, in 2025, the minimum deductibles are $1,650 for self-only
coverage and $3,300 for other-than-self only (e.g., family) coverage. The IRA imposed a $2,000 limit on Part D deductibles. Because the HDHP minimum deductible for other-than-self only coverage is higher
than the S2,000 Part D out-of-pocket maximum introduced by the IRA, all HSA-compatible HDHPs
will potentially lose creditable coverage status for 2025. This change can also impact other prescription
drug coverage that is not an HDHP if it has a higher deductible than the new Part D deductible. This is
not the only consideration, but it is a simple way for employers to get a quick sense of how their plans
compare under the new Part D coverage.
Reconsider 2025 prescription drug offerings.
All benefit options should be immediately reviewed and evaluated in light of the changes to Medicare
Part D and employers may want to ensure that at least one of their coverage options for prescription
drug benefits meets the creditable coverage requirements for Medicare-eligible employees and spouses
who would prefer to remain in group coverage rather than Medicare. This will be particularly
important to executives and upper-level management. Deductibles may need to be decreased for plans
that allow it (i.e., non-HSA compatible HDHPs).
Develop a participant communication strategy for Medicare Part D.
Plan sponsors should prepare a communications strategy to advise affected individuals of the changes to
the creditable coverage requirements and the potential impact on HDHPs and other benefit options in 2025. These individuals will need to weigh the pros and cons of remaining in an employer plan that is no
longer creditable coverage or transitioning to Medicare or a potentially higher cost plan of the employer
that meets the creditable coverage standard. Communications should consider the timing of open
enrollment and election changes so that employees are able to drop the group health plan coverage to
enroll in Medicare Part D by cafeteria plan rules and restrictions on mid-year election changes. Medicare eligible individuals who lose creditable coverage will be eligible for a two-month special enrollment period into Part D, so timing of the employer notice and communications is particularly important.
Consider a Medicare enrollment guide for employees.
The interaction of Medicare and group health coverage is one of the more confusing areas for
employees when making decisions about their benefit coverage. Failing to make the correct choices can
result in significant financial exposure relating to coordination of benefits with COBRA, for example,
or in lifetime premium penalties under Medicare for late enrollment. Plan sponsors may want to
consider providing an enrollment guide or other resource to employees addressing the interaction
between non-creditable prescription drug coverage and Medicare Part D late enrollment penalties and
how enrollment in Medicare Parts A, B, or D (or a Medicare Advantage Plan) will result in the loss of
HSA contribution eligibility.
Relational Advisors is a UBA Partner Firm.
This information has been prepared for UBA by Fisher & Phillips LLP. It is general information and provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.