On April 1, 2024, the Centers for Medicare and Medicaid Services (“CMS”) released the Final Part D Redesign Program Instructions for the 2025 calendar year. These instructions provide an overview of the Part D program redesign, including guidance relative to certain modifications of the Part D benefit, as enacted under the Inflation Reduction Act of 2022 (“IRA”). As noted in the release, these program modifications have the potential to affect the creditable coverage status of employer-sponsored prescription drug plans beginning in CY 2025.
These changes were highlighted in the BRCC’s May 2024 bulletin.
Employer Action Items
- Employers with insured prescription drug plans should inquire with their carriers to determine if the plan’s coverage is considered creditable.
- For self-insured plans and level-funded plans, or if the carrier for an insured plan has not made a determination about the plan’s creditability of coverage status, employers can use the simplified determination method from CMS (dated September 18, 2009), provided the coverage meets specific design requirements. If it does not, an actuarial determination method must be used.
Summary
The most significant modification to the Medicare Part D credibility standards relate to the annual out-of-pocket costs for prescription drug coverage for Medicare eligible employees. Beginning in 2025, the out-of-pocket costs for prescription drug coverage will be capped at $2,000 annually (as compared to the 2024 out-of-pocket limit which is significantly higher at $8,000 annually).
To be deemed creditable coverage, an employer’s prescription drug coverage must be at least as valuable as the coverage provided by Medicare Part D. Employers with prescription drug coverage incorporated within their group health plans, and for which enrollment is made available to individuals eligible for Medicare Part D, must notify these individuals (and CMS) as to whether such coverage is deemed creditable under these standards.
The Final Program Instructions state that CMS will continue to allow the use of the simplified determination methodology, without any modifications, for calendar year 2025 for group health plan sponsors who are not applying for the retiree drug subsidy.
CMS plans to reassess the use of the existing simplified determination methodology (or introduce a revised one for calendar year 2026 in future guidance).
Some of the redesign changes for participants include:
- Out-of-Pocket Financial Cap;
- Medicare Prescription Payment Plan;
- Part D Manufacture Discount Program; and,
- Medicare Insulin and Vaccine Benefits.
Additional Resources
A fact sheet on the Final Program Instructions has been provided by CMS, summarizing key policies and outlining changes to the Part D benefit. For more details and resources on the changes to Medicare Part D, visit CMS’ Part D Improvements webpage.
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