As you may recall, the Inflation Reduction Act of 2022 (IRA) changed the Medicare Part D program (prescription drug benefit program). Highlights are described below. Importantly this may impact the creditable status of an employer’s prescription drug benefit program. As a reminder, an employer who offers prescription drug benefits to Medicare eligible individuals must provide annually and at certain other times a statement indicating whether the employer’s prescription drug benefit is creditable, meaning is it comparable to Medicare Part D. On April 1, 2024, the Centers for Medicare & Medicaid Services (CMS) released the Final Calendar Year (CY) 2025 Part D Redesign Program Instructions, detailing CMS updates for Part D in 2025. Key changes for 2025 include a newly designed Part D benefit with three phases: annual deductible, initial coverage, and catastrophic coverage; lower annual out-of-pocket threshold of $2,000, the current threshold is $8,000; sunset of the Coverage Gap Discount Program and initiation of the Manufacturer Discount Program; and the annual deductible will rise from $545 to $590. These changes may impact whether an employer’s prescription drug benefit is creditable. A simplified method of determining creditable coverage can continue to be used in 2025, however, this may change in subsequent years. It should also be noted that the health savings account high deductible health plan determination may impact creditable coverage as well. The 2025 HDHP dollar amounts are expected to be issued in the next four to six weeks.
It is not required that an employer offer creditable coverage, however, it is required that an employer communicate whether its prescription drug plan is creditable. If the plan changes from creditable to non-creditable or vice versa, Medicare eligible individuals must be notified within thirty days of the change.
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