The Medicare Prescription Drug Improvement and Modernization Act of 2003 (Medicare Part D) takes effect Jan. 1, 2006. It is a voluntary insurance plan created by Congress to help Medicare-eligible people pay for their prescriptions. Medicare recipients will choose their drug plan and pay a monthly premium. While aimed at individuals, the Act also has a direct effect on credit unions. Credit unions with employer-sponsored health plans providing prescription coverage to Medicare-eligible individuals (including active employees, retirees, or dependents) face two notice requirements – the first to Medicare eligible individuals on their plan and the second to the federal government. If a credit union's prescription drug plan covers post-65 retirees, the credit union will have additional decisions to make, including whether to apply for a 28% government subsidy for qualified prescription drug costs, purchase a subsidized plan, or cease providing this coverage altogether. Notice Requirements Employers must provide a Notice of Creditable Coverage, or Notice of Non-Creditable Coverage, to all Medicare Part D – eligible individuals who are covered, or have applied for prescription coverage, under your health plan prior to Nov. 15, 2005, which is the beginning of the Medicare Part D enrollment period. An individual is eligible for Medicare Part D if he or she is entitled to Medicare Part A and/or enrolled in Part B, as of the effective date of coverage under the Part D plan. CUNA Mutual recommends notifying all individuals on the plan to ensure no one is missed, as you may not be aware of employees or dependents that could be Medicare-eligible due to age, disability, or end-stage renal disease. The notice is intended to inform those who are Medicare-eligible whether or not your plan provides creditable or non-creditable coverage. Individuals not covered under creditable prescription drug coverage and who choose not to enroll before the end of their initial enrollment period for Part D, will pay a premium surcharge of 1%, on a permanent basis, for every month they delay if they subsequently enroll in Part D. However, if the coverage provided is creditable, the Medicare-eligible individual can enroll in Part D after their initial enrollment period without paying the surcharge, assuming there is not a break in coverage longer than 63 days from the time he or she has creditable coverage to the time he or she enrolls in Part D. The notice may be sent electronically or by mail and may be provided with other plan participant information such as enrollment or renewal materials. Information will be forthcoming from CMS on a second notice regarding creditable coverage that you will be required to send to the agency. This notice must then be provided annually or upon any change that affects whether the coverage provided is creditable. Creditable Versus Non-Creditable Coverage Coverage is considered creditable if the prescription drug coverage provided is at least as good as or better than the value of the coverage available through a Medicare prescription drug plan. There are two ways to make this determination, assuming you are not applying for the subsidy: Follow a simplified approach to the determination. Complete an actuarial attestation. There is no requirement that a prescription drug program must provide creditable coverage; however, providing the notice is required. If your credit union provides non-creditable coverage, you simply use a different notice, and you are not penalized or required to make any changes to your plan design. Employer Options Related to Medicare Part D Assess your overall coverage to determine the best long-term approach to your plan given the impact of Medicare Part D. Here are some of the options to consider: Keep your existing (or similar) plan and apply to CMS for the 28% tax-free federal subsidy. Purchase a subsidized prescription drug plan Drop prescription drug coverage for retirees. Do nothing. Keep your existing plan in place and elect not to apply for the subsidy this year. The subsidy referenced above is determined for each employer. It was included to encourage employers to keep their drug plans and is available if the employer's plan is actuarially equivalent to Medicare Part D. The subsidy is only available for enrollees not also enrolled in Part D and is 28% of the amount paid by the employer and retiree with a maximum cap. CMS estimates the current average subsidy will be about $668. The subsidy application must be submitted by Sept. 30, 2005. The decision to apply for the subsidy or to consider other alternatives related to your post-65 retiree prescription drug coverage can be complex and dependent on numerous factors.