How to determine if you have creditable drug coverage

One of my neighbors, a retired school teacher, recently asked me if she should hold onto her prescription drug coverage that she has through her former employer or switch to Medicare Part D when she turns 65. As soon as I started to explain that it all depends on whether or not she has “creditable coverage,” her eyes began to go cross-eyed. So let me see if I can make this easier to understand for you and her.

Creditable coverage is coverage that is considered as good as or better than the standard coverage provided by Medicare Part D. Standard Medicare prescription drug coverage is actually very good, so if your employer’s plan is not that great—for example, if it has a very high deductible, very high co-payments, or a small list of covered drugs (formulary)—it may not be considered creditable coverage. If that’s the case, then you will need to switch to Medicare Part D (or a Medicare Advantage plan with prescription drug coverage, MA-PD) when you become eligible.

On the other hand, if your employer’s prescription drug benefit is considered creditable coverage, it’s wise to stick with that plan. In fact, in some cases you run the risk of losing your employer-group prescription benefit and your employer-group health insurance if you join a Medicare Part D plan!

How do I know if I have creditable coverage or not?

The easiest way to find out if you have creditable coverage is to look through the plan materials provided by your employer-group plan. At least once a year, your employer must send you a letter called a Notice of Creditable Coverage (or Notice of Non-Creditable Coverage). If you cannot find this letter, contact your plan’s benefits advisor and request the document be mailed or e-mailed to you.

If the letter states that the coverage being offered by your employer is “as good or better” than Medicare’s Part D coverage, you have creditable drug coverage. Make sure you keep a copy of this document on file. You should also request a copy of this document every year so you have proof that you have maintained creditable drug coverage. If you ever need to join a Medicare Part D plan in the future, you will need to provide these documents to the plan so you do not incur a late enrollment penalty.

However, if the drug coverage that is being offered through your employer is not as good as Medicare’s standard coverage, you will need to evaluate your options carefully. First, talk with your employer’s benefit advisor to find out if you can keep your group health insurance and enroll in Medicare Part D. If you can, ask for this in writing. As I mentioned before, some employer-group plans will not let you keep your health coverage if you elect Part D rather than sticking with the drug coverage provided in the health plan.

I really can’t stress enough how important it is to talk to your plan’s benefit advisor before making any moves at all. Every employer has different kinds of coverage and different rules pertaining to that coverage. Family and friends can give you some advice, but only your benefit advisor can give you the facts.

Reminder: Medicare Open Enrollment is now through December 7th.

The Countdown to Medicare Part D Open Enrollment Is Over

Open Enrollment for 2012 begins today, October 15, and ends on Wednesday, December 7, 2011.

The 3 eligibility windows for joining or switching Part D plans

Since today is the start of the Annual Coordinated Election Period (or Open Enrollment), I thought I’d give a quick review of the 3 eligibility windows for joining or switching prescription drug plans.

1. Initial Enrollment Period
2. Open Enrollment Period
3. Special Enrollment Period

1. Initial Enrollment Period

If you are turning 65 and newly eligible for Medicare, you have 7 months to enroll in a Medicare Part D plan:

• Up to 3 full months before you turn 65
• During the month of your 65th birthday
• Up to 3 full months after you turn 65

If you join during the 3 months before you turn 65, your coverage will start on the first day of your birthday month. If you join during or after your birthday month, your coverage will begin on the first day of the next month.

For example, let’s say Patricia is going to turn 65 on May 10, 2012. Her eligibility window will be from February 1 to August 31, 2012.  If she enrolls in a plan any time in February, March, or April, her coverage will begin on May 1. If she waits to join on her birthday, her coverage will begin the following month, on June 1.

If you get Medicare due to a disability, you can enroll in a Medicare Part D plan:

• Up to 3 months before the 25th month of your disability
• Up to 3 months after your 25th month of disability
• During your Initial Enrollment Period when you turn 65

2. Open Enrollment Period

If you are already in a Medicare prescription drug plan (PDP) or Medicare Advantage plan with prescription drug coverage (MA-PD), you can switch to a new Medicare Part D plan during the Open Enrollment Period from October 15 through December 7.

3. Special Enrollment Period

Outside these two windows above, you may only switch plans if you qualify for a Special Enrollment Period (SEP). For example, you may qualify for an SEP for the following reasons:

• You lose creditable coverage (coverage as good as or better than standard Medicare) through no fault of your own
• You move to a new permanent address that is not in your current plan’s service area
• Your current plan no longer offers prescription drug coverage
• You receive Medicaid or get Extra Help with Part D costs
• You are enrolled in a State Pharmaceutical Assistance Program (SPAP)

How to avoid a late-enrollment penalty

I talked a lot about the late-enrollment penalty yesterday, but I want to remind you again that if you choose not to enroll in a Part D plan when you first become eligible, Medicare will impose a monthly penalty if you join later. To avoid paying a late-enrollment penalty:

• Make sure you join a Part D plan during your Initial Enrollment Period.
• Be sure to enroll in a plan within 63 days of not having a Part D plan or other creditable coverage, such as coverage from:
• A current or former employer or union
• TRICARE
• Department of Veterans Affairs
• Let your new prescription drug plan know within 63 days if you had other creditable coverage (your former plan must send you a letter called “Notice of Creditable Coverage,” which you can use as proof of coverage when you join a new plan).

Countdown to Medicare Part D Open Enrollment: Day 2

Open Enrollment for 2012 begins tomorrow, October 15,
and ends on Wednesday, December 7, 2011.

Day 2: The Medicare Part D Myth Buster–Why you should enroll when you first become eligible

If you’ve ever watched the show Mythbusters on the Discovery Channel, you know the hosts Adam Savage and Jamie Hyneman set out to prove–or bust–some of the craziest myths out there. Would a bull do damage in a china shop? Nope, in fact they’ll daintily and nimbly walk among the aisles of breakables. Can you teach an old dog new tricks? You sure can!

So here’s a big myth about Medicare Part D prescription plans that I’m going to dispel for you: “If I don’t use many drugs, or no drugs at all, it’s not worth it for me to enroll in a Medicare Part D plan and pay a monthly premium.”

Busted.  That’s like saying you’re not going to get auto insurance because you’ve never had an accident before.

Unless you have creditable prescription drug coverage through another plan (such as from your former employer or union, TRICARE, or Department of Veterans Affairs), it pays to enroll in a plan and pay the monthly premium.

Here are 3 reasons why you should enroll in a Part D plan when you first become eligible:
1. You can’t put a price on peace of mind
2. You can’t sign up for a plan mid-year
3. You will pay a late-enrollment penalty if you change your mind later

Although you may not use many or even any drugs right now, you never know what your drugs needs are going to be down the road. Sure, you may luck out and never have to take drugs for a chronic condition (such as asthma or diabetes), but what if you were in an accident or had a bad case of the flu and had to take a lot of drugs? Without Part D, you’ll be out of luck (or money). Do you really want to worry about that on top of everything else?

Still not convinced? Let’s say you become eligible for Medicare in February but decide not to join a plan because you don’t take any drugs. In June, you’re diagnosed with Lyme disease, so your doctor prescribes several expensive medications. A few months later you experience some complications and have to take a few more drugs. Some of these new-fangled drugs cost hundreds of dollars for people without insurance–why chance it?

The dreaded late-enrollment penalty
Are you starting to think twice about delaying enrollment now? If not, the late-enrollment penalty should be the deciding factor.
If you don’t enroll in a Part D plan when you first became eligible, or you go for 63 continuous days or more without creditable prescription drug coverage,* you will more than likely have to pay a monthly penalty if you join a Part D plan later.

If you must pay a late enrollment penalty:
• The penalty amount will be added to your premium invoice each month.
• You will be charged a penalty for as long as you have Part D coverage—it follows you everywhere, even if you switch plans.
• The penalty amount will change each year, based on the national base plan premium.

How to determine the amount of the penalty that you will pay:
• Count the number of full months you delayed joining a Part D plan after you were first eligible to enroll or the number of full months in which you did not have creditable prescription drug coverage for more than 63 days.
• The penalty is 1% for every month that you delayed or didn’t have creditable coverage.
• Multiply the penalty percentage (1% x number of months) and the national base plan premium (for 2012, the average is $31.08). Then round to the nearest 10 cents.
• For example, if you go 10 months without prescription drug coverage, you will have to pay an extra $3.11 each month in 2012 (1% x 10 x $31.08 rounded up).

In this example above, an extra $3.11 a month doesn’t really sound like much, but do you really want to pay more than everyone else for the same thing?

Tomorrow, the first day of Open Enrollment, I’ll review eligibility windows for enrollment and go over again how to avoid the late-enrollment penalty.

*Creditable prescription drug coverage is coverage that is at least as good as Medicare’s standard prescription drug coverage.