CMS Moves To Eliminate Long-Standing Medicare Part D Creditable Coverage Reporting Requirement For HRAs

The Centers for Medicare & Medicaid Services (“CMS”) issued a proposed rule (“Proposed Rule”) on November 28 that would remove the requirement for Health Reimbursement Arrangements (“HRAs”) to report creditable coverage status to individuals eligible for Medicare Part D prescription drug coverage and to CMS. CMS explains that it is proposing this change in response to feedback it received from organizations seeking relief from the administrative burden associated with these notice requirements.

The Social Security Act (“SSA”) requires entities offering prescription drug coverage, including group health plans (“GHPs”), to provide notice to Medicare Part D-eligible individuals and CMS regarding whether or not the coverage equals or exceeds the actuarial value of standard prescription drug coverage under Medicare Part D. Under the final regulations from 2005, account-based health plans, including HRAs, have been included under the definition of GHP.

Unlike prescription drug coverage under Medicare Part D, HRAs are paid solely by an individual's employer to reimburse the medical expenses of employees, their spouses, and their dependents. The financial benefit of these reimbursement accounts is difficult to compare against the actuarial value of a prescription drug plan. The Proposed Rule states that this fundamental difference prohibits an “apples to apples” comparison, leading CMS to propose eliminating the requirement that HRAs, including individual coverage HRAs (“ICHRAs”), provide creditable coverage notices.

The Proposed Rule states that it is seeking to remove the Medicare Part D creditable coverage disclosure requirements for HRAs to reduce confusion for Part D-eligible individuals and minimize administrative burdens for entities providing these account-based plans. CMS explains that, under the existing requirements, individuals can receive contradictory notices—such as a non-creditable coverage notice from an HRA but a creditable coverage notice from a prescription drug plan—leading to confusion as to whether they are actually enrolled in creditable coverage. Individuals who decline enrollment in a Part D plan when they first become eligible risk being subject to a late enrollment penalty if they do not have other creditable coverage. CMS notes that the benefit design of account-based plans, such as HRAs, is not conducive to determining and reporting creditable coverage status and can create administrative burdens that entities offering or administering HRAs are not equipped to address. CMS asserts that updating this regulation to remove HRAs from Part D notice requirements aligns with President Trump's “Unleashing Prosperity Through Deregulation” Executive Order issued on January 31.

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