With open enrollment right around the corner for many employers, we need to look at the impact of changes in 2025 to Medicare Part D Plans. Medicare Part D changes will target enhancing prescription drug coverage for beneficiaries. The changes will also impact cost-sharing structures, formulary requirements, and overall benefits to make medications more affordable and accessible for seniors.
Employers need to understand the impact of these changes on their group health plan and prescription drug plan offerings.
Changes impacting employers in 2025 include the following:
Creditable Coverage Determination Methods
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Actuarial Determination Method — Uses actual claims experience and demographic data. This method can make it a more expensive and labor-intensive option for certain plans.
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Simplified Determination Method — Provides employers (that do not participate in the Retiree Drug Subsidy program) with a more straightforward approach for determining creditable status that does not require complicated actuarial tests.
Part D Plan Design Changes
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Reduction of the maximum out-of-pocket amount to $2,000. This means employers may have a higher threshold for meeting creditable plan status. The change will likely preclude high-deductible health plans (HDHPs) from qualifying as creditable coverage, which may be difficult for employers to navigate after spending years steering employees in this direction and not offering other options to help drive costs down.
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Employers may need to take some additional action in 2025 to revamp reporting, notice distribution, and/or their communication strategy to ensure Part D eligible employees understand their penalty risk if enrolling in an HDHP (and any other plans with non-creditable coverage) for the 2025 plan year.
With these changes, employers should keep in mind the Medicare Secondary Payer (MSP) rules that prohibit employers from suggesting or encouraging employees to drop employer coverage in favor of enrolling in Medicare.
Action Steps
It is recommended that employers consider the following actions for 2025:
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Obtain written confirmation from the carrier or third-party administrator (TPA) about the creditable or non-creditable coverage status of your plans for the upcoming plan year.
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Distribute the creditable coverage notice prior to October 15 annually and at any other times prescribed by the regulations.
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Provide additional communications to employees with any non-creditable coverage notices to ensure that Part D-eligible employees are aware of the penalty for not enrolling in creditable coverage.
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Complete the online disclosure to the Centers for Medicare & Medicaid Services (CMS) within 60 days of the start of the plan year and within 30 days of a creditable status change or termination of the prescription drug plan.
Remember, as employers, we may not always know whether an individual is Medicare eligible, so it is recommended that the notice is distributed to all employees.
Your broker or your TPA are great sources for more information related to these changes.
Jana Karr is a human resources consultant for Employers Council.