IRA Changes to Medicare Part D May Impact Employer Plans

 

The Inflation Reduction Act of 2022 (IRA) includes several cost-reduction provisions to Medicare Part D plans that are designed to help beneficiaries but may also impact employer-sponsored health plans.

 

Key benefits include the following:

 

 

Lower Medicare costs could mean higher costs for employers that provide prescription drug coverage as pharmacies and providers seek to make up for lost revenue by increasing costs in the private sector. The changes may also affect the creditable coverage status of employer-sponsored prescription drug coverage.

 

Creditable Coverage

 

Employers that provide prescription drug coverage to individuals who are eligible for Medicare Part D must inform them and CMS whether their prescription drug coverage is creditable, meaning that the employer’s prescription drug coverage is at least as good as Medicare Part D coverage.

 

Given the significant changes made to Medicare Part D by the IRA, one of the methods for determining whether coverage is creditable has been revised to better reflect actuarial equivalence.

 

Employers should consult with their benefit advisers on use of the revised method for calendar year 2026 to ensure the appropriate Medicare Part D disclosure notices are sent.

 

Important Dates

 

Oct. 15, 2024 - For calendar year 2025, Part D enrollees can opt in to the Medicare Prescription Payment Plan during the period between this date and the beginning of the plan year.

 

April 7, 2025 - CMS published its final Part D redesign program instructions for calendar year 2026 with information on a revised creditable coverage determination methodology.

 

Action Steps

 

Employers and their benefit advisors should take proactive steps to manage costs should these increases occur and develop cost containment strategies, if necessary. In addition, employers should become familiar with the revised creditable coverage determination methods for calendar year 2026.

 

More information, including links to available resources and the latest updates, can be found on the Centers for Medicare and Medicaid Services’ (CMS) Part D Improvements webpage.