The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (PubL.No.
108-173) created a new voluntary prescription drug benefit under section 1860(D) of the
Social Security Act (“Medicare Part D”). The law provides that beneficiaries
entitled to Medicare Part A or enrolled in Medicare Part B, enrollees in Medicare
Advantage plans, and enrollees in Medicare Savings Account plans are eligible for Medicare
Part D beginning January 1, 2006.
In anticipation of the January 1, 2006 effective date of the Medicare Part D benefit, the
Department wishes to clarify some of the responsibilities of insurers licensed to write
accident and health insurance, Article 43 corporations and health maintenance
organizations (collectively, “insurers”) regarding the MMA.
1. The Insurance Department has received
inquiries regarding the permissibility of provisions in health insurance policies or
contracts, including the standardized individual direct pay contracts issued by HMOs,
which would “carve-out” from coverage the prescription drug benefit available
under Part D for Medicare-eligible individuals, even if those individuals are not enrolled
in Part D. As provided in Section 52.16(c)(8) of Regulation 62 (11 NYCRR 52), such
carve-out provisions are impermissible in the context of the Medicare Part D benefit where
the individual is not enrolled in Part D.
(NOTE: Although similar carve-out
provisions have been permitted by the Insurance Department in the context of Medicare Part
B, Part D is distinguishable from Part B because Part D is a limited benefit, requires
affirmative enrollment, imposes a substantial penalty on individuals for late enrollment,
and may be underwritten by different insurers with varying formularies and utilization
review/managed care procedures.)
Thus, while insurers may have contract
provisions that coordinate coverage with Medicare Part D coverage, the contract provisions
may be applied only to those individuals who are actually enrolled in Medicare Part D.
Insurers may not carve out Medicare Part D benefits solely because a subscriber is
eligible for such coverage.
2. Insurers issuing coverage for
prescription drugs are reminded of their responsibility under the MMA to send appropriate
notice to covered persons who are also Medicare beneficiaries, advising of creditable
coverage. More information about insurers’ obligations under the MMA and a model
notice is available on the federal Centers for Medicare and Medicaid Services (CMS)
website at
http://www.cms.hhs.gov/medicarereform/Credcovrg.asp.
Any questions on this Circular Letter may be directed to:
Sarah L. Allen
Health Bureau
New York Insurance Department
One Commerce Plaza
Albany, New York 12257
Or by e-mail to sallen@ins.state.ny.us.
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