Title 42—Public Health--Volume 1
PART 423—VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT
§ 423.2263   General marketing requirements.
Marketing is a subset of communications and therefore must follow the requirements outlined in § 423.2262 as well as this section. Marketing (as defined in § 423.2260) must additionally meet the following requirements:
(a) Part D sponsors may begin marketing prospective plan year offerings on October 1 of each year for the following contract year. Part D sponsors may market the current and prospective year simultaneously provided materials clearly indicate what year is being discussed.
(b) In marketing, Part D sponsors may not do any of the following:
(1) Provide cash or other monetary rebates as an inducement for enrollment or otherwise.
(2) Offer gifts to beneficiaries, unless the gifts are of nominal value (as governed by guidance published by the HHS OIG), are offered to similarly situated beneficiaries without regard to whether or not the beneficiary enrolls, and are not in the form of cash or other monetary rebates.
(3) Provide meals to potential enrollees regardless of value.
(4) Market non-health care related products to prospective enrollees during any Part D sales activity or presentation. This is considered cross-selling and is prohibited.
(5) Compare their plan to other plans, unless the information is accurate, not misleading, and can be supported by the Part D sponsor making the comparison.
(6) Display the names or logos or both of pharmacy co-branding partners on marketing materials, unless the materials clearly indicate via a disclaimer or in the body that “Other pharmacies are available in the network.”
(7) Knowingly target or send unsolicited marketing materials to any Part D enrollee during the Open Enrollment Period (OEP).
(i) During the OEP, a Part D sponsors may do any of the following:
(A) Conduct marketing activities that focus on other enrollment opportunities, including but not limited to marketing to age-ins (who have not yet made an enrollment decision), marketing by 5-star plans regarding their continuous enrollment special election period (SEP), and marketing to dual-eligible and LIS beneficiaries who, in general, may make changes once per calendar quarter during the first nine months of the year;
(B) Send marketing materials when a beneficiary makes a proactive request;
(C) At the beneficiary's request, have one-on-one meetings with a sales agent;
(D) At the beneficiary's request, provide information on the OEP through the call center; and
(E) Include educational information, excluding marketing, on the Part D sponsor's website about the existence of OEP.
(ii) During the OEP, a Part D sponsors may not:
(A) Send unsolicited materials advertising the ability or opportunity to make an additional enrollment change or referencing the OEP;
(B) Specifically target beneficiaries who are in the OEP because they made a choice during Annual Enrollment Period (AEP) by purchase of mailing lists or other means of identification;
(C) Engage in or promote agent or broker activities that intend to target the OEP as an opportunity to make further sales; or
(D) Call or otherwise contact former enrollees who have selected a new plan during the AEP.
(8) Advertise benefits that are not available to beneficiaries in the service area(s) where the marketing appears, unless the advertisement is in local media that serves the service area(s) where the benefits are available and reaching beneficiaries who reside in other service areas is unavoidable.
(9) Market any products or plans, benefits, or costs, unless the Part D sponsor or marketing name(s) as listed in HPMS of the entities offering the referenced products or plans, benefits, or costs are identified in the marketing material.
(i) Part D sponsor or marketing names must be in 12-point font in print and may not be in the form of a disclaimer or in fine print.
(ii) For television, online, or social media, the Part D sponsor or marketing name(s) must be either read at the same pace as the phone number or must be displayed throughout the entire advertisement in a font size equivalent to the advertised phone number, contact information or benefits.
(iii) For radio or other voice-based advertisements, Part D sponsor or marketing names must be read at the same pace as phone numbers or contact information.
(10) Part D sponsors may not include information about savings available to potential enrollees that are based on a comparison of typical expenses borne by uninsured individuals, unpaid costs of dually eligible beneficiaries, or other unrealized costs of a Medicare beneficiary.
(c) The following requirements apply to how Part D sponsors must display CMS-issued Star Ratings:
(1) References to individual Star Rating measure(s) must also include references to the overall Star Rating for MA-PDs and the summary rating for PDP plans.
(2) May not use an individual underlying category, domain, or measure rating to imply overall higher Star Ratings.
(3) Must be clear that the rating is out of 5 stars.
(4) Must clearly identify the Star Ratings contract year.
(5) May only market the Star Ratings in the service area(s) for which the Star Rating is applicable unless using Star Ratings to convey overall Part D sponsor performance (for example, “Plan X has achieved 4.5 stars in Montgomery, Chester, and Delaware Counties), in which case the Part D sponsor must do so in a way that is not confusing or misleading.
(6) The following requirements apply to all 5 Star PDP contracts:
(i) May not market the 5-star special enrollment period, as defined in § 423.38(c)(20), after November 30 of each year if the contract has not received an overall 5 star for the next contract year.
(ii) May use CMS' 5- star icon or may create their own icon.
(7) The following requirements apply to all Low Performing MA contracts:
(i) The Low Performing Icon must be included on all materials about or referencing the specific contract's Star Ratings.
(ii) Must state the Low Performing Icon means that the Part D sponsor's contract received a summary rating of 2.5 stars or below in Part D for the last 3 years.
(iii) May not attempt to refute or minimize Low Performing Status.
§ 423.2264   Beneficiary contact.
For the purpose of this section, beneficiary contact means any outreach activities to a beneficiary or a beneficiary's caregivers by the Part D sponsor or its agents and brokers.
(a) Unsolicited contact. Subject to the rules for contact for plan business in paragraph (b) of this section, the following rules apply when materials or activities are given or supplied to a beneficiary or their caregiver without prior request:
(1) Part D sponsors may make unsolicited direct contact by conventional mail and other print media (for example, advertisements and direct mail) or email (provided every email contains an opt-out option).
(2) Part D sponsors may not do any of the following if unsolicited:
(i) Use door to door solicitation, including leaving information of any kind, except that information may be left when an appointment is pre-scheduled but the beneficiary is not home.
(A) Contact is unsolicited door-to-door contact unless an appointment, at the beneficiary's home at the applicable time and date, was previously scheduled.
(B) [Reserved]
(ii) Approach enrollees in common areas such as parking lots, hallways, lobbies.
(iii) Send direct messages from social media platforms.
(iv) Use telephone solicitation (that is, cold calling), robocalls, text messages, or voicemail messages, including, but not limited to, the following:
(A) Calls based on referrals.
(B) Calls to former enrollees who have disenrolled or those in the process of disenrolling, except to conduct disenrollment surveys for quality improvement purposes.
(C) Calls to beneficiaries who attended a sales event, unless the beneficiary gave express permission to be contacted.
(D) Calls to prospective enrollees to confirm receipt of mailed information.
(3) Calls are not considered unsolicited if the beneficiary provides consent or initiates contact with the plan. For example, returning phone calls or calling an individual who has completed a business reply card requesting contact is not considered unsolicited.
(b) Contact for plan business. Part D sponsors may contact current, and to a more limited extent, former members, including those enrolled in other products offered by the parent organization, to discuss plan business, in accordance with the following requirements:
(1) A Part D sponsor may conduct the following activities as plan business:
(i) Call current enrollees, including those in non-Medicare products, to discuss Medicare products. Examples of such calls include, but are not limited to the following:
(A) Enrollees aging into Medicare from commercial products.
(B) Existing enrollees, including Medicaid enrollees, to discuss other Medicare products or plan benefits.
(C) Members in an MA or cost plan to discuss other Medicare products.
(ii) Call beneficiaries who submit enrollment applications to conduct business related to enrollment.
(iii) With prior CMS approval, call LIS enrollees that a plan is prospectively losing due to reassignment. CMS decisions to approve calls are for limited circumstances based on the following:
(A) The proximity of cost of the losing plan as compared to the national benchmark; and
(B) The selection of plans in the service area that are below the benchmark.
(iv) Agents/brokers calling clients who are enrolled in other products they may sell, such as automotive or home insurance.
(v) Part D sponsors may not make unsolicited calls about other lines of business as a means of generating leads for Medicare plans.
(2) If the Part D sponsor reaches out to beneficiaries regarding plan business, as outlined in this section, the Part D sponsor must provide notice to all beneficiaries whom the plan contacts as least once annually, in writing, of the individual's ability to opt out of future calls regarding plan business.
(c) Events with beneficiaries. Part D sponsors and their agent or brokers may hold educational events, marketing or sales events, and personal marketing appointments to meet with Medicare beneficiaries, either face-to-face or virtually. The requirements for each type of event are as follows:
(1) Educational events must be advertised as such and be designed to generally inform beneficiaries about Medicare, including Medicare Advantage, Prescription Drug programs, or any other Medicare program.
(i) At educational events, Part D sponsors and agents/brokers may not market specific Part D sponsors or benefits.
(ii) Part D sponsors holding or participating in educational events may do any of the following:
(A) Distribute communication materials.
(B) Answer beneficiary initiated questions pertaining to Part D plans.
(C) Distribute business cards.
(D) Make available and receive beneficiary contact information, including Business Reply Cards, but not including Scope of Appointment forms.
(iii) Part D sponsors holding or participating in educational events may not conduct sales or marketing presentations or distribute or accept plan applications.
(iv) Part D sponsors may schedule appointments with residents of long-term care facilities (for example, nursing homes, assisted living facilities, board and care homes) upon a resident's request. If a resident did not request an appointment, any visit by an agent or broker is prohibited as unsolicited door-to-door marketing.
(2) Marketing or sales events are group events that fall within the definition of marketing at § 423.2260.
(i) Marketing events are prohibited from taking place within 12 hours of an educational event, in the same location. The same location is defined as the entire building or adjacent buildings.
(ii) Part D sponsors holding or participating in marketing events may do any of the following:
(A) Provide marketing materials.
(B) Distribute and accept plan applications.
(C) Collect Scope of Appointment forms for future personal marketing appointments.
(D) Conduct marketing presentations.
(iii) Part D sponsors holding or participating in marketing events may not do any of the following:
(A) Require sign in sheets or require attendees to provide contact information as a prerequisite for attending an event.
(B) Conduct activities, including health screenings, health surveys, or other activities that are used for or could be viewed as being used to target a subset of members (that is “cherry-picking”).
(C) Use information collected for raffles or drawings for any purpose other than raffles or drawings.
(3) Personal marketing appointments are those appointments that are tailored to an individual or small group (for example, a married couple). Personal marketing appointments are not defined by the location.
(i) At least 48 hours prior to the scheduled personal marketing appointment, the Part D plan (or agent or broker, as applicable) must agree upon and record the Scope of Appointment with the beneficiary(ies), except for:
(A) SOAs that are completed during the last four days prior to a valid election period for the beneficiary.
(B) Unscheduled in person visits (walk-ins) initiated by the beneficiary.
(ii) Part D sponsors holding a personal marketing appointment may do any of the following:
(A) Provide marketing materials.
(B) Distribute and accept plan applications.
(C) Conduct marketing presentations.
(D) Review the individual needs of the beneficiary including, but not limited to, health care needs and history, commonly used medications, and financial concerns.
(iii) Part D sponsors holding a personal marketing appointment may not do any of the following:
(A) Market any health care related product during a marketing appointment beyond the scope agreed upon by the beneficiary, and documented by the plan in a Scope of Appointment, business reply card, or request to receive additional information, which is valid for 12 months following the date of beneficiary's signature date or the date of the beneficiary's initial request for information.
(B) Market additional health related lines of plan business not identified prior to an individual appointment without a separate Scope of Appointment, identifying the additional lines of business to be discussed; such Scope of Appointment is valid for 12 months following the beneficiary's signature date.
(C) Market non-health related products such as annuities.
§ 423.2265   Websites.
As required under § 423.128(d)(2), Part D sponsors must have a website.
(a) General website requirements. (1) Part D sponsor websites must meet all of the following requirements:
(i) Maintain current year contract content through December 31 of each year.
(ii) Notify users when they will leave the Part D sponsor's Medicare site.
(iii) Include or provide access to (for example, through a hyperlink) applicable notices, statements, disclosures, or disclaimers with corresponding content. Overarching disclaimers, such as the Federal Contracting Statement, are not required on every page.
(iv) Reflect the most current information within 30 days of any material change
(v) Keep PDP content separate and distinct from other lines of business, including Medicare Supplemental Plans.
(2) Part D sponsor websites may not do any of the following:
(i) Require beneficiaries to enter any information other than zip code, county, or state for access to non-beneficiary-specific website content.
(ii) Provide links to foreign drug sales, including advertising links.
(iii) State that the Part D sponsor is not responsible for the content of their social media pages or the website of any first tier, downstream, or related entity that provides information on behalf of the Part D sponsor.
(b) Required content. A Part D sponsor's websites must include the following content:
(1) A toll-free customer service number, TTY number, and days and hours of operation.
(2) A physical or Post Office Box address.
(3) A PDF or copy of a printable pharmacy directory.
(4) A searchable pharmacy directory.
(5) A searchable formulary.
(6) Information on enrollees' and Part D sponsors' rights and responsibilities upon disenrollment. Part D sponsors may either post this information or provide specific information on where it is located in the Evidence of Coverage together with a link to that document.
(7) A description of and information on how to file a grievance, request an organization determination, and an appeal.
(8) Prominently displayed link to the Medicare.gov electronic complaint.
(9) A Notice of Privacy Practices as required under the HIPAA Privacy Rule (45 CFR 164.520).
(10) Prescription Drug Transition Policy.
(11) LIS Premium Summary Chart.
(12) Prescription Drug Transition Policy.
(13) A separate section or page about MTM programs providing the following:
(i) Explanation of MTM program, including eligibility requirements, the purpose and benefits of MTM, how to obtain MTM service documents including the Medication list, that the service is free, and a summary of services.
(ii) Information on how to obtain information about the MTM program, including how the member will know they are eligible and enrolled into the MTM program, the comprehensive medication review and targeted medication reviews, a description of how reviews are conducted and delivered, including time commitments and materials beneficiaries will receive.
(14) Instructions on how to appoint a representative including a link to the downloadable version of the CMS Appointment of Representative Form (CMS Form-1696).
(15) Enrollment instructions and forms.
(16) Information about the Medicare Prescription Payment Plan as described in § 423.137(m)(2).
(c) Required posted materials. A Part D sponsor's website must provide access to the following materials, in a printable format, within the timeframes specified in paragraphs (c)(1) and (2) of this section.
(1) The following materials for each plan year must be posted on the website by October 15 prior to the beginning of the plan year:
(i) Evidence of Coverage.
(ii) Annual Notice of Change (for renewing plans).
(iii) Summary of Benefits.
(iv) Pharmacy Directory.
(v) Formulary.
(vi) Utilization Management Forms for physicians and enrollees.
(2) The following materials must be posted on the website throughout the year and be updated as required:
(i) Prior Authorization Forms for Physicians and Enrollees.
(ii) Part D Model Coverage Determination and Redetermination Request Forms.
(iii) Exception request forms for physicians (which must be posted by January 1 for new plans).
(iv) CMS Star Ratings document, which must be posted within 21 days after its release on the Medicare Plan Finder.
§ 423.2266   Activities with healthcare providers or in the healthcare setting.
(a) Where marketing is prohibited. The requirements in paragraphs (c) through (e) of this section apply to activities in the health care setting. Marketing activities and materials are not permitted in areas where care is being administered, including but not limited to the following:
(1) Exam rooms.
(2) Hospital patient rooms.
(3) Treatment areas where patients interact with a provider and his/her clinical team and receive treatment (including such areas in dialysis treatment facilities).
(4) Pharmacy counter areas.
(b) Where marketing is permitted. Marketing activities and materials are permitted in common areas within the health care setting, including the following:
(1) Common entryways.
(2) Vestibules.
(3) Waiting rooms.
(4) Hospital or nursing home cafeterias.
(5) Community, recreational, or conference rooms.
(c) Provider-initiated activities. Provider-initiated activities are activities conducted by a provider at the request of the patient, or as a matter of a course of treatment, and occur when meeting with the patient as part of the professional relationship between the provider and patient. Provider-initiated activities do not include activities conducted at the request of the Part D sponsor or pursuant to the network participation agreement between the Part D sponsor and the provider. Provider-initiated activities that meet this definition in this paragraph (c) fall outside of the definition of marketing in § 423.2260. Permissible provider-initiated activities include:
(1) Distributing unaltered, printed materials created by CMS, such as reports from Medicare Plan Finder, the “Medicare & You” handbook, or “Medicare Options Compare” (from https://www.medicare.gov ) including in areas where care is delivered.
(2) Providing the names of Part D sponsors with which they contract or participate or both.
(3) Answering questions or discussing the merits of a Part D plan or plans, including cost sharing and benefit information including in areas where care is delivered.
(4) Referring patients to other sources of information, such as State Health Insurance Assistance Program (SHIP) representatives, plan marketing representatives, State Medicaid Office, local Social Security Offices, CMS' website at https://www.medicare.gov, or 1-800-MEDICARE.
(5) Referring patients to Part D marketing materials available in common areas.
(6) Providing information and assistance in applying for the LIS.
(7) Announcing new or continuing affiliations with Part D sponsors, once a contractual agreement is signed. Announcements may be made through any means of distribution.
(d) Plan-initiated provider activities. Plan-initiated provider activities are those activities conducted by a provider at the request of a Part D sponsor. During a plan-initiated provider activity, the provider is acting on behalf of the Part D sponsor. For the purpose of plan-initiated activities, the Part D sponsor is responsible for compliance with all applicable regulatory requirements.
(1) During plan-initiated provider activities, Part D sponsors must ensure that the provider does not:
(i) Accept/collect scope of appointment forms.
(ii) Accept Medicare enrollment applications.
(iii) Make phone calls or direct, urge, or attempt to persuade their patients to enroll in a specific plan based on financial or any other interests of the provider.
(iv) Mail marketing materials on behalf of a Part D sponsor.
(v) Offer inducements to persuade patients to enroll with a particular Part D plan or sponsor.
(vi) Conduct health screenings as a marketing activity.
(vii) Distribute marketing materials or enrollment forms in areas where care is being delivered.
(viii) Offer anything of value to induce enrollees to select the provider.
(ix) Accept compensation from the Part D sponsor for any marketing or enrollment activities performed on behalf of the Part D sponsor.
(2) During plan-initiated provider activities, the provider may do any of the following:
(i) Make available, distribute, and display communications materials, including in areas where care is being delivered.
(ii) Provide or make available marketing materials and enrollment forms in common areas.
(e) Part D sponsor activities in the healthcare setting. Part D sponsor activities in the health care setting are those activities, including marketing activities that are conducted by Part D sponsor or on behalf of the Part D sponsor, or by any downstream entity, but not by a provider. All marketing must comply with the requirements in paragraphs (a) and (b) of this section. However, during Part D sponsor activities, the following is permitted:
(1) Accepting and collect Scope of Appointment forms.
(2) Accepting enrollment forms.
(3) Making available, distributing, and displaying communications materials, including in areas where care is being delivered.
§ 423.2267   Required materials and content.
For information CMS deems to be vital to the beneficiary, including information related to enrollment, benefits, health, and rights, the agency may develop materials or content that are either standardized or provided in a model form. Such materials and content are collectively referred to as required.
(a) Standards for required materials and content. All required materials and content, regardless of categorization as standardized in paragraph (b) of this section or model in paragraph (c) of this section, must meet the following:
(1) Be in a 12pt font, Times New Roman or equivalent.
(2) For markets with a significant non-English speaking population, be in the language of these individuals. Specifically, Part D sponsors must translate required materials into any non-English language that is the primary language of at least 5 percent of the individuals in a plan benefit package (PBP) service area.
(3) Be provided to enrollees on a standing basis in any non-English language identified in paragraphs (a)(2) and (4) of this section and/or accessible format using auxiliary aids and services upon receiving a request for the materials in a non-English language or accessible format or when otherwise learning of the enrollee's primary language and/or need for an accessible format. This requirement also applies to the individualized plans of care described in § 422.101(f)(1)(ii) of this chapter for special needs plan enrollees.
(4) For any fully integrated dual eligible special needs plan or highly integrated dual eligible special needs plan as defined at § 422.2 of this chapter, or applicable integrated plan as defined at § 422.561 of this chapter, be translated into the language(s) required by the Medicaid translation standard as specified through their capitated Medicaid managed care contract in addition to the language(s) required by the Medicare translation standard in paragraph (a)(2) of this section.
(5) Be provided to the beneficiary within CMS's specified timeframes.
(b) Standardized materials. Standardized materials and content are required materials and content that must be used in the form and manner provided by CMS.
(1) When CMS issues standardized material or content, a Part D sponsor must use the document without alteration except for the following:
(i) Populating variable fields.
(ii) Correcting grammatical errors.
(iii) Adding customer service phone numbers.
(iv) Adding plan name, logo, or both.
(v) Deleting content that does not pertain to the plan type (for example, removing MA language for a Part D plan).
(vi) Adding the SMID.
(vii) A Notice of Privacy Practices as required under the HIPAA Privacy Rule (45 CFR 164.520).
(2) When CMS issues standardized content, Part D sponsors—
(3) The Part D sponsor may develop accompanying language for standardized material or content, provided that language does not conflict with the standardized material or content. For example, CMS may issue standardized content associated with an appeal notification and Part D sponsor may draft a letter that includes the standardized content in the body of the letter; the remaining language in the letter is at the sponsor's discretion, provided it does not conflict with the standardized content or other regulatory standards.
(c) Model materials. Model materials and content are those required materials and content created by CMS as an example of how to convey beneficiary information. When drafting required materials or content based on CMS models, Part D sponsors:
(1) Must accurately convey the vital information in the required material or content to the beneficiary, although the Part D sponsor is not required to use CMS model materials or content verbatim; and
(2) Must follow CMS's specified order of content, when specified.
(d) Delivery of required materials. Part D sponsors must mail required materials in hard copy or provide them electronically, following the requirements in paragraphs (d)(1) and (2) of this section.
(1) For hard copy mailed materials, each enrollee must receive his or her own copy, except in cases of non-beneficiary-specific material(s) where the Part D sponsor has determined multiple enrollees are living in the same household and it has reason to believe the enrollees are related. In that case, the Part D sponsor may mail one copy to the household. The Part D sponsor must provide all enrollees an opt-out process so the enrollees can each receive his or her own copy, instead of a copy to the household. Materials specific to an individual beneficiary must always be mailed to that individual.
(2) Materials may be delivered electronically following the requirements in paragraphs (d)(2)(i) and (ii) of this section.
(i) Without prior authorization from the enrollee, Part D sponsors may mail new and current enrollees a notice informing enrollees how to electronically access the following required materials: the Evidence of Coverage, Provider and Pharmacy Directories, and Formulary. The following requirements apply:
(A) The Part D sponsor may mail one notice for all materials or multiple notices.
(B) Notices for prospective year materials may not be mailed prior to September 1 of each year, but must be sent in time for an enrollee to access the specified materials by October 15 of each year.
(C) The Part D sponsor may send the notice throughout the year to new enrollees.
(D) The notice must include the website address to access the materials, the date the materials will be available if not currently available, and a phone number to request that hard copy materials be mailed.
(E) The notice must provide the enrollee with the option to request hardcopy materials. Requests may be material specific, and must have the option of a one-time request or a permanent request that must stay in place until the enrollee chooses to receive electronic materials again.
(F) Hard copies of requested materials must be sent within three business days of the request.
(ii) With prior authorization from the enrollee, the Part D sponsor may provide any required material or content electronically. To do so, the Part D sponsor must do all of the following:
(A) Obtain prior consent from the enrollee. The consent must specify both the media type and the specific materials being provided in that media type.
(B) Provide instructions on how and when enrollees can access the materials.
(C) Have a process through which an enrollee can request hard copies be mailed, providing the beneficiary with the option of a one-time request or a permanent request (which must stay in place until the enrollee chooses to receive electronic materials again), and with the option of requesting hard copies for all or a subset of materials. Hard copies must be mailed within three business days of the request.
(D) Have a process for automatic mailing of hard copies when electronic versions or the chosen media type is undeliverable.
(e) CMS required materials and content. The following are required materials that must be provided to current and prospective enrollees, as applicable, in the form and manner outlined in this section. Unless otherwise noted or instructed by CMS and subject to § 423.2263(a) of this chapter, required materials may be sent once a fully executed contract is in place, but no later than the due dates listed for each material in this section.
(1) Evidence of Coverage (EOC). The EOC is a standardized communications material through which certain required information (under § 423.128(b)) must be provided annually and must be provided:
(i) To current enrollees of plan by October 15, prior to the year to which the EOC applies.
(ii) To new enrollees within 10 calendar days from receipt of CMS confirmation of enrollment or by last day of month prior to effective date, whichever is later.
(2) Part D explanation of benefits (EOB). The EOB is a model communications material through which plans must provide the information required under § 423.128(e). Part D sponsors must provide enrollees with an EOB no later than the end of the month following any month in which the enrollee utilized their prescription drug benefit.
(3) Annual Notice of Change (ANOC). The ANOC is a standardized marketing material through which plans must provide the information required under § 423.128(g)(2) annually.
(i) Must send for enrollee receipt no later than September 30 of each year.
(ii) Enrollees with an October 1, November 1, or December 1 effective date must receive within 10 calendar days from receipt of CMS confirmation of enrollment or by last day of month prior to effective date, whichever is later.
(4) Pre-enrollment checklist (PECL). The PECL is a standardized communications material that plans must provide to prospective enrollees with the enrollment form, so that the enrollees understand important plan benefits and rules. For telephonic enrollments the contents of the PECL must be reviewed with the prospective enrollee prior to the completion of the enrollment. It references information on the following:
(i) The EOC.
(ii) Provider directory.
(iii) Pharmacy directory.
(iv) Formulary.
(v) Premiums/copayments/coinsurance.
(vi) Emergency/urgent coverage.
(vii) Plan-type rules.
(viii) Effect on current coverage.
(5) Summary of Benefits (SB). Part D sponsors must disseminate a summary of highly utilized coverage that include benefits and cost sharing to prospective enrollees, known as the SB. The SB is a model marketing material. It must be in a clear and accurate format.
(i) The SB must be provided with an enrollment form as follows:
(A) In hardcopy with a paper enrollment form.
(B) For online enrollment, the SB must be made available electronically (for example, via a link) prior to the completion and submission of enrollment request.
(C) For telephonic enrollment, the beneficiary must be verbally told where the SB can be accessed.
(ii) The SB must include the following information:
(A) Information on prescription drug expenses, including:
( 1 ) Monthly plan premium
( 2 ) Deductible, the initial coverage phase, coverage gap, and catastrophic coverage.
( 3 ) A statement that costs may differ based on pharmacy type or status (for example, preferred/non-preferred, mail order, long-term care (LTC) or home infusion, and 30- or 90-day supply), when applicable.
( 4 ) For dual eligible enrollees with differing levels of cost must state how cost sharing and benefits differ depending on the level of Medicaid eligibility.
(B) Plan sponsors may describe or identify other health related benefits in the SB.
(6) Enrollment/Election form. This is the model communications material through which plans must provide the information required under § 423.32(b).
(7) Enrollment Notice. This is a model communications material through which plans must provide the information required under § 423.32(d).
(8) Disenrollment Notice. This is a model communications material through which plans must provide the information required under § 423.36(b)(2).
(9) Formulary. This is a model communications material through which Part D sponsors must provide information required under § 423.128(b)(4).
(i) Must be provided to current enrollees of plan by October 15 of each year.
(ii) Must also provide to new enrollees within 10 calendar days from receipt of CMS confirmation of enrollment or by last day of month prior to effective date, whichever is later.
(10) Low Income Subsidy (LIS) Notice. This is a model communications content through which Part D sponsors must notify potential enrollees of what their plan premium will be once they are eligible for Extra Help and receive the low-income subsidy.
(11) Low Income Subsidy (LIS) Rider. This is a model communications material provided to all enrollees who qualify for Extra Help. In the LIS Rider, the Part D sponsors must convey how much help the beneficiary will receive in the benefit year toward their Part D premium, deductible, and copayments provide to all beneficiaries who qualify for Extra Help.
(i) The LIS Rider must be provided at least once per year by September 30.
(ii) The LIS Rider must be sent to enrollees who qualify for Extra Help or have a change in LIS levels within 30 days of receiving notification from CMS.
(12) Midyear Change Notification. This is a model communications material through which plans must provide a notice to enrollees when there is a midyear change in benefits or plan rules, under the following timelines:
(i) Notices of changes in plan rules, unless otherwise addressed elsewhere in the regulation, must be provided 30 days in advance.
(ii) National Coverage Determination (NCD) changes announced or finalized less than 30 days before effective date, a notification is required as soon as possible.
(iii) Midyear NCD or legislative changes must be provided no later than 30 days after the NCD is announced or the legislative change is effective.
(A) Plans may include the change in next plan mass mailing (for example, newsletter), provided it is within 30 days.
(B) The notice must also appear on the MA organization's website.
(13) Non-renewal notice. This is a standardized communications material through which plans must provide the information required under § 423.507.
(i) The Non-renewal Notice must be provided at least 90 calendar days before the date on which the nonrenewal is effective. For contracts ending on December 31, the notice must be dated October 2 to ensure national consistency in the application of Medigap Guaranteed Issue (GI) rights to all enrollees, except for those enrollees in Medicare-Medicaid Plans (MMPs) and special needs plans (SNPs). Information about non-renewals or service area reductions may not be released to the public, including the Non-renewal Notice in this section, until CMS provides notification to the plan.
(ii) The Non-renewal Notice must do all of the following:
(A) Inform the enrollee that the plan will no longer be offered and the date the plan will end.
(B) Provide information about any applicable open enrollment periods or special election periods or both (for example, Medicare open enrollment, non-renewal special election period), including the last day the enrollee has to make a Medicare prescription drug plan selection.
(C) Explain what the enrollee must do to continue receiving Medicare coverage and what will happen if the enrollee chooses to do nothing.
(D) As required under § 423.507(a)(2)(ii)(A), provide a CMS-approved written description of alternative MA plan, MA-PD plan, and PDP options available for obtaining qualified Medicare services within the beneficiary's region in the enrollee's notice.
(E) Specify when coverage will start after a new Medicare plan is chosen.
(F) List 1-800-MEDICARE contact information together with other organizations that may be able to assist with comparing plans (for example, SHIPs).
(G) Include the Part D sponsor's call center telephone number, TTY number, and hours and days of operation.
(14) Part D Transition Letter. This is a model communications material that must be provided to the beneficiary when they receive a transition fill for a nonformulary drug. The Part D Transition Letter must be sent within three days of adjudication of temporary transition fill.
(15) Pharmacy Directory. This is a model communications material through which Part D sponsors must provide the information required under § 423.128. The pharmacy directory must meet all of the following:
(i) Be provided to current enrollees by October 15 of the year prior to the applicable year.
(ii) Be provided to new enrollees within 10 calendars days from receipt of CMS confirmation of enrollment or by last day of month prior to effective date, whichever is later.
(iii) Be provided to current enrollees upon request, within three business days of the request.
(iv) Be updated any time the Part D sponsor becomes aware of changes.
(A) All updates to the online pharmacy directories must be completed within 30 days of receiving information requiring update.
(B)( 1 ) Updates to hardcopy provider directories must be completed within 30 days.
( 2 ) Hardcopy directories that include separate updates via addenda are considered up-to-date.
(16) Prescription transfer letter. This is a model communications material that must be sent when a Part D sponsor requests permission from an enrollee to fill a prescription at a different network pharmacy than the one currently being used by enrollee.
(17) Star Ratings Document. This is a standardized marketing material through which Star Ratings information is conveyed to prospective enrollees.
(i) The Star Ratings Document is generated through HPMS.
(ii) The Star Ratings Document must be provided with an enrollment form as follows:
(A) In hardcopy with a paper enrollment form.
(B) For online enrollment, made available electronically (for example, via a link) prior to the completion and submission of enrollment request.
(C) For telephonic enrollment, the beneficiary must be verbally told where they can access the Star Ratings Document.
(iii) New Part D sponsors that have no Star Ratings are not required to provide the Star Ratings Document until the following contract year.
(iv) Updated Star Ratings must be used within 21 calendar days of release of updated information on Medicare Plan Finder.
(v) Updated Star Ratings must not be used until CMS releases Star Ratings on Medicare Plan Finder.
(18) Coverage Determination Notices. This is a model communications material through which plans must provide the information under § 423.568.
(19) Excluded Provider Notices. This is a model communications material through which plans must notify enrollees when a provider they use has been excluded from participating in the Medicare program based on an OIG exclusion or the CMS preclusion list.
(20) Notice of Denial of Medicare Prescription Drug Coverage. This is a standardized material used to convey detailed descriptions of denied drug coverage and appeal rights.
(21) Medicare Prescription Drug Coverage and Your Rights. This is a standardized communications material used to convey a beneficiary's appeal rights when a drug cannot be filled at point-of-sale.
(22) Medicare Part D Coverage Determination Request Form. This is a model communications material used to collect additional information from a prescriber.
(23) Request for Additional Information. This is a standardized communications material used by the Part D sponsor to request a beneficiary obtain additional information from the prescriber regarding a beneficiary's exception request.
(24) Notice of Right to an Expedited Grievance. This is a model communications material used to convey a Medicare beneficiary's rights to request that a decision be made on a grievance or appeal within a shorter timeframe.
(25) Notice of Inquiry. This is a model communications material from a prescription drug plan informing a beneficiary if a drug is covered by the formulary.
(26) Notice of Case Status. This is a model communications material used to inform a beneficiary of the denial of an appeal and additional appeal rights.
(27) Request for Reconsideration of Medicare Prescription Drug Denial. This is a model communications material used to inform the beneficiary of rights to an independent review of a Part D sponsor's decision.
(28) Notice of Redetermination. This is a model communications material used to convey instructions for requesting an appeal of an adverse coverage determination.
(29) LEP Reconsideration Request Form. This is a model communication used to request an appeal of a decision on an LEP by the independent review entity.
(30) Request for Administrative Law Judge (ALJ) Hearing or Review of Dismissal. This is a model communication used by an enrollee to request a hearing by the ALJ or a review of the IRE dismissal.
(31) Appointment of Representative (AOR). This is a standardized material used to assign an individual to act on behalf of a beneficiary for the purpose of an appeal, grievance, or coverage determination.
(32) Member ID card. The member ID card is a model communications material that plans must provide to enrollees as required under § 423.128(d)(2). The member ID card—
(i) Must be provided to new enrollees within 10 calendars days from receipt of CMS confirmation of enrollment or by the last day of month prior to the plan effective date, whichever is later;
(ii) Must include the Part D sponsor's—
(A) Website address;
(B) Customer service number (the member ID card is excluded from the hours of operations requirement under § 423.2262(c)(1)(i)); and
(C) Contract/PBP number;
(iii) Must include, if issued for a preferred provider organization (PPO) and PFFS plan, the phrase “Medicare limiting charges apply.”;
(iv) May not use a member's Social Security number (SSN), in whole or in part;
(v) Must be updated whenever information on a member's existing card changes; in such cases an updated card must be provided to the member;
(vi) Is excluded from the translation requirement under paragraphs (a)(2) through (4) of this section;
(vii) Is excluded from the 12-point font size requirement under paragraph (a)(1) of this section; and
(viii) For dual eligible special needs plans that are applicable integrated plans, as defined in § 422.561 of this chapter, must be an integrated member ID card that serves as the ID card for both the Medicare and Medicaid plans in which the enrollee is enrolled, beginning no later than contract year 2027.
(33) Notice of availability of language assistance services and auxiliary aids and services (Notice of Availability).
(i) Prior to contract year 2026 marketing on September 30, 2025, the notice is referred to as the Multi-language insert (MLI). This is a standardized communications material which states, “We have free interpreter services to answer any questions you may have about our health or drug plan. To get an interpreter, just call us at [1-xxx-xxx-xxxx]. Someone who speaks [language] can help you. This is a free service.” in the following languages: Spanish, Chinese, Tagalog, French, Vietnamese, German, Korean, Russian, Arabic, Italian, Portuguese, French Creole, Polish, Hindi, and Japanese.
(A) Additional languages that meet the 5-percent service area threshold, as required under paragraph (a)(2) of this section, must be added to the MLI used in that service area. A plan may also opt to include in the MLI any additional language that do not meet the 5 percent service area threshold, where it determines that this inclusion would be appropriate.
(B) Except where otherwise provided in paragraph (e)(33)(i)(G) of this section, the MLI must be provided with all required materials under paragraph (e) of this section.
(C) The MLI may be included as a part of the required material or as a standalone material in conjunction with the required material.
(D) When used as a standalone material, the MLI may include organization name and logo.
(E) When mailing multiple required materials together, only one MLI is required.
(F) The MLI may be provided electronically when a required material is provided electronically as permitted under paragraph (d)(2) of this section.
(G) At plan option for CY 2025 marketing and communications beginning September 30, 2024, the plan may use the model notice described in § 423.2267(e)(33)(ii) to satisfy the MLI requirements set forth in paragraph (e)(33)(i) of this section.
(ii) For CY 2026 marketing and communications beginning September 30, 2025, the required notice is referred to as the Notice of availability of language assistance services and auxiliary aids and services (Notice of Availability). This is a model communications material through which MA organizations must provide a notice of availability of language assistance services and auxiliary aids and services that, at a minimum, states that the MA organization provides language assistance services and appropriate auxiliary aids and services free of charge.
(A) This notice of availability of language assistance services and auxiliary aids and services must be provided in English and at least the 15 languages most commonly spoken by individuals with limited English proficiency of the relevant State or States associated with the plan's service area and must be provided in alternate formats for individuals with disabilities who require auxiliary aids and services to ensure effective communication.
(B) If there are additional languages in a particular service area that meet the 5 percent service area threshold, described in paragraph (a)(2) of this section, beyond the languages described in paragraph (e)(33)(i) of this section, the notice of availability of language assistance services and auxiliary aids and services must also be translated into those languages. MA organizations may also opt to translate the notice in any additional languages that do not meet the 5-percent service area threshold, where the MA organization determines that this inclusion would be appropriate.
(C) The notice must be provided with all required materials under paragraph (e) of this section.
(D) The notice may be included as a part of the required material or as a standalone material in conjunction with the required material.
(E) When used as a standalone material, the notice may include organization name and logo.
(F) When mailing multiple required materials together, only one notice is required.
(G) The notice may be provided electronically when a required material is provided electronically as permitted under paragraph (d)(2) of this section.
(34) Federal Contracting Statement. This is model content through which plans must convey that they have a contract with Medicare and that enrollment in the plan depends on contract renewal.
(i) The Federal Contracting Statement must include all of the following:
(A) Legal or marketing name of the organization.
(B) Type of plan (for example PDP).
(C) A statement that the organization has a contract with Medicare (when applicable, Part D sponsors may incorporate a statement that the organization has a contract with the State/Medicaid program).
(D) A statement that enrollment depends on contract renewal.
(ii) Part D sponsors must include the Federal Contracting Statement on all marketing materials with the exception of the following:
(A) Banner and banner-like advertisements.
(B) Outdoor advertisements.
(C) Text messages.
(D) Social media.
(E) Envelopes
(35) Star Ratings Disclaimer. This is model content through which plans must:
(i) Convey that plan sponsors are evaluated yearly by Medicare
(ii) Convey that the ratings are based on a 5-star rating system
(iii) Include the model content in disclaimer form or within the material whenever Star Ratings are mentioned in marketing materials, with the exception of when Star Ratings are published on small objects (that is, a give-away items such as a pens or rulers).
(36) Accommodations Disclaimer. This is model content through which plans must:
(i) Convey that accommodations for persons with special needs is available
(ii) Provide a telephone number and TTY number
(iii) Include the model content in disclaimer form or within the body of the material on any advertisement of invitation to all events as described under § 423.2264(c).
(37) Mailing Statements. This is standardized content. It consists of statements on envelopes that Part D sponsor must include when mailing information to current members, as follows:
(i) Part D sponsors must include the following statement when mailing information about the enrollee's current plan: “Important [Insert Plan Name] information.”
(ii) Part D sponsors must include the following statement when mailing health and wellness information “Health and wellness or prevention information.”
(iii) The Part D sponsor must include the plan name; however, if the plan name is elsewhere on the envelope, the plan name does not need to be repeated in the disclaimer.
(iv) Delegated or sub-contracted entities and downstream entities that conduct mailings on behalf of a multiple Part D sponsors must also comply with this requirement, however, they do not have to include a plan name.
(38) Promotional Give-Away Disclaimer. This is model content. The disclaimer consists of a statement that must make clear that there is no obligation to enroll in a plan, and must be included when offering a promotional give-away such as a drawing, prizes, or a free gift.
(39) Provider Co-Branded Material Disclaimer. This is model content through which Part D sponsors must:
(i) Convey, as applicable, that other pharmacies, physicians or providers are available in the plan's network.
(ii) Include the model content in disclaimer form or within the material whenever co-branding relationships with network provider are mentioned.
(40) Limited access to preferred cost-sharing pharmacies. This is standardized content that must—
(i) Be used on all materials mentioning preferred pharmacies when there is limited access to preferred pharmacies; and
(ii) Include the following language: “<insert organization/plan name>'s pharmacy network includes limited lower-cost, preferred pharmacies in <insert geographic area type(s) and state(s) for which plan is an outlier)>. The lower costs advertised in our plan materials for these pharmacies may not be available at the pharmacy you use. For up-to-date information about our network pharmacies, including whether there are any lower-cost preferred pharmacies in your area, please call <insert Member Services phone number and TTY> or consult the online pharmacy directory at <insert website>.”
(41) Third-party marketing organization disclaimer. This is standardized content. If a TPMO does not sell for all Part D sponsors in the service area the disclaimer consists of the statement: “We do not offer every plan available in your area. Currently we represent [insert number of organizations] organizations which offer [insert number of plans] products in your area. Please contact Medicare.gov , 1-800-MEDICARE, or your local State Health Insurance Program to get information on all of your options.” If the TPMO sells for all Part D sponsors in the service area the disclaimer consists of the statement: “Currently we represent [insert number of organizations] organizations which offer [insert number of plans] products in your area. You can always contact Medicare.gov , 1-800-MEDICARE, or your local State Health Insurance Program for help with plan choices.” The Part D sponsor must ensure that the disclaimer is as follows:
(i) Used by any TPMO, as defined under § 422.2260, that sells plans on behalf of more than one Part D sponsor.
(ii) Verbally conveyed within the first minute of a sales call.
(iii) Electronically conveyed when communicating with a beneficiary through email, online chat, or other electronic means of communication.
(iv) Prominently displayed on TPMO websites.
(v) Included in any marketing materials, including print materials and television advertisements, developed, used or distributed by the TPMO.
(42) [Reserved]
(43) Comprehensive medication review—written summary. This is the standardized communications material Part D sponsors must provide to all MTM program enrollees who receive a comprehensive medication review, as required under § 423.153(d)(1)(vii)(B).
(44) Safe disposal information. This is model communications material Part D sponsors must provide to all enrollees targeted for its MTM program, as required under § 423.153(d)(1)(vii)(E).
(45) Election request form. This is a model communications material that Part D sponsors must provide to allow enrollees to request to opt into the Medicare Prescription Payment Plan, as required under § 423.137(d)(10)(i).
(46) Notice of election approval. This is a model communications material that Part D sponsors must provide upon accepting a Medicare Prescription Payment Plan election request, as required under § 423.137(d)(10)(ii).
(47) Medicare Prescription Payment Plan Likely to Benefit Notice. This is a standardized communications material that Part D sponsors must provide to enrollees identified as being likely to benefit from opting into the Medicare Prescription Payment Plan, as required under § 423.137(e)(4).
(48) Notice of failure to pay. This is a model communications material that Part D sponsors must provide to Medicare Prescription Payment Plan participants who fail to pay a program bill, as required under § 423.137(f)(2)(ii)(C).
(49) Involuntary termination notice. This is a model communications material that Part D sponsors must provide to Medicare Prescription Payment Plan participants who are being involuntarily terminated from the program due to failure to pay, as required under § 423.137(f)(2)(ii)(D).
(50) Voluntary termination notice. This is a model communications material that Part D sponsors must provide to Medicare Prescription Payment Plan participants who request to voluntarily leave the program, as required under § 423.137(f)(2)(i)(A)( 2 ).
(51) Renewal notice. This is a model communications material that Part D sponsors must send to Medicare Prescription Payment Plan participants alerting them that their participation in the program will automatically renew for the subsequent plan year, as required under § 423.137(d)(10)(iv).
§ 423.2272   Licensing of marketing representatives and confirmation of marketing resources.
In its marketing, the Part D organization must—
(a) Demonstrate to CMS's satisfaction that marketing resources are allocated to marketing to the disabled Medicare population as well as beneficiaries age 65 and over.
(b) Establish and maintain a system for confirming that enrolled beneficiaries have in fact enrolled in the PDP and understand the rules applicable under the plan.
(c) Employ as marketing representatives only individuals who are licensed by the State to conduct direct marketing activities (as defined in the Medicare Marketing Guidelines) in that State, and whom the sponsor has informed that State it has appointed, consistent with the appointment process provided for under State law.
(d) Report to the State in which the MAO appoints an agent or broker, the termination of any such agent or broker, including the reasons for such termination if State law requires that the reasons for the termination be reported.
(e) Establish and implement an oversight plan that monitors agent and broker activities, identifies non-compliance with CMS requirements, and reports non-compliance to CMS.
§ 423.2274   Agent, broker, and other third-party requirements.
If a Part D sponsor uses agents and brokers to sell its Medicare Part D plans, the requirements in paragraphs (a) through (e) of this section are applicable. If a Part D sponsor makes payments to third parties, the requirements in paragraph (f) of this section are applicable.
(a) Definitions. For purposes of this section, the following definitions are applicable:
Compensation. (i) Includes monetary or non-monetary remuneration of any kind relating to the sale, renewal, or services related to a plan or product offered by a Part D sponsor including, but not limited to the following:
(A) Commissions.
(B) Bonuses.
(C) Gifts.
(D) Prizes or Awards.
(E) Beginning with contract year 2025, payment of fees to comply with state appointment laws, training, certification, and testing costs.
(F) Beginning with contract year 2025, reimbursement for mileage to, and from, appointments with beneficiaries.
(G) Beginning with contract year 2025, reimbursement for actual costs associated with beneficiary sales appointments such as venue rent, snacks, and materials.
(H) Beginning with contract year 2025, any other payments made to an agent or broker that are tied to enrollment, related to an enrollment in a Part D plan or product, or for services conducted as a part of the relationship associated with the enrollment into a Part D plan or product.
(ii) Does not include any of the following:
(A) Payment of fees to comply with State appointment laws, training, certification, and testing costs.
(B) Reimbursement for mileage to, and from, appointments with beneficiaries.
(C) Reimbursement for actual costs associated with beneficiary sales appointments such as venue rent, snacks, and materials.
Fair market value (FMV) means, for purposes of evaluating agent or broker compensation under the requirements of this section only, the amount that CMS determines could reasonably be expected to be paid for an enrollment or continued enrollment into a Part D plan. Beginning January 1, 2021, the national FMV is 81. In contract year 2025, there will be a one-time increase of $100 to the FMV to account for administrative payments included under the compensation rate. For subsequent years, FMV is calculated by adding the current year FMV and the produce of the current year FMV and Annual Percentage Increase for Part D, which is published for each year in the rate announcement issued under § 422.312.
Initial enrollment year means the first year that a beneficiary is enrolled in a plan versus subsequent years (c.f., renewal year ) that a beneficiary remains enrolled in a plan.
Like plan type means one of the following:
(i) PDP replaced with another PDP.
(ii) MA or MA-PD replaced with another MA or MA-PD.
(iii) Cost plan replaced with another cost plan.
Plan year and enrollment year mean the year beginning January 1 and ending December 31.
Renewal year means all years following the initial enrollment year in the same plan or in different plan that is a like plan type.
Unlike plan type means one of the following:
(i) An MA or MA-PD plan to a PDP or Section 1876 Cost Plan.
(ii) A PDP to a Section 1876 Cost Plan or an MA or MA-PD plan.
(iii) A Section 1876 Cost Plan to an MA or MA-PD plan or PDP.
(b) Agent/broker requirements. Agents and brokers who represent Part D sponsors must follow the requirements in paragraphs (b)(1) through (3) of this section. Representation includes selling products (including Medicare Advantage plans, Medicare Advantage-Prescription Drug plans, Medicare Prescription Drug plans, and section 1876 Cost plans) as well as outreach to existing or potential beneficiaries and answering or potentially answering questions from existing or potential beneficiaries.
(1) Be licensed and appointed under State law (if required under applicable State law).
(2) Be trained and tested annually as required under paragraph (c)(4) of this section, and achieve an 85 percent or higher on all forms of testing.
(3) Secure and document a Scope of Appointment prior to meeting with potential enrollees.
(c) Part D sponsor oversight. Part D sponsors must oversee first tier, downstream, and related entities that represent Part D sponsor to ensure agents and brokers abide by all applicable State and Federal laws, regulations, and requirements. Part D sponsors must do all of the following:
(1) As required under applicable State law, employ as marketing representatives only individuals who are licensed by the State to conduct marketing (as defined in this subpart) of health insurance in that State, and whom the Part D sponsor has informed that State it has appointed, consistent with the appointment process for agents and brokers provided for under State law.
(2) As required under applicable State law, report the termination of an agent or broker to the State and the reason for termination if required by state law.
(3) Report to CMS all enrollments made by unlicensed agents or brokers and for-cause terminations of agents or brokers.
(4) On an annual basis, provide training and testing to agents and brokers on Medicare rules and regulations, the plan products that agents and brokers will sell including any details specific to each plan product, and relevant State and Federal requirements.
(5) On an annual basis for plan years through 2024, by the last Friday in July, report to CMS whether the MA organization intends to use employed, captive, or independent agents or brokers in the upcoming plan year and the specific rates or range of rates the plan will pay independent agents and brokers. Following the reporting deadline, MA organizations may not change their decisions related to agent or broker type, or their compensation rates and ranges, until the next plan year.
(6) On an annual basis by October 1, have in place full compensation structures for the following plan year. The structure must include details on compensation dissemination, including specifying payment amounts for initial enrollment year and renewal year compensation.
(7) Submit agent or broker marketing materials to CMS through HPMS prior to use, following the requirements for marketing materials in this subpart.
(8) Ensure beneficiaries are not charged marketing consulting fees when considering enrollment in Part D plans.
(9) Establish and maintain a system for confirming that:
(i) Beneficiaries enrolled by agents or brokers understand the product, including the rules applicable under the plan.
(ii) Agents and brokers appropriately complete Scope of Appointment records for all marketing appointments (including telephonic and walk-in).
(10) Demonstrate that marketing resources are allocated to marketing to the disabled Medicare population as well as to Medicare beneficiaries age 65 and over.
(11) Must comply with State requests for information about the performance of a licensed agent or broker as part of a state investigation into the individual's conduct. CMS will establish and maintain a memorandum of understanding (MOU) to share compliance and oversight information with States that agree to the MOU.
(12) Ensure that, prior to an enrollment CMS' required questions and topics regarding beneficiary needs in a health plan choice are fully discussed. Topics include information regarding pharmacies (that is, whether or not the beneficiary's current pharmacy is in the plan's network), prescription drug coverage and costs (including whether or not the beneficiary's current prescriptions are covered), premiums, and other services or incentives.
(13) Beginning with contract year 2025, ensure that no provision of a contract with an agent, broker, or other TPMO has a direct or indirect effect of creating an incentive that would reasonably be expected to inhibit an agent or broker's ability to objectively assess and recommend which plan best fits the health care needs of a beneficiary.
(d) Compensation requirements. Part D sponsors must ensure they meet the requirements in paragraphs (d)(1) through (5) of this section in order to pay compensation. These compensation requirements only apply to independent agents and brokers.
(1) General rules. (i) MA organizations may only pay agents or brokers who meet the requirements in paragraph (b) of this section.
(ii) For contract years through contract year 2024, Part D sponsors may determine, through their contracts, the amount of compensation to be paid, provided it does not exceed limitations outlined in this section. Beginning with contract year 2025, Part D sponsors are limited to the compensation amounts outlined in this section.
(iii) Part D sponsors may determine their payment schedule (for example, monthly or quarterly). Payments (including payments for AEP enrollments) must be made during the year of the beneficiary's enrollment.
(iv) Part D sponsors may only pay compensation for the number of months a member is enrolled.
(2) Initial enrollment year compensation. For each enrollment in an initial enrollment year for contract years through contract year 2024, Part D sponsors may pay compensation at or below FMV.
(i) Part D sponsors may pay either a full or pro-rated initial enrollment year compensation for:
(A) A beneficiary's first year of enrollment in any plan; or
(B) A beneficiary's move from an employer group plan to a non-employer group plan (either within the same parent organization or between parent organizations).
(ii) Part D sponsors must pay pro-rated initial enrollment year compensation for:
(A) A beneficiary's plan change(s) during their initial enrollment year.
(B) A beneficiary's selection of an “unlike plan type” change. In that case, the new plan would only pay the months that the beneficiary is enrolled, and the previous plan would recoup the months that the beneficiary was not in the plan.
(3) Renewal compensation. For each enrollment in a renewal year for contract years through contract year 2024, Part D sponsors may pay compensation at a rate of up to 50 percent of FMV. For contract years beginning with contract year 2025, for each enrollment in a renewal year, MA organizations may pay compensation at 50 percent of FMV.
(i) Part D sponsors may pay compensation for a renewal year:
(A) In any year following the initial enrollment year the beneficiary remains in the same plan; or
(B) When a beneficiary enrolls in a new “like plan type”.
(ii) [Reserved]
(4) Other compensation scenarios. (i) When a beneficiary enrolls in a PDP, the Part D sponsor may pay only the PDP compensation (and not compensation for MA enrollment under § 422.2274 of this chapter).
(ii) When a beneficiary enrolls in both a section 1876 Cost Plan and a stand-alone PDP, the 1876 Cost Plan sponsor may pay compensation for the cost plan enrollment and the Part D sponsor must pay compensation for the Part D enrollment.
(iii) When a beneficiary enrolls in a MA-only plan and a PDP, the MA plan may pay for the MA plan enrollment and the Part D sponsor may pay for the PDP enrollment.
(5) Additional compensation, payment, and compensation recovery requirements (Charge-backs). (i) Part D sponsors must retroactively pay or recoup funds for retroactive beneficiary changes for the current and previous calendar years. Part D sponsors may choose to recoup or pay compensation for years prior to the previous calendar year, but they must do both (recoup amounts owed and pay amounts due) during the same year.
(ii) Compensation recovery is required when:
(A) A beneficiary makes any plan change (regardless of the parent organization) within the first three months of enrollment (known as rapid disenrollment), except as provided in paragraph (d)(5)(iii) of this section.
(B) Any other time period a beneficiary is not enrolled in a plan, but the plan paid compensation based on that time period.
(iii) Rapid disenrollment compensation recovery does not apply when:
(A) A beneficiary enrolls effective October 1, November 1, or December 1 and subsequently uses the Annual Election Period to change plans for an effective date of January 1.
(B) A beneficiary's enrollment change is not in the best interests of the Medicare program, including for the following reasons:
( 1 ) Other creditable coverage ( for example , an employer plan).
( 2 ) Moving into or out of an institution.
( 3 ) Gain or loss of employer/union sponsored coverage.
( 4 ) Plan termination, non-renewal, or CMS imposed sanction.
( 5 ) To coordinate with Part D enrollment periods or the State Pharmaceutical Assistance Program.
( 6 ) Becoming LIS or dually eligible for Medicare and Medicaid.
( 7 ) Qualifying for another plan based on special needs.
( 8 ) Due to an auto, facilitated, or passive enrollment.
( 9 ) Death.
( 10 ) Moving out of the service area.
( 11 ) Non-payment of premium.
( 12 ) Loss of entitlement or retroactive notice of entitlement.
( 13 ) Moving into a 5-star plan.
( 14 ) Moving from an LPI plan into a plan with three or more stars.
(iv)(A) When rapid disenrollment compensation recovery applies, the entire compensation must be recovered.
(B) For other compensation recovery, plans must recover a pro-rated amount of compensation (whether paid for an initial enrollment year or renewal year) from an agent or broker equal to the number of months not enrolled.
( 1 ) If a plan has paid full initial compensation, and the enrollee disenrolls prior to the end of the enrollment year, the total number of months not enrolled (including months prior to the effective date of enrollment) must be recovered from the agent or broker.
( 2 ) Example: A beneficiary enrolls upon turning 65 effective April 1 and disenrolls September 30 of the same year. The plan paid full initial enrollment year compensation. Recovery is equal to 6/12ths of the initial enrollment year compensation (for January through March and October through December).
(e) Payments other than compensation (administrative payments). (1) For contract years through contract year 2024, payments for services other than enrollment of beneficiaries (for example, training, customer service, agent recruitment, operational overhead, or assistance with completion of health risk assessments) must not exceed the value of those services in the marketplace.
(2) Beginning with contract year 2025, administrative payments are included in the calculation of enrollment-based compensation.
(f) Payments for referrals. Payments may be made to individuals for the referral (including a recommendation, provision, or other means of referring beneficiaries), recommendation, provision, or other means of referring beneficiaries to an agent, broker or other entity for potential enrollment into a plan. The payment may not exceed $100 for a referral into an MA or MA-PD plan and $25 for a referral into a PDP plan.
(g) TPMO oversight. In addition to any applicable FDR requirements under § 423.505(i), when doing business with a TPMO, either directly or indirectly through a downstream entity, Part D sponsor must implement the following as a part of their oversight of TPMOs:
(1) When TPMOs is not otherwise an FDR, the Part D sponsor is responsible for ensuring that the TPMO adheres to any requirements that apply to the Part D sponsor.
(2) Contracts, written arrangements, and agreements between the TPMO and a Part D plan, or between a TPMO and a Part D plan's FDR, must ensure the TPMO:
(i) Discloses to the plan any subcontracted relationships used for marketing, lead generation, and enrollment.
(ii) Record all marketing, sales, and enrollment calls, including the audio portion of calls occurring via web-based technology, in their entirety.
(iii) Report to plans monthly any staff disciplinary actions or violations of any requirements that apply to the Part D sponsor associated with beneficiary interaction to the plan.
(iv) Use the TPMO disclaimer as required under § 423.2267(e)(41).
(3) Ensure that the TPMO, when conducting lead generating activities, either directly or indirectly for a Part D sponsor, must, when applicable:
(i) Disclose to the beneficiary that his or her information will be provided to a licensed agent for future contact. This disclosure must be provided:
(A) Verbally when communicating with a beneficiary through telephone;
(B) In writing when communicating with a beneficiary through mail or other paper; and
(C) Electronically when communicating with a beneficiary through email, online chat, or other electronic messaging platform.
(ii) When applicable, disclose to the beneficiary that he or she is being transferred to a licensed agent who can enroll him or her into a new plan.
(4) Beginning October 1, 2024, personal beneficiary data collected by a TPMO for marketing or enrolling them into a Part D plan may only be shared with another TPMO when prior express written consent is given by the beneficiary. Prior express written consent from the beneficiary to share the information and be contacted for marketing or enrollment purposes must be obtained through a clear and conspicuous disclosure that lists each entity receiving the data and allows the beneficiary to consent or reject to the sharing of their data with each individual TPMO.
§ 423.2276   Employer group retiree marketing.
Part D sponsors may develop marketing materials designed for members of an employer group who are eligible for employer-sponsored benefits through the Part D sponsor, and furnish these materials only to the group members. These materials are not subject to CMS prior review and approval.
§ 423.2300   Scope.
This subpart implements provisions included in sections 1860D-14A and 1860D-43 of the Act. This subpart sets forth requirements regarding the following:
(a) Condition for coverage of applicable drugs under Part D.
(b) The Medicare Coverage Gap Discount Program Agreement.
(c) Coverage gap discount payment processes for Part D sponsors.
(d) Provision of applicable discounts on applicable drugs for applicable beneficiaries.
(e) Manufacturer audit and dispute resolution processes.
(f) Resolution of beneficiary disputes involving coverage gap discounts.
(g) Compliance monitoring and civil money penalties.
(h) The termination of the Discount Program Agreement.
§ 423.2305   Definitions.
As used in this subpart, unless otherwise specified—
Applicable discount means 50 percent or, with respect to a plan year after plan year 2018, 70 percent of the portion of the negotiated price (as defined in this section) of the applicable drug of a manufacturer that falls within the coverage gap and that remains after such negotiated price is reduced by any supplemental benefits that are available.
Applicable number of calendar days means, with respect to claims for reimbursement submitted electronically, 14 days, and otherwise, 30 days.
Date of dispensing means the date of service.
Labeler code means the first segment of the Food and Drug Administration national drug code (NDC) that identifies a particular manufacturer.
Manufacturer means any entity which is engaged in the production, preparation, propagation, compounding, conversion or processing of prescription drug products, either directly or indirectly, by extraction from substances of natural origin, or independently by means of chemical synthesis, or by a combination of extraction and chemical synthesis. For purposes of the Discount Program, such term does not include a wholesale distributor of drugs or a retail pharmacy licensed under State law, but includes entities otherwise engaged in repackaging or changing the container, wrapper, or labeling of any applicable drug product in furtherance of the distribution of the applicable drug from the original place of manufacture to the person who makes the final delivery or sale to the ultimate consumer or user.
Medicare Coverage Gap Discount Program (or Discount Program) means the Medicare coverage gap discount program established under section1860D-14A of the Act.
Medicare Coverage Gap Discount Program Agreement (or Discount Program Agreement) means the agreement described in section 1860D-14A(b) of the Act.
Medicare Part D discount information means the information sent from CMS or the TPA to the manufacturer along with each quarterly invoice that is derived from applicable data elements available on prescription drug events as determined by CMS.
National Drug Code (NDC) means the unique identifying prescription drug product number that is listed with the Food and Drug Administration (FDA) identifying the product and package size and type.
Negotiated price for purposes of the Discount Program, means the price for a covered Part D drug that—
(1) The Part D sponsor (or other intermediary contracting organization) and the network dispensing pharmacy or other network dispensing provider have negotiated as the lowest possible reimbursement such network entity will receive, in total, for a particular drug;
(i) Includes all price concessions (as defined in § 423.100) from network pharmacies or other network providers; and
(ii) Excludes additional contingent amounts, such as incentive fees, if these amounts increase prices;
(2) Is reduced by those discounts, direct or indirect subsidies, rebates, non-pharmacy price concessions, and direct or indirect remuneration that the Part D sponsor has elected to pass through to Part D enrollees at the point-of-sale; and
(3) Excludes any dispensing fee or vaccine administration fee for the applicable drug.
(4)In connection with applicable drugs dispensed by an out-of-network provider in accordance with the applicable beneficiary's Part D plan out-of-network policies, the negotiated price means the plan allowance as set forth in § 423.124, less any dispensing fee or vaccine administration fee.
Other health or prescription drug coverage means any coverage or financial assistance under other health benefit plans or programs that provide coverage or financial assistance for the purchase or provision of prescription drug coverage on behalf of applicable beneficiaries, including, in the case of employer group health or waiver plans, other than basic prescription drug coverage as defined in § 423.100.
Third Party Administrator (TPA) means the CMS contractor responsible for administering the requirements established by the CMS to carry out section 1860D-14A of the Act.
§ 423.2310   Condition for coverage of drugs under Part D.
(a) Covered Part D drug coverage requirement. Except as specified in paragraph (b) of this section, in order for coverage to be available under Medicare Part D for applicable drugs of a manufacturer, the manufacturer must do all of the following:
(1) Participate in the Discount Program.
(2) Have entered into and have in effect an agreement described in § 423.2315(b).
(3) Have entered into and have in effect, under terms and conditions specified by CMS, a contract with the TPA.
(b) Exception to covered drug coverage requirement. Paragraph (a) of this section does not apply to an applicable drug if CMS has made a determination that the availability of the applicable drug is essential to the health of beneficiaries enrolled in Medicare Part D.
§ 423.2315   Medicare Coverage Gap Discount Program Agreement.
(a) General rule. The Medicare Coverage Gap Discount Program Agreement (or Discount Program Agreement) between the manufacturer and CMS must contain the provisions specified in paragraph (b) of this section, and may contain such other provisions as are established in a model agreement consistent with section 1860D-14A (a)(1) of the Act.
(b) Agreement requirements. The manufacturer agrees to the following:
(1) All the applicable requirements and conditions set forth in this part and general instructions.
(2) Reimburse all applicable discounts provided by Part D sponsors on behalf of the manufacturer for all applicable drugs having NDCs with the manufacturer's FDA-assigned labeler code(s) invoiced to the manufacturer within a maximum of 3 years of the date of dispensing based upon information reported to CMS by Part D sponsors.
(3) Pay each Part D sponsor in the manner specified by CMS within 38 calendar days of receipt of the invoice and Medicare Part D Discount Information for the applicable discounts included on the invoice, except as specified in § 423.2330(c)(3).
(4) Provide CMS with all labeler codes for all the manufacturer's applicable drugs and to promptly update such list with any additional labeler codes for applicable drugs no later than 3 business days after learning of a new code assigned by the FDA.
(5) Collect, have available, and maintain appropriate data, including data related to manufacturer's labeler codes, FDA drug approvals, FDA NDC Directory listings, NDC last lot expiration dates, utilization and pricing information relied on by the manufacturer to dispute quarterly invoices, and any other data CMS determines are necessary to carry out the Discount Program, for a period of not less than 10 years from the date of payment of the invoice.
(6) Comply with the audit and dispute resolution requirements in § 423.2330.
(7) Electronically list and maintain up-to-date electronic FDA listings of all NDCs of the manufacturer, including providing timely information about discontinued drugs to enable the publication of accurate information regarding what drugs, identified by NDC, are in current distribution.
(8) Maintain up-to-date NDC listings with the electronic database vendors for which the manufacturer provides NDCs for pharmacy claims processing.
(9) Enter into and have in effect, under terms and conditions specified by CMS, an agreement with the TPA that has a contract with CMS under section 1860D-14(A)(d)(3) of the Act.
(10) Pay quarterly invoices directly to accounts established by Part D sponsors via electronic funds transfer, or other manner if specified by CMS, within the time period specified in paragraph (b)(3) of this section and within 5 business days of the transfer to provide the TPA with electronic documentation of such payment in a manner specified by CMS.
(11) Use information disclosed to the manufacturer on the invoice, as part of the Medicare Part D Discount Information, or upon audit or dispute only for purposes of paying the discount under the Discount Program.
(c) Timing and length of agreement. (1) For 2011, a manufacturer must enter into a Discount Program Agreement not later than 30 days after the date of establishment of the model Discount Program Agreement.
(2) For 2012 and subsequent years, for a Discount Program Agreement to be effective for a year, a manufacturer must enter into a Discount Program Agreement not later than January 30th of the preceding year.
(3) Unless terminated in accordance with § 423.2345, the initial period of a Discount Program Agreement is 24 months and the agreement is automatically renewed for a 1-year period on January first each year for a period of 1 year thereafter.
(d) Compliance with requirements for administration of the Program. Each manufacturer with an agreement in effect under this subpart must comply with the requirements imposed by CMS or the third party administrator (as defined in § 423.2305) for purposes of administering the program.
§ 423.2320   Payment processes for Part D sponsors.
(a) Interim payments. CMS provides monthly interim coverage gap discount program payments as necessary for Part D sponsors to advance coverage gap discounts to beneficiaries.
(b) Coverage Gap Discount Reconciliation. CMS reconciles interim payments with invoiced manufacturer discount amounts made available to each Part D plan's enrollee under the Discount Program.
(c) Manufacturer bankruptcy. In the event that a manufacturer declares bankruptcy, as described in Title 11 of the United States Code, and as a result of the bankruptcy, does not pay the quarterly invoices described in § 423.2315(b)(10) used for a particular contract year's Coverage Gap Discount Reconciliation described in paragraph (b) of this section, CMS adjusts the Coverage Gap Discount Reconciliation amount of each of the affected Part D sponsors to account for the total unpaid quarterly invoiced amount owed to each of the Part D sponsors for that particular contract year being reconciled.
§ 423.2325   Provision of applicable discounts.
(a) General rule. On behalf of the manufacturers, Part D sponsors must provide applicable beneficiaries with applicable discounts on applicable drugs at the point-of-sale.
(b) Discount determination. (1) Part D sponsors must determine the following:
(i) Whether an enrollee is an applicable beneficiary (as defined in § 423.100).
(ii) Whether a Part D drug is an applicable drug (as defined in § 423.100).
(iii) The amount of the applicable discount (as defined in § 423.2305) to be provided at the point-of-sale.
(2) Part D sponsors must make retroactive adjustments to the applicable discount as necessary to reflect changes to the claim or beneficiary eligibility determined after the date of dispensing.
(3) Part D sponsors must determine whether any affected beneficiaries need to be notified by the Part D sponsor that an applicable drug is eligible for Part D coverage whenever CMS specifies a retroactive effective date for a labeler code and notify such beneficiaries.
(c) Exception to point-of-sale requirement. Part D sponsors must provide an applicable discount for applicable drugs submitted by applicable beneficiaries via paper claims, including out-of-network and in-network paper claims, if such claims are payable under the Part D plan.
(d) Collection of data. Part D sponsors must provide CMS with appropriate data on the applicable discounts provided by the Part D sponsors in a manner specified by CMS.
(e) Supplemental benefits. (1) An applicable discount must be applied to beneficiary cost-sharing after supplemental benefits (as defined in § 423.100) have been applied to the claim for an applicable drug.
(2) No applicable discount is available if supplemental benefits (as defined in § 423.100) eliminate the coverage gap so that a beneficiary has zero cost-sharing.
(f) Other health or prescription drug coverage. An applicable discount must be applied to beneficiary cost-sharing when Part D is the primary payer before any other health or prescription drug coverage is applied.
(g) Pharmacy prompt payment. Part D sponsors must reimburse a network pharmacy (as defined in § 423.100) the amount of the applicable discount no later than the applicable number of calendar days after the date of dispensing of an applicable drug. For long-term care and home infusion pharmacies, the date of dispensing can be interpreted as the date the pharmacy submits the discounted claim for reimbursement.
(h) Treatment of employer group waiver plans. As of 2014, Part D sponsors offering employer group waiver plans must provide applicable discounts to applicable beneficiaries who are employer group waiver plan enrollees as determined consistent with the defined standard benefit.
§ 423.2330   Manufacturer discount payment audit and dispute resolution.
(a) Third-party Administration (TPA) audits. (1) Manufacturers participating in the Discount Program may conduct periodic audits, no more often than annually, directly or through third parties as specified in this section.
(2) The manufacturer must provide the TPA with 60 days notice of the reasonable basis for the audit and a description of the information required for the audit.
(3) The manufacturer must have the right to audit a statistically significant sample of data and information held by the TPA that were used to determine applicable discounts for applicable drugs having NDCs with the manufacturer's FDA-assigned labeler code(s). Such data and information will be made available on-site, and with the exception of work papers, such information cannot be removed from the audit site.
(4) The auditor for the manufacturer may release only an opinion of the audit results and is prohibited from releasing other information obtained from the audit, including work papers, to its client, employer, or any other party.
(b) Manufacturer audits. (1) A manufacturer is subject to periodic audit by CMS no more often than annually, directly or through third parties, as specified in this section.
(2) CMS provides the manufacturer with 60 days notice of the audit and a description of the information required for the audit.
(3) CMS has the right to audit appropriate data, including data related to a manufacturer's FDA-assigned labeler codes, NDC last lot expiration dates, utilization, and pricing information relied on by the manufacturer to dispute quarterly invoices, and any other data CMS determines are necessary to carry out the Discount Program.
(c) Dispute resolution. (1) Manufacturers may dispute applicable discounts invoiced to the manufacturer on quarterly invoices by providing notice of the dispute to the TPA in a manner specified by CMS within 60 days of receipt of the information that is the subject of the dispute.
(2) Such notice must be accompanied by supporting evidence that is material, specific, and related to the dispute in a manner specified by CMS.
(3) The manufacturer must not withhold any invoiced discount payments pending dispute resolution with the sole exception of invoiced amounts for applicable drugs that do not have labeler codes provided by the manufacturer to CMS in accordance with § 423.2315(b)(4). If payment is withheld in accordance with this paragraph, the manufacturer must notify the TPA and applicable Part D sponsors within 38 days of receipt of the applicable invoice that payment is being withheld for this reason.
(4) If the manufacturer receives an unfavorable determination from the TPA, or the dispute is not resolved within 60 calendar days of the TPA's receipt of the notice of dispute, the manufacturer may request review by the independent review entity contracted by CMS within—
(i) Thirty calendar days of the unfavorable determination; or
(ii) Ninety calendar days after the TPA's receipt of the notice of dispute if dispute is not resolved within 60 days, whichever is earlier.
(5) The independent review entity must make a determination within 90 calendar days of receipt of the manufacturer's request for review.
(6)(i) CMS or a manufacturer that receives an unfavorable determination from the independent review entity may request review by the CMS Administrator within 30 calendar days of receipt of the notification of such determination.
(ii) The decision of the CMS Administrator is final and binding.
(7) CMS adjusts future invoices (or implements an alternative reimbursement process if determined necessary by CMS) if the dispute is resolved in favor of the manufacturer.
§ 423.2335   Beneficiary dispute resolution.
The Part D coverage determination and appeals process as described in §§ 423.558 through 423.638 applies to beneficiary disputes involving the availability and amount of applicable discounts under the Discount Program.
§ 423.2340   Compliance monitoring and civil money penalties.
(a) General rule. CMS monitors compliance by a manufacturer with the terms of the Discount Program Agreement.
(b) Basis for imposing civil money penalties. CMS imposes a civil money penalty (CMP) on a manufacturer that fails to provide applicable beneficiaries applicable discounts for applicable drugs of the manufacturer in accordance with the Discount Program Agreement.
(c) Determination of the civil money penalty amounts. CMS imposes a CMP for each failure by a manufacturer to provide an applicable discount in accordance with the Discount Program Agreement equal to the sum of the following:
(1) The amount of applicable discount the manufacturer would have paid under the Discount Program Agreement, which will then be used to pay the applicable discount that the manufacturer had failed to provide.
(2) Twenty-five percent of such amount.
(d) Procedures for imposing civil money penalties. If CMS makes a determination to impose a CMP described in paragraph (c) of this section, CMS sends a written notice of its decision to impose a CMP to include the following:
(1) A description of the basis for the determination.
(2) The basis for the penalty.
(3) The amount of the penalty.
(4) The date the penalty is due.
(5) The manufacturer's right to a hearing (as specified in § 423.1006).
(6) Information about where to file the request for hearing.
(e) Collection of civil money penalties imposed by CMS. (1) When a manufacturer does not request a hearing, CMS initiates the collection of the CMP following the expiration of the timeframe for requesting an ALJ hearing as specified in § 423.1020.
(2) If a manufacturer requests a hearing and the Administrator upholds CMS' decision to impose a CMP, CMS may initiate collection of the CMP once the Administrator's decision is final.
(f) Other applicable provisions. The provisions of section 1128A of the Act (except subsections (a) and (b) of section of 1128A of the Act) apply to CMPs under this section to the same extent that they apply to a CMP or procedure under section 1128A(a) of the Act.
§ 423.2345   Termination of Discount Program Agreement.
(a)(1) CMS may terminate the Discount Program Agreement for a knowing and willful violation of the requirements of the agreement or other good cause shown in relation to the manufacturer's participation in the Discount Program.
(2) The termination must not be effective earlier than 30 days after the date of notice to the manufacturer of such termination and must not be effective prior to resolution of timely appeal requests received in accordance with paragraphs (a)(4) and (5) of this section.
(3)(i) CMS provides the manufacturer with an opportunity to cure any ground for termination for cause or to show the manufacturer is in compliance with the Discount Program Agreement within 30 calendar days of receipt of the written termination notice.
(ii) If the manufacturer cures the violation, or establishes that it was in compliance within the cure period, CMS repeals the termination notice by written notice.
(4) CMS provides upon request a manufacturer with a hearing with the hearing officer concerning such termination if requested in writing within 15 calendar days of receiving notice of the termination. The hearing takes place prior to the effective date of the termination with sufficient time for such effective date to be repealed if CMS determines appropriate.
(5)(i) CMS or a manufacturer that has received an unfavorable determination from the hearing officer may request review by the CMS Administrator within 30 calendar days of receipt of the notification of such determination.
(ii) The decision of the CMS Administrator is final and binding.
(b)(1) The manufacturer may terminate the Discount Program Agreement for any reason.
(2) Such termination is effective as of the day after the end of the calendar year if the termination occurs before January 30 of a calendar year, or as of the day after the end of the succeeding calendar year if the termination occurs on or after January 30 of a calendar year.
(c) Any termination does not affect the manufacturer's responsibility to reimburse Part D sponsors for applicable discounts incurred before the effective date of the termination.
(d) Upon the effective date of termination of the Discount Program Agreement, CMS ceases releasing data to the manufacturer except as necessary to ensure that the manufacturer reimburses applicable discounts for previous time periods in which the Discount Program Agreement was in effect, and notifies the manufacturer to destroy data files provided by CMS under the Discount Program Agreement.
(e) Manufacturer reinstatement is available only upon payment of any and all outstanding applicable discounts incurred during any previous period under the Discount Program Agreement. The timing of any such reinstatement is consistent with the requirements for entering into a Discount Program Agreement under § 423.2315(c) of this subpart.
§ 423.2400   Basis and scope.
This subpart is based on sections 1857(e)(4), 1860D-12(b)(3)(D), and 1106 of the Act, and sets forth medical loss ratio requirements for Part D sponsors, financial penalties and sanctions against Part D sponsors when minimum medical loss ratios are not achieved by Part D sponsors and release of medical loss ratio data to entities outside of CMS.
§ 423.2401   Definitions.
Non-claims costs means those expenses for administrative services that are not—
(1) Incurred claims (as provided in § 423.2420(b)(2) through (b)(4));
(2) Expenditures on quality improving activities (as provided in § 423.2430);
(3) Licensing and regulatory fees (as provided in § 423.2420(c)(2)(i)); or
(4) State and Federal taxes and assessments (as provided in § 423.2420(c)(2)(ii) and (iii)).
§ 423.2410   General requirements.
(a) For contracts beginning in 2014 or subsequent contract years, a Part D sponsor (defined at § 423.4) is required to report the information required under § 423.2460 for each contract under this part for each contract year.
(b) If CMS determines for a contract year that a Part D sponsor has an MLR for a contract that is less than 0.85, the Part D sponsor must remit to CMS an amount equal to the product of the following:
(1) The total revenue of the prescription drug plan for the contract year.
(2) The difference between 0.85 and the MLR for the contract year.
(c) If CMS determines that a Part D sponsor has an MLR for a contract that is less than 0.85 for 3 or more consecutive contract years, CMS does not permit the enrollment of new enrollees under the contract for coverage during the second succeeding contract year.
(d) If CMS determines that a Part D sponsor has an MLR for a contract that is less than 0.85 for 5 consecutive contract years, CMS terminates the contract under the authority at 423.509(b)(1) and (d) effective as of the second succeeding contract year.
§ 423.2420   Calculation of medical loss ratio.
(a) Determination of the MLR. (1) The MLR for each contract under this part is the ratio of the numerator (as defined in paragraph (b) of this section) to the denominator (as defined in paragraph (c) of this section). An MLR may be increased by a credibility adjustment according to the rules at § 423.2440, or subject to an adjustment determined by CMS to be warranted based on exceptional circumstances for areas outside the 50 states and the District of Columbia.
(2) The MLR must reflect costs and revenues for benefits described at § 423.104(d) through (f). The MLR for MA-PD plans (defined at § 422.2 of this chapter) must also reflect costs and revenues for benefits described at § 422.100(c) of this chapter.
(b) Determining the MLR numerator. (1) For a contract year, the numerator of the MLR for a Part D prescription drug contract must equal the sum of paragraphs (b)(1)(i) through (iii) of this section and must be in accordance with paragraphs (b)(5) and (b)(6) of this section.
(i) Incurred claims for all enrollees, as defined in paragraphs (b)(2) through (4) of this section.
(ii) The expenditures under the contract for activities that improve health care quality, as defined in § 423.2430;
(2) Incurred claims for prescription drug costs. Incurred claims must include the following:
(i) Direct drug costs that are actually paid (as defined in § 423.308, which are net of prescription drug rebates and other direct or indirect remuneration as defined herein) by the Part D sponsor.
(ii) Unpaid claims reserves for the current contract year, including claims reported in the process of adjustment.
(iii) Percentage withholds from payments made to contracted providers.
(iv) Claims incurred but not reported based on past experience, and modified to reflect current conditions such as changes in exposure, claim frequency or severity.
(v) Changes in other claims-related reserves.
(vi) Claims that are recoverable for anticipated coordination of benefits.
(vii) Claims payments recoveries received as a result of subrogation.
(viii) [Reserved]
(ix) Reserves for contingent benefits and the Part D claim portion of lawsuits.
(3) Adjustments that must be deducted from incurred claims include the following:
(i) Overpayment recoveries received from providers.
(4) Exclusions from incurred claims. The following amounts must not be included in incurred claims:
(i) Non-claims costs, as defined in § 423.2401, which include the following:
(A) Amounts paid to third party vendors for secondary network savings.
(B) Amounts paid to third party vendors for any of the following:
( 1 ) Network development.
( 2 ) Administrative fees.
( 3 ) Claims processing.
( 4 ) Utilization management.
(C) Amounts paid, including amounts paid to a pharmacy, for professional or administrative services that do not represent compensation or reimbursement for covered services provided to an enrollee, such as the following:
( 1 ) Medical record copying costs.
( 2 ) Attorneys' fees.
( 3 ) Subrogation vendor fees.
( 4 ) Bona fide service fees.
( 5 ) Compensation to any of the following:
( i ) Paraprofessionals.
( ii ) Janitors.
( iii ) Quality assurance analysts.
( iv ) Administrative supervisors.
( v ) Secretaries to medical personnel.
( vi ) Medical record clerks.
(D) Unsettled balances from the Medicare Prescription Payment Plan.
(ii) Amounts paid to CMS as a remittance under § 423.2410(b).
(5) Incurred claims under this part for policies issued by one Part D sponsor and later assumed by another entity must be reported by the assuming organization for the entire MLR reporting year during which the policies were assumed and no incurred claims under this part for that contract year must be reported by the ceding Part D sponsor.
(6) Reinsured incurred claims for a block of business that was subject to indemnity reinsurance and administrative agreements effective before March 23, 2010, for which the assuming entity is responsible for 100 percent of the ceding entity's financial risk and takes on all of the administration of the block, must be reported by the assuming issuer and must not be reported by the ceding issuer.
(c) Determining the MLR denominator. For a contract year, the denominator of the MLR for a Part D prescription drug contract must equal the total revenue under the contract. Total revenue under the contract is as described in paragraph (c)(1) of this section, net of deductions described in paragraph (c)(2) of this section, taking into account the exclusions described in and paragraph (c)(3) of this section, and be in accordance with paragraphs (c)(4) and (5) of this section.
(1) CMS' payments to the Part D sponsor for all enrollees under a contract, reported on a direct basis, including the following:
(i) Payments under § 423.329(a)(1) and (2).
(ii) Payment adjustments resulting from reconciliation per § 423.329(c)(2)(ii).
(iii) All premiums paid by or on behalf of enrollees to the Part D sponsor as a condition of receiving coverage under a Part D plan, including CMS' payments for low income premium subsidies under § 422.304(b)(2) of this chapter.
(iv) All unpaid premium amounts that a Part D sponsor could have collected from enrollees in the Part D plan(s) under the contract.
(v) All changes in unearned premium reserves.
(vi) Payments under § 423.315(e).
(2) The following amounts must be deducted from total revenue in calculating the MLR:
(i) Licensing and regulatory fees. Statutory assessments to defray operating expenses of any State or Federal department, such as the “user fee” described in section 1857(e)(2) of the Act, and examination fees in lieu of premium taxes as specified by State law.
(ii) Federal taxes and assessments. All Federal taxes and assessments allocated to health insurance coverage.
(iii) State taxes and assessments. State taxes and assessments, such as the following:
(A) Any industry-wide (or subset) assessments (other than surcharges on specific claims) paid to the State directly.
(B) Guaranty fund assessments.
(C) Assessments of State industrial boards or other boards for operating expenses or for benefits to sick employed persons in connection with disability benefit laws or similar taxes levied by States.
(D) State income, excise, and business taxes other than premium taxes.
(iv) Community benefit expenditures. Community benefit expenditures are payments made by a Federal income tax-exempt Part D sponsor for community benefit expenditures as defined in paragraph (c)(2)(iii)(A) of this section, limited to the amount defined in paragraph (c)(2)(iii)(B) of this section, and allocated to a contract as required under paragraph (d)(1) of this section.
(A) Community benefit expenditures means expenditures for activities or programs that seek to achieve the objectives of improving access to health services, enhancing public health and relief of government burden.
(B) Such payment may be deducted up to the limit of either 3 percent of total revenue under this part or the highest premium tax rate in the State for which the Part D sponsor is licensed, multiplied by the Part D sponsor's earned premium for the contract.
(3) The following amounts must not be included in total revenue:
(i) The amount of unpaid premiums for which the Part D sponsor can demonstrate to CMS that it made a reasonable effort to collect.
(ii) Coverage Gap Discount Program payments under § 423.2320.
(4) Total revenue (as defined at § 423.2420(c)) of this chapter) for policies issued by one Part D sponsor and later assumed by another entity must be reported by the assuming entity for the entire MLR reporting year during which the policies were assumed and no revenue under this part for that contract year must be reported by the ceding Part D sponsor.
(5) Total revenue (as defined at § 423.2420(c) of this chapter) that is reinsured for a block of business that was subject to indemnity reinsurance and administrative agreements effective before March 23, 2010, for which the assuming entity is responsible for 100 percent of the ceding entity's financial risk and takes on all of the administration of the block, must be reported by the assuming issuer and must not be reported by the ceding issuer.
(d) Allocation of expenses —(1) General requirements. (i) Each expense must be included under only one type of expense, unless a portion of the expense fits under the definition of or criteria for one type of expense and the remainder fits into a different type of expense, in which case the expense must be pro-rated between types of expenses.
(ii) Expenditures that benefit multiple contracts, or contracts other than those being reported, including but not limited to those that are for or benefit self-funded plans, must be reported on a pro rata share.
(2) Description of the methods used to allocate expenses. (i) Allocation to each category must be based on a generally accepted accounting method that is expected to yield the most accurate results. Specific identification of an expense with an activity that is represented by one of the categories in paragraph (b) or (c) of this section will generally be the most accurate method.
(ii) Shared expenses, including expenses under the terms of a management contract, must be apportioned pro rata to the entities incurring the expense.
(iii)(A) Any basis adopted to apportion expenses must be that which is expected to yield the most accurate results and may result from special studies of employee activities, salary ratios, premium ratios or similar analyses.
(B) Expenses that relate solely to the operations of a reporting entity, such as personnel costs associated with the adjusting and paying of claims, must be borne solely by the reporting entity and are not to be apportioned to other entities within a group.
§ 423.2430   Activities that improve health care quality.
(a) Activity requirements. (1) Activities conducted by a Part D sponsor to improve quality must either—
(i) Fall into one of the categories in paragraph (a)(2) of this section and meet all of the requirements in paragraph (a)(3) of this section; or
(ii) Be listed in paragraph (a)(4) of this section.
(2) Categories of quality improving activities. The activity must be designed to achieve one or more of the following:
(i) To improve health outcomes through the implementation of activities such as quality reporting, effective case management, care coordination, chronic disease management, and medication and care compliance initiatives, including through the use of the medical homes model as defined for purposes of section 3602 of the Patient Protection and Affordable Care Act, for treatment or services under the plan or coverage.
(ii) To prevent hospital readmissions through a comprehensive program for hospital discharge that includes patient-centered education and counseling, comprehensive discharge planning, and post-discharge reinforcement by an appropriate health care professional.
(iii) To improve patient safety and reduce medical errors through the appropriate use of best clinical practices, evidence-based medicine, and health information technology under the plan or coverage.
(iv) To promote health and wellness.
(v) To enhance the use of health care data to improve quality, transparency, and outcomes and support meaningful use of health information technology. Activities, such as Health Information Technology (HIT) expenses, are required to accomplish the activities that improve health care quality and that are designed for use by health plans, health care providers, or enrollees for the electronic creation, maintenance, access, or exchange of health information, and are consistent with meaningful use requirements, and which may in whole or in part improve quality of care, or provide the technological infrastructure to enhance current quality improving activities or make new quality improvement initiatives possible.
(3) The activity must be designed for all of the following:
(i) To improve health quality.
(ii) To increase the likelihood of desired health outcomes in ways that are capable of being objectively measured and of producing verifiable results and achievements.
(iii) To be directed toward individual enrollees or incurred for the benefit of specified segments of enrollees or provide health improvements to the population beyond those enrolled in coverage as long as no additional costs are incurred due to the non-enrollees.
(iv) To be grounded in evidence-based medicine, widely accepted best clinical practice, or criteria issued by recognized professional medical associations, accreditation bodies, government agencies or other nationally recognized health care quality organizations.
(4)(i) Medication Therapy Management Programs meeting the requirements of § 423.153(d).
(ii) Fraud reduction activities, including fraud prevention, fraud detection, and fraud recovery.
(b) Exclusions. Expenditures and activities that must not be included in quality improving activities include, but are not limited to, the following:
(1) Those that are designed primarily to control or contain costs other than those that are related to fraud reduction.
(2) The pro rata share of expenses that are for lines of business or products other than those being reported, including but not limited to, those that are for or benefit self-funded plans.
(3) Those which otherwise meet the definitions for quality improving activities but which were paid for with grant money or other funding separate from premium revenue.
(4) Those activities that can be billed or allocated by a pharmacy for care delivery and that are reimbursed as clinical services.
(5) Establishing or maintaining a claims adjudication system, including costs directly related to upgrades in health information technology that are designed primarily or solely to improve claims payment capabilities (and that are not related to fraud reduction activities under paragraph (a)(4)(ii) of this section) or to meet regulatory requirements for processing claims, including ICD-10 implementation costs in excess of 0.3 percent of total revenue under this part, and maintenance of ICD-10 code sets adopted in accordance with the Health Insurance Portability and Accountability Act (HIPAA), 42 U.S.C. 1320d-2, as amended.
(6) That portion of the activities of health care professional hotlines that does not meet the definition of activities that improve health quality.
(7) All retrospective and concurrent utilization review.
(8) [Reserved]
(9) The cost of developing and executing pharmacy contracts and fees associated with establishing or managing a pharmacy network, including fees paid to a vendor for the same reason.
(10) Pharmacy network credentialing.
(11) Marketing expenses.
(12) Costs associated with calculating and administering individual enrollee or employee incentives.
(13) That portion of prospective utilization review that does not meet the definition of activities that improve health quality.
(14) Any function or activity not expressly permitted by CMS under this part.
§ 423.2440   Credibility adjustment.
(a) A Part D sponsor may add the credibility adjustment specified under paragraph (e) of this section to a contract's MLR if the contract's experience is partially credible, as defined in paragraph (d)(1) of this section.
(b) A Part D sponsor may not add a credibility adjustment to a contract's MLR if the contract's experience is fully credible, as defined in paragraph (d)(2) of this section.
(c) For those contract years for which a contract has non-credible experience, as defined in paragraph (d)(3) of this section, sanctions under § 423.2410(b) through (d) will not apply.
(d)(1) A contract's experience is partially credible if it is based on the experience of at least 4,800 member months and fewer than or equal to 360,000 member months.
(2) A contract's experience is fully credible if it is based on the experience of more than 360,000 member months.
(3) A contract's experience is non-credible if it is based on the experience of fewer than 4,800 member months.
(e) The credibility adjustment for partially credible experience is determined based on the number of member months for all enrollees under the contract and the factors shown in Table 1 of this section. When the number of member months used to determine credibility exactly matches a member month category listed in Table 1 of this section, the value associated with that number of member months is the credibility adjustment. The credibility adjustment for a number of member months between the values shown in Table 1 of this section is determined by linear interpolation.
Table 1 to § 423.2440—Credibility Adjustments for Part D Contracts
§ 423.2450   [Reserved]
§ 423.2460   Reporting requirements.
(a) Except as provided in paragraph (b) of this section, for each contract year, each Part D sponsor must submit to CMS, in a timeframe and manner specified by CMS, a report that includes the data needed by the Part D sponsor to calculate and verify the medical loss ratio (MLR) and remittance amount, if any, for each contract under this part, including the amount of incurred claims for prescription drugs, supplemental benefits, total revenue, expenditures on quality improving activities, non-claims costs, taxes, licensing and regulatory fees, and any remittance owed to CMS under § 423.2410.
(b) For contract years 2018 through 2022, each Part D sponsor must submit to CMS, in a timeframe and manner specified by CMS, the following information:
(1) Fully credible and partially credible contracts. For each contract under this part that has fully credible or partially credible experience, as determined in accordance with § 423.2440(d), the Part D sponsor must report to CMS the MLR for the contract and the amount of any remittance owed to CMS under § 423.2410.
(2) Non-credible contracts. For each contract under this part that has non-credible experience, as determined in accordance with § 423.2440(d), the Part D sponsor must report to CMS that the contract is non-credible.
(c) Total revenue included as part of the MLR calculation must be net of all projected reconciliations.
(d) Subject to paragraph (e) of this section, the MLR is reported once, and is not reopened as a result of any payment reconciliation processes.
(e) With respect to a Part D sponsor that has already submitted to CMS the MLR report or MLR data required under paragraph (a) or (b) of this section, respectively, for a contract for a contract year, paragraph (d) of this section does not prohibit resubmission of the MLR report or MLR data for the purpose of correcting the prior MLR report or data submission. Such resubmission must be authorized or directed by CMS, and upon receipt and acceptance by CMS, is regarded as the contract's MLR report or data submission for the contract year for purposes of this subpart.
§ 423.2470   Remittance to CMS if the applicable MLR requirement is not met.
(a) General requirement. For each contract year, a Part D sponsor must provide a remittance to CMS if the contract's MLR does not meet the minimum percentage required by § 423.2410(b).
(b) Amount of remittance. For each contract that does not meet MLR requirement for a contract year, the Part D sponsor must remit to CMS the amount by which the MLR requirement exceeds the contract's actual MLR multiplied by the total revenue of the contract, as provided in § 423.2420(c), for the contract year.
(c) Timing of remittance. CMS will deduct the remittance from plan payments in a timely manner after the MLR is reported, on a schedule determined by CMS.
(d) Treatment of remittance. Payment to CMS must not be included in the numerator or denominator of any year's MLR.
§ 423.2480   MLR review and non-compliance.
To ensure the accuracy of MLR reporting, CMS conducts selected review of data submitted under § 423.2460 to determine that the MLRs and remittance amounts under § 423.2410(b) and sanctions under § 423.2410(c) and (d), were accurately calculated, reported, and applied.
(a) The reviews will include a validation of amounts included in both the numerator and denominator of the MLR calculation reported to CMS.
(b) Part D sponsors are required to maintain evidence of the amounts reported to CMS and to validate all data necessary to calculate MLRs.
(c)(1) Documents and records must be maintained for 10 years from the date such calculations were reported to CMS with respect to a given contract year.
(2) Part D sponsors must require any third party vendor supplying drug cost contracting and claim adjudication services to the Part D sponsors to provide all underlying data associated with MLR reporting to that Part D sponsor in a timely manner, when requested by the Part D sponsor, regardless of current contractual limitations, in order to validate the accuracy of MLR reporting.
(d) Data submitted under § 423.2460, calculations, or any other MLR submission required by this subpart found to be materially incorrect or fraudulent—
(1) Are noted by CMS;
(2) Appropriate remittance amounts are recouped by CMS; and
(3) Sanctions may be imposed by CMS as provided in § 423.752.
§ 423.2490   Release of Part D MLR data.
(a) Terminology. Subject to the exclusions in paragraph (b) of this section, Part D MLR data consists of the information submitted under § 423.2460.
(b) Exclusions from Part D MLR data. For the purpose of this section, the following items are excluded from Part D MLR data:
(1) Narrative descriptions that Part D sponsors submit to support the information reported to CMS pursuant to the reporting requirements at § 423.2460, such as descriptions of expense allocation methods.
(2) Information that is reported at the plan level, such as the number of member months associated with each plan under a contract, including information submitted for a contract consisting of only one plan.
(3) Any information that could be used to identify Medicare beneficiaries or other individuals.
(4) MLR review correspondence.
(5) Any information for a contract for those contract years for which the contract is determined to be non-credible, as defined in accordance with § 423.2440(d).
(c) Data release. CMS releases to the public Part D MLR data, for each contract for each contract year, no earlier than 18 months after the end of the applicable contract year
§ 423.2500   Basis and scope.
(a) Basis. This subpart is based on section 1860D-14 of the Social Security Act.
(b) Scope. This subpart sets forth the requirements for the Limited Income Newly Eligible Transition (LI NET) program that begins no later than January 1, 2024. Under this program, eligible individuals are provided transitional coverage for Part D drugs.
§ 423.2504   LI NET eligibility and enrollment.
(a) Eligibility. An individual is eligible for LI NET coverage if they satisfy the criteria at paragraph (a)(1) or (2) of this section.
(1) LIS-eligible. The individual is a low-income subsidy eligible individual as defined at § 423.773 and—
(i) Has not yet enrolled in a prescription drug plan or an MA-PD plan; or
(ii) Has enrolled in a prescription drug plan or MA-PD plan but their coverage has not yet taken effect.
(2) Immediate need individuals. An individual who states their eligibility for LIS and immediate need for their prescription, but whose eligibility as defined at § 423.773 cannot be confirmed at the point-of-sale, will be granted immediate need LI NET coverage.
(3) Documentation of LIS eligibility. Individuals may provide documentation to the LI NET sponsor to demonstrate LIS eligibility. Documentation may include, but is not limited to:
(i) A copy of the beneficiary's Medicaid card that includes their name and the eligibility date;
(ii) A copy of a letter from the State or SSA showing LIS or “Extra Help” status;
(iii) The date that a verification call was made to the State Medicaid Agency, the name and telephone number of the State staff person who verified the Medicaid period, and the Medicaid eligibility dates confirmed on the call;
(iv) A copy of a State document that confirms active Medicaid status;
(v) A screen-print from the State's Medicaid systems showing Medicaid status; or
(vi) Evidence at point-of-sale of recent Medicaid billing and payment in the pharmacy's patient profile.
(4) Confirmation of LIS eligibility. CMS uses documentation submitted under paragraph (a)(3) of this section to confirm LIS eligibility.
(5) Inability to confirmation of eligibility. If CMS cannot confirm an immediate need individual's eligibility during the period of LI NET coverage, the individual will not be auto-enrolled into a standalone Part D plan in accordance with § 423.34(d) following their LI NET coverage.
(b) Enrollment. Individuals who are eligible for LI NET as defined in § 423.2504 are enrolled into the LI NET program as follows:
(1) Automatic enrollment. Beneficiaries who are LIS-eligible and whose auto-enrollment into a Part D plan (as outlined in § 423.34(d)(1)) has not taken effect will be automatically enrolled by CMS into the LI NET program unless the beneficiary has affirmatively declined enrollment in Part D per § 423.34(e);
(2) Point-of-sale enrollment. An individual who is not automatically enrolled in accordance with paragraph (b)(1) of this section and whose claim is submitted at the point-of-sale and accepted by the LI NET sponsor will be enrolled into the LI NET program by the LI NET sponsor; or
(3) Direct reimbursement request. An individual described in paragraph (a)(1) of this section who is not automatically enrolled in accordance with paragraph (b)(1) or at the point-of-sale as provided in paragraph (b)(2) of this section and who submits a direct reimbursement request form, receipts for reimbursement for eligible claims paid out of pocket (with and optional documentation of LIS eligibility listed in paragraph (a)(3) of this section), will be retroactively enrolled into the LI NET program by the LI NET sponsor. The LI NET sponsor has 14 calendar days to reply with a coverage decision; or
(4) LI NET application form. An individual who is not enrolled through one of the methods in paragraphs (b)(1) though (3) of this section may submit an LI NET application form to the LI NET sponsor (with optional documentation of LIS eligibility listed in paragraph (a)(3) of this section). If no documentation is submitted and accepted, the LI NET sponsor will periodically check for eligibility and enroll applicants once LIS eligibility is confirmed.
(c) Duration of LI NET enrollment. (1) Enrollment begins on the first day of the month an individual is identified as eligible under this section and ends after 2 months, with a longer LI NET enrollment for those with retroactive coverage per paragraph (c)(2) of this section.
(2) Retroactive LI NET coverage begins on the date an individual is identified as eligible for a low-income subsidy as a full-benefit dual eligible or an SSI benefit recipient, or 36 months prior to the date such individual enrolls in (or opts out of) Part D coverage, whichever is later. LI NET coverage ends with enrollment into a Part D plan or opting out of Part D coverage.
(d) Ending LI NET enrollment. An individual's enrollment in the LI NET program ends when:
(1) The individual is auto-enrolled into a standalone Part D plan in accordance with the guidelines at § 423.34(d) and that coverage has taken effect.
(2) The individual elects another Part D plan and that coverage has taken effect.
(3) The individual voluntarily disenrolls from the LI NET program.
(4) The individual is involuntarily disenrolled under § 423.44(b).
(5) LIS eligibility for an individual in LI NET due to an immediate need cannot be confirmed within the period of LI NET coverage.
§ 423.2508   LI NET benefits and beneficiary protections.
(a) Formulary. The LI NET program provides access to all Part D drugs under an open formulary.
(b) Network. The LI NET sponsor must allow its network and out-of-network pharmacies that are in good standing to process claims under the program. Licensed pharmacies are considered to be in good standing for the LI NET program so long as they: are not revoked from Medicare under § 424.535; do not appear on the Office of Inspector General's list of entities excluded from Federally funded health care programs pursuant to section 1128 of the Act or from Medicare and State health care programs under section 1156 of the Act (unless waived by the OIG); do not appear on the preclusion list as defined at § 423.100; and do not have a determination by the LI NET sponsor of a credible allegation of fraud as defined at § 423.4.
(c) Safety. The following provisions necessary to improve patient safety and ensure appropriate dispensing of medication apply to the LI NET program and LI NET sponsor, as applicable:
(1) Sections 423.153(b) and (c) for dispensing and point-of-sale safety edits;
(2) Section 423.154 for appropriate dispensing of prescription drugs in long-term care facilities;
(3) Sections 423.159 and 423.160 for electronic prescribing, excepting the requirements pertaining to formulary standards in § 423.160(b)(5);
(4) Section 423.162 for QIO activities; and
(5) Section 423.165 for compliance deemed on the basis of accreditation.
(d) Cost sharing. (1) LI NET beneficiaries under § 423.2504(a)(1) will pay the applicable cost sharing for their low-income category as established for each year in the Rate Announcement publication specified in § 422.312 of this chapter.
(2) LI NET beneficiaries under § 423.2504(a)(2) will pay the cost sharing associated with the category of non-institutionalized full-benefit dual eligible individuals with incomes above 100% of the Federal poverty level and full-subsidy-non-FBDE individuals. If the beneficiary is later confirmed to belong to a different LIS category, the LI NET sponsor must reimburse the beneficiary for the difference between the cost sharing they paid versus what they would have paid in their LIS category.
(e) Appeals. LI NET enrollees have rights with respect to Part D grievances, coverage determinations, and appeals processes set out in subpart M of this part.
§ 423.2512   LI NET sponsor requirements.
The LI NET program is administered by one or more Part D sponsor(s) that meet all of the requirements in paragraphs (a) through (c) of this section.
(a) Pharmacies and access to Part D drugs. (1) The LI NET sponsor must be a PDP sponsor that has an established contracted pharmacy network in all geographic areas of the United States in which low-income subsidies are available.
(2) The LI NET sponsor must meet the requirements for providing access to Part D drugs under § 423.120(a), (c), and (d).
(b) Experience. The LI NET sponsor must have a minimum of two consecutive years contracting with CMS as a Part D sponsor.
(c) Other LI NET sponsor requirements. The LI NET sponsor must:
(1) Have the technical capability and the infrastructure to provide immediate, current, and retroactive coverage for LI NET enrollees;
(2) Have the technical capability to develop the infrastructure necessary for verifying Medicaid dual eligibility status for presumed eligible LI NET enrollees.
(3) Identify, develop, and conduct outreach plans in consultation with CMS targeting key stakeholders to inform them about the LI NET program.
(4) Establish and manage a toll-free customer call center per § 423.128(d)(1) and fax line that can be accessed by pharmacy providers and beneficiaries, or others acting on their behalf, for purposes that include but are not limited to: handling inquiries about services under the LI NET program, providing the status of eligibility or claims, and having the ability to accept supporting documentation.
(5) Timely respond to beneficiary requests for reimbursement of claims by issuing reimbursement for eligible claims submitted by beneficiaries no later than 30 days after receipt, or, if the drug is not covered, the LI NET sponsor has 14 days to send communication to the beneficiary with a reason for the denial.
(6) Adjudicate claims from out-of-network pharmacies that are in good standing (as defined in § 423.2508(b)) according to the LI NET sponsor's standard reimbursement for their network pharmacies.
§ 423.2516   Selection of LI NET sponsor and contracting provisions.
(a) Appointment by CMS. CMS appoints a Part D sponsor that meets the requirements at § 423.2512 to serve as the LI NET sponsor.
(b) Selection criteria. In appointing a LI NET sponsor, CMS evaluates the following:
(1) Experience covering low-income beneficiaries, including but not limited to enrolling and providing coverage to low-income subsidy individuals as defined in § 423.34;
(2) Pharmacy access as outlined in § 423.120;
(3) Past performance, including Star Ratings (as detailed in § 423.186), previous intermediate sanctions (as detailed in § 423.750), and consistent with past performance in § 423.503(b); and
(4) Ability to meet the requirements listed in § 423.505 that are not waived under § 423.2536.
(c) Term of appointment. The term of the appointment will be ongoing provided mutual agreement between CMS and the selected party, subject to an annual contracting and bid process (per § 423.2524(b)) to determine payment rates for the upcoming year.
§ 423.2518   Intermediate sanctions for the LI NET sponsor.
In the event it is determined that the LI NET sponsor violated its contract, CMS may impose intermediate sanctions as outlined in subpart O of this part.
§ 423.2520   Non-renewal or termination of appointment.
(a) Notice of non-renewal. If the LI NET sponsor decides for any reason to non-renew its existing contract, it must notify CMS by January 1 of the year before the next contract year. Except as provided in paragraph (c) of this section, if CMS decides for any reason to non-renew the existing contract with the incumbent LI NET sponsor, CMS notifies the LI NET sponsor by January 1 of the year before the next contract year.
(b) Selection of successor and transition period. After a notice of non-renewal or termination, CMS selects a successor for the LI NET contract from among potentially eligible entities (as detailed in § 423.2516). The outgoing LI NET sponsor must coordinate with the successor for a period of no less than 3 months to ensure seamless transition of the LI NET program, including timely transfer of any data or files.
(c) Immediate termination for cause. (1) Notwithstanding paragraph (a) of this section, CMS may immediately terminate the existing LI NET contract for any of the reasons specified at § 423.509(a)(4)(i) and (xii) or § (b)(2)(i)(A) and (B).
(2) CMS sends notice of an immediate termination as specified at § 423.509(b)(2)(ii).
(d) Appeal rights. Subpart N of this part applies to a termination under paragraph (c) of this section.
§ 423.2524   Bidding and payments to LI NET sponsor.
(a) Source of payments. CMS payments under this section are made from the Medicare Prescription Drug Account.
(b) Submission of bids and related information. (1) The submission of LI NET bids and related information must follow the requirements and limitations in § 423.265(b), (c), (d)(1), (d)(2)(i), (ii), (iv), and (v), (d)(4) and (6), and (e).
(2) The review, negotiation, and approval of the LI NET bid would follow the provisions in § 423.272(a) and (b)(1) and (4).
(3) Basic rule for bid. The bid must reflect the LI NET sponsor's estimate of its revenue needs for Payment Rates A and B per paragraph (c) of this section.
(c) Monthly payments. CMS provides advance monthly LI NET payments equal to the sum of Payment Rates A and B as established in the LI NET sponsor's approved bid, as outlined in paragraph (b) of this section. LI NET payments are made on a prospective per-member, per-month basis.
(1) Payment Rate A is an annual rate of payment for projected administrative costs. An annual percentage-based cap on Payment Rate A limiting the year over year increase to Payment Rate A is set as part of the bid review and negotiation under § 423.272(a).
(i) For the 2024 plan year, the LI NET sponsor includes in its bid the assumption that Payment Rate A cannot exceed a 2% increase from the prior year's Payment A, which is a figure CMS will provide to the LI NET sponsor.
(ii) For the 2025 plan year and subsequent plan years, the LI NET sponsor will specify its assumption for any increase needed to the prior year's Payment Rate A, submitting justification to CMS in their bid if the cap exceeds 2%.
(2) Payment Rate B reflects the projected net costs of the Part D drugs dispensed to individuals who receive the LI NET benefit.
(d) Payment reconciliation and risk corridors —(1) Reconciliation. CMS conducts LI NET payment reconciliation each year for Payment Rates A and B after the annual PDE data submission deadline has passed and makes the resulting payment adjustment consistent with § 423.343(a).
(2) Risk corridors. As part of LI NET payment reconciliation, CMS will apply risk corridors to Payment Rate B as follows:
(i) There will be no risk sharing in the symmetrical 1% risk corridor around the target amount as defined in § 423.308.
(ii) There will be symmetrical risk sharing of 0.1% beyond the 1% risk corridor.
(iii) To carry out this section, § 423.336(c) applies to LI NET.
(e) Reopening. The LI NET contract will be subject to payment reopenings per § 423.346 as applicable.
(f) Payment appeals. The LI NET sponsor can appeal under § 423.350.
(g) Overpayments. The overpayment provisions at §§ 423.352 and 423.360 apply to LI NET.
§ 423.2536   Waiver of Part D program requirements.
CMS waives the following Part D program requirements for the LI NET program:
(a) General information. Paragraphs (1) and (3)(B) of section 1860D-4(a) of the Act (relating to dissemination of general information; availability of information on changes in formulary through the internet).
(b) Formularies. Subparagraphs (A) and (B) of section 1860D-4(b)(3) of the Act (relating to requirements on development and application of formularies; formulary development) and formulary requirements in §§ 423.120(b) and 423.128(e)(5) and (6).
(c) Medicare Prescription Payment Plan. Section 423.137.
(d) Cost control and quality improvement requirements. Provisions under subpart D of this part, including requirements about medication therapy management, are waived except for the provisions in § 423.2508(c)(1) through (5).
(1) Section 423.153(b) and (c) for dispensing and point-of-sale safety edits;
(2) Section 423.154 for appropriate dispensing of prescription drugs in long-term care facilities;
(3) Sections 423.159 and 423.160 for electronic prescribing, excepting the requirements pertaining to formulary standards in § 423.160(b)(5);
(4) Section 423.162 for QIO activities; and
(5) Section 423.165 for compliance deemed on the basis of accreditation.
(e) Out-of-network access. Section 423.124 Special rules for out-of-network access to Part D drugs at out-of-network pharmacies, except for § 423.124(a)(2), which applies to LI NET.
(f) Medicare contract determinations and appeals. Subpart N, except for the provisions that apply to LI NET in § 423.2520(d).
(g) Risk-sharing arrangements. Section 423.336(a), (b), and (d).
(h) Certification of accuracy of data for price comparison. Section 423.505(k)(6).
(i) Part D communication requirements. Portions of subpart V of this part related to Part D communication requirements that are inapplicable to LI NET, including:
(1) Section 423.2265(b)(4), (5), (11), (13), and (16);
(2) Section 423.2265(c);
(3) Section 423.2266(a);
(4) Section 423.2267(e)(3) through (5), (9) through (12), (14) through (17), (25), (29), (33), and (45) through (51); and
(5) Section 423.2274.
(j) Medicare Coverage Gap Discount Program. Subpart W of this part.
(k) Requirements for a minimum medical loss ratio. Subpart X of this part.
(l) Recovery audit contractor Part C appeals process. Subpart Z of this part.
§ 423.2600   Payment appeals.
If the Part D RAC did not apply its stated payment methodology correctly, a Part D plan sponsor may appeal the findings of the applied methodology. The payment methodology itself is not subject to appeal.
§ 423.2605   Request for reconsideration.
(a) Time for filing a request. The request for reconsideration must be filed with the designated independent reviewer within 60 calendar days from the date of the demand letter received by the Part D plan sponsor.
(b) Content of request. (1) The request for reconsideration must be in writing and specify the findings or issues with which the Part D plan sponsor disagrees.
(2) The Part D plan sponsor must include with its request all supporting documentary evidence it wishes the independent reviewer to consider.
(i) This material must be submitted in the format requested by CMS.
(ii) Documentation, evidence, or substantiation submitted after the filing of the reconsideration request will not be considered.
(c) CMS Rebuttal. CMS may file a rebuttal to the Part D plan sponsor's reconsideration request.
(1) The rebuttal must be submitted within 30 calendar days of the review entity's notification to CMS that it has received the Part D plan sponsor's reconsideration request.
(2) CMS sends its rebuttal to the Part D plan sponsor at the same time it is submitted to the independent reviewer.
(d) Review entity. An independent reviewer conducts the reconsideration. The independent reviewer reviews the demand for repayment, the evidence and findings upon which it was based, and any evidence that the Part D plan sponsor or CMS submitted in accordance with this section.
(e) Notification of decision. The independent reviewer informs CMS and the Part D plan sponsor of its decision in writing.
(f) Effect of decision. A reconsideration decision is final and binding unless the Part D plan sponsor requests a hearing official review in accordance with § 423.2610.
(g) Right to hearing official review. A Part D plan sponsor that is dissatisfied with the independent reviewer's reconsideration decision is entitled to a hearing official review as provided in § 423.2610.
§ 423.2610   Hearing official review.
(a) Time for filing a request. A Part D plan sponsor must file with CMS a request for a hearing official review within 30 calendar days from the date of the independent reviewer's issuance of a determination.
(b) Content of the request. (1) The request must be in writing and must provide evidence or reasons or both to substantiate the request.
(2) The Part D plan sponsor must submit with its request all supporting documentation, evidence, and substantiation that it wants to be considered.
(3) No new evidence may be submitted.
(4) Documentation, evidence, or substantiation submitted after the filing of the request will not be considered.
(c) CMS rebuttal. CMS may file a rebuttal to the Part D plan sponsor's hearing official review request.
(1) The rebuttal must be submitted within 30 calendar days of the Part D plan sponsor's submission of its hearing official review request.
(2) CMS sends its rebuttal to the Part D plan sponsor at the same time it is submitted to the hearing official.
(d) Conducting a review. A CMS-designated hearing official conducts the hearing on the record.
(1) The hearing is not to be conducted live or via telephone unless the hearing official, in his or her sole discretion, requests a live or telephonic hearing.
(2) In all cases, the hearing official's review is limited to information that meets one or more of the following:
(i) The Part D RAC used in making its determinations.
(ii) The independent reviewer used in making its determinations.
(iii) The Part D plan sponsor submits with its hearing request.
(iv) CMS submits in accordance with paragraph (c) of this section.
(3) Neither the Part D plan sponsor nor CMS may submit new evidence.
(e) Hearing official decision. The CMS hearing official decides the case within 60 days and sends a written decision to the Part D plan sponsor and CMS, explaining the basis for the decision.
(f) Effect of hearing official decision. The hearing official's decision is final and binding, unless the decision is reversed or modified by the CMS Administrator in accordance with § 423.2610.
§ 423.2615   Review by the Administrator.
(a) Request for review by Administrator. If a Part D plan sponsor is dissatisfied with the hearing official's decision, it may request that the CMS Administrator review the decision.
(1) The request must be filed with the CMS Administrator within 30 calendar days of the date of the hearing official's decision.
(2) The request must provide evidence or reasons to substantiate the request.
(b) Content of request. The Part D plan sponsor must submit with its request all supporting documentation, evidence, and substantiation that it wants to be considered.
(1) Documentation, evidence, or substantiation submitted after the filing of the request will not be considered.
(2) Neither the Part D plan sponsor nor CMS may submit new evidence.
(c) Discretionary review. After receiving a request for review, the CMS Administrator has the discretion to review the hearing official's decision in accordance with paragraph (e) of this section or to decline to review said decision.
(d) Notification of decision whether to review. The CMS Administrator notifies the Part D plan sponsor within 45 days of receiving the Part D plan sponsor's hearing request of whether he or she intends to review the hearing official's decision. If the Administrator agrees to review the hearing official's decision, CMS may file a rebuttal statement within 30 days of the Administrator's notice to the plan sponsor that the request for review has been accepted. CMS sends its rebuttal statement to the plan sponsor at the same time it is submitted to the Administrator. If the CMS Administrator declines to review the hearing official's decision, the hearing official's decision is final and binding.
(e) Administrator review. If the CMS Administrator agrees to review the hearing official's decision, he or she determines, based upon this decision, the hearing record, and any arguments submitted by the Part D plan sponsor or CMS in accordance with this section, whether the determination should be upheld, reversed, or modified. The CMS Administrator furnishes a written decision, which is final and binding, to the Part D plan sponsor and to CMS.