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Every year, group health plans are required to notify their Medicare-eligible policyholders whether their prescription drug coverage is “creditable coverage.” Drug coverage is creditable if it is as good or better than the Medicare drug benefit. If a Medicare-eligible individual is not enrolled in creditable coverage, they may incur late enrollment fees for every month they are not enrolled in Medicare part D.
There are two primary notice requirements for entities that offer prescription drug coverage:
- Annual disclosure to Medicare-eligible individuals covered by the plan by no later than October 15 of each
- Annual reporting to the Centers for Medicare & Medicaid Services (CMS) of creditable coverage status of their prescription drug plan within 60 days prior to the beginning of the plan year (Nov. 1 for calendar year plans), 30 days of the termination of a prescription drug plan, or 30 days after any change in creditable coverage
Overview of Creditable Coverage Changes
The Inflation Reduction Act (IRA) made several changes to Medicare Part D, including capping out-of-pocket expenses at
$2,000 for individuals with Medicare Part D starting in 2025 (this cap is indexed for following years). This is a significant change compared to the out-of-pocket maximum of $8,000 for 2024. This shift, with the other changes made by the IRA, will make it more difficult to meet the creditable coverage criteria, particularly for high deductible health plans.
What About Non-Calendar Year Plans?
The new Medicare Part D benefits affect plans’ creditable coverage determinations for calendar year plans beginning in 2025. Determination of creditable coverage for non-calendar year plans is not required until the plan renews in 2025. For example, if a plan renews on June 1, 2025, creditable coverage tested against the 2025 Medicare Part D parameters is not required to be evaluated and reported to CMS until April 1, 2025.
Employer Action Items
- Review your If you have not already reviewed your coverage prior to the October 15 notification deadline, do so as soon as possible. Calendar year plans should be testing against the 2025 parameters and non- calendar year plans should be testing against the 2024 parameters until its CMS reporting is required prior to its 2025 plan year (60 days before the start of the plan year).
- Notify CMS of creditable coverage changes within 30 days of
This information has been prepared for UBA by Fisher & Phillips LLP. It is general information and provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.
