Each year, employers that sponsor group health plans with prescription drug coverage must determine whether that coverage is “creditable” or “non-creditable” and notify Medicare Part D–eligible individuals of the plan’s status. The annual notice must be provided before October 15, when Medicare’s annual enrollment period begins.
For employers, this means the annual notice should be distributed no later than October 14. But before sending the notice, employers should confirm that they have a current creditable coverage determination for each health plan option that includes prescription drug coverage.
What Does “Creditable Coverage” Mean?
Prescription drug coverage is considered creditable when its actuarial value equals or exceeds the value of standard Medicare Part D prescription drug coverage. In practical terms, the employer-sponsored coverage is expected to pay at least as much for prescription drugs as the standard Medicare Part D benefit.
Employers are not required to offer creditable prescription drug coverage. They are, however, required to determine whether their coverage is creditable and communicate that status to Medicare Part D–eligible individuals.
This information is important because individuals may generally delay enrolling in Medicare Part D while they have other creditable prescription drug coverage. An individual who goes 63 days or longer without creditable coverage may face a late enrollment penalty when later enrolling in Part D.
Why the Determination Deserves Attention
Medicare Part D benefits expanded beginning in 2025, increasing the value of the standard Part D benefit. As Medicare coverage changes, employers should not assume that a health plan option remains creditable simply because it was creditable in a prior year.
CMS has also revised its simplified method for determining creditable coverage status. For 2026 plan years, employers may use either the existing or revised simplified method or obtain an actuarial determination. For plan years beginning in 2027, only the revised method will be available to employers using the simplified determination method.
Insurance carriers and third-party administrators often provide employers with information regarding a plan’s creditable status. If that information is not provided, however, the employer remains responsible for ensuring that a determination is made.
Who Must Receive the Notice?
The notice must be provided to Medicare Part D–eligible individuals who are covered under or seeking coverage under the employer’s prescription drug plan. This can include employees, retirees, COBRA participants, spouses, and dependents.
Because employers may not always know who is Medicare eligible—for example, a spouse or dependent may qualify for Medicare because of disability—many employers provide the notice more broadly to everyone eligible to enroll in the prescription drug plan.
What Should Employers Do Now?
September is a good time to confirm the creditable or non-creditable status of each health plan option with prescription drug coverage and prepare the appropriate notice for distribution.
Employers should also confirm who is responsible for making the determination, use the appropriate creditable or non-creditable coverage notice, and retain documentation of both the determination and distribution.
Although the annual notice is often distributed during open enrollment, the October 14 deadline applies regardless of when the employer’s plan year or open enrollment period begins.
Employers should also remember that the participant notice is separate from the annual disclosure of creditable coverage status to CMS, which is generally due within 60 days after the beginning of the plan year.
Final Reminder
The Medicare Part D creditable coverage notice is more than an annual paperwork requirement. It provides Medicare-eligible individuals with important information they may need when deciding whether to enroll in Medicare Part D and helps them understand the potential consequences of going without creditable prescription drug coverage.
Employers should confirm their plan’s creditable coverage status and distribution process well before the October 14 deadline rather than assuming that last year’s determination continues to apply.
If you have questions about Medicare Part D creditable coverage requirements or the annual disclosure notice, your INSURICA team is available to help.
This is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.
