Understanding Creditable Drug Coverage: Why It Matters for Employer Health Plans

Employers who offer health coverage to Medicare-eligible employees have an important compliance responsibility: determining whether their prescription drug coverage is creditable.

What is Creditable Drug Coverage?
Creditable coverage means the plan is expected to pay, on average, as much as standard Medicare Part D coverage. CMS (Centers for Medicare & Medicaid Services) requires employers to determine the creditable status of their plans annually.

If your coverage is creditable, you must notify Medicare-eligible employees in writing before October 15 each year (the start of Medicare Open Enrollment).

Why Is This Important?
Failing to properly test and notify employees can lead to:

• Penalties for employees who delay enrolling in Part D without knowing their coverage was non-creditable

• Compliance risks and potential audits

• Employee dissatisfaction and confusion

Who Needs to Pay Attention?
-Employers with self-funded or fully insured group health plans
-HR teams managing retiree coverage or mixed-eligibility groups
-Brokers and advisors helping clients with benefits compliance

How to Stay Compliant

• Perform annual creditable coverage testing

• Document actuarial or simplified determinations

• Provide clear, timely notices to all Medicare-eligible plan participants

• Maintain records of testing results and employee communications

Don’t Leave Compliance to Chance
At creditable, we help employers simplify the creditable coverage determination process - ensuring you stay compliant and your employees stay informed.