Understanding the Penalties for Not Having Creditable Coverage
Introduction
Failing to provide creditable coverage for your employees’ prescription drug plans can lead to penalties when they eventually enroll in Medicare. Let’s explore these penalties and how you can avoid them.
What Are Late Enrollment Penalties?
If an employee doesn’t have creditable prescription drug coverage and delays enrolling in Medicare Part D, they will face a late enrollment penalty when they eventually sign up. This penalty is added to their Part D premium and lasts for as long as they have Medicare.
How Penalties Are Calculated
The late enrollment penalty is calculated by multiplying 1% of the “national base beneficiary premium” by the number of months the person was eligible for Part D but didn’t enroll. This penalty is permanent and increases over time.
How to Avoid These Penalties:
Verify Creditability Annually: Make sure your prescription drug coverage is creditable and inform your employees annually.
Encourage Timely Enrollment: Help employees understand the importance of enrolling in Medicare when they become eligible, especially if their coverage is not creditable.
Use Automation: Leverage our Part D Credibility Platform to streamline the process and ensure accuracy.
Conclusion
By ensuring your employees have creditable Part D coverage, you can help them avoid costly late enrollment penalties when they transition to Medicare.