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Creditable Coverage for Medicare | Requirements, Notice, Example & Calculator

Creditable Coverage

If you have health insurance but are also eligible for Medicare, you could be debating whether to stick with it or change. A health insurance, prescription drug, or other health benefit plan that satisfies a minimal set of requirements is considered to have creditable coverage.

Not every health or prescription drug plan offered by organisations or businesses satisfies the requirements for creditable coverage. Whether you are eligible for coverage may depend on the size of your job or the employment of your spouse. We'll take a close look at credible coverage in this article so you can decide for sure what your best course of action is.

What is Creditable Coverage ?

Health insurance or prescription drug coverage that meets or exceeds the coverage provided by Medicare is defined as creditable coverage. Prescription drug coverage that pays out on average as least as much as a Medicare Part D plan is considered creditable coverage.

To qualify as creditable coverage, prescription drug plans must typically pay at least as much for medicines as Medicare Part D. Your out-of-pocket costs will remain around the same as they would be if you had Part D in this fashion.

Group and individual health plans, student health plans, and other government-sponsored or -provided plans are examples of creditable coverage plan types. To evaluate whether policyholders must pay late enrollment fines or, in some situations, coverage and costs related to pre-existing conditions, creditable coverage is employed.

Key Facts of Creditable Coverage

  • Creditable coverage is health insurance that meets or exceeds the drug coverage benefits provided by Medicare. 
  • A health benefit, prescription medication, or health insurance plan, including individual and group health plans, that satisfies a minimum set of requirements is considered creditable coverage.
  • When determining whether policyholders must pay late enrollment fines or, in some situations, coverage and costs related to pre-existing conditions, creditable coverage is taken into account.
  • The majority of businesses that provide Medicare-eligible beneficiaries with prescription medication coverage are required to indicate whether their coverage plans are creditable or not.
  • You can put off signing up for Medicare without incurring any penalties if you have creditable coverage.
  • If you no longer have creditable coverage, you have eight months to enroll in Medicare or face penalties and late fees.

How Does the Creditable Coverage Work ?

Health insurance that is not offered via Medicare but meets or surpasses the coverage that Medicare offers is referred to as creditable coverage. Prescription drug coverage is most strongly correlated with credible coverage. Most businesses that offer Medicare-eligible beneficiaries prescription drug coverage are required to state whether their plan is creditable or not. Creditable coverage is defined as coverage that is equal to or greater than that provided by a Medicare Part D prescription medication plan.

This disclosure, which is required whether the insurer is main or secondary to Medicare, gives beneficiaries who are eligible for Medicare vital information about their membership in Medicare Part D. The policyholder can be qualified for subsidies if their coverage is deemed creditable. Prescription medication policyholders who do not use Medicare can also avoid paying a Part D late enrollment penalty by providing a notification of creditable coverage.

No matter the specifics of your circumstance, the Medicare Modernization Act (MMA) mandates that your insurance provider provide an annual notice regarding your coverage if you are eligible for Medicare. This announcement must :
  • Provided in writing
  • Every year, received before October 15
  • Provided to a Medicare, eligible person when they enroll the plan

You should carefully read your notice once you receive it in the mail. Verify that your coverage is still considered creditable. If so, you can stick with your current strategy.

However, if your plan no longer offers creditable coverage, you might choose to enroll in Medicare Part D during an annual open enrollment period or a special enrollment period that starts after you lose coverage. Every year, open enrollment lasts from October 15 to December 7.

When you receive your annual health insurance notices, do not transmit them to Medicare. Keep them instead so you can prove your former coverage when you later apply for Medicare.

Note :
When you sign up for Medicare, you could need to pay a late fee if you go 63 or more consecutive days without creditable coverage. Since this penalty is ongoing, you will have to pay extra for insurance each month that you have Medicare Part D.

Creditable Coverage Example

To help you better comprehend how creditable coverage operates, consider the following two examples :

1) Although Mr. John has COBRA at the moment, he is qualified for Medicare. He was informed that his plan offers respectable drug coverage. It will, however, expire in six months. When it expires, he enrolls in Medicare Part D during a special enrollment period without paying a penalty.

2) Although Ms. Olivia is still employed, she is eligible for Medicare. She would like to preserve her employer-provided health insurance. She receives notification every year that her current insurance is deemed acceptable. Without changing her health insurance coverage, she files the notification away.

Requirements for Creditable Coverage

There are 4 basic requirements that plans must meet to qualify as creditable coverage :
  • Both brand-name and generic prescriptions are covered
  • Offers reasonable access to retail providers.
  • Covers at least 60%, on average, of the drug costs for participants.
  • Meets requirements for minimum annual coverage amounts. (Not having a maximum annual benefit or having a low deductible)

There are different criteria for evaluating creditable coverage if you have integrated health coverage, which combines the prescription drug benefit with your other insurance (such as medical, dental, and vision coverage). There would be no annual benefit cap (or a maximum annual benefit paid by the plan of at least $25,000) and a deductible of no more than $250 per year. A lifetime combined benefit maximum of $1 million would also be provided to you.

Plans for Creditable Coverage

There are different types of insurance plans that eligible. These may consist of :

You are not required to enroll in Medicare Part D during your initial enrollment period if you already have creditable coverage through another source and want to keep it. You can enroll in Medicare Part D during the two-month special enrollment period or the yearly open enrollment if your current coverage expires in the future. Be advised that you may be responsible for paying a late enrollment penalty that will boost your Part D premium permanently if you go 63 days or more without having creditable prescription medication coverage.

Note :
If you have insurance that isn't provided by Medicare, the provider must inform you annually whether or not your plan qualifies for creditable.

Medicare Part D Creditable Coverage Test Results

Plans for the calendar year should be evaluated against the Medicare Part D specifications for 2023. The plan should be retested to see whether there has been a change in creditable coverage status if the plan design changes later before January 1, 2023. Members should be informed of any changes to their status as having creditable coverage.

Plans for the off-calendar year (2022-2023) should be evaluated against the Medicare Part D guidelines from 2022. The plan should be retested against the 2023 Medicare Part D specifications to see whether there has been a change in creditable coverage status if the plan design changes later for the 2023–2024 renewal/coverage period. Members should be informed of any changes to their status as having creditable coverage.

Which Prescription Drug Coverage is Creditable ?

The status of plans as creditable or non-creditable is shown in the following chart :

Why Employers Need to Send Creditable Coverage Notices ? 

The notice of creditable coverage is necessary to inform beneficiaries who are eligible for Medicare whether they should continue to participate in their current group prescription drug plan or sign up for a Medicare Part D plan.

The Medicare-eligible beneficiaries in a group whose coverage is not creditable must sign up for Medicare Part D when they become eligible in order to avoid paying a penalty of 1% of the monthly premium for each month they do not participate in the Part D program.

The beneficiaries who are eligible for Medicare do not need to enroll in Medicare Part D if the group's coverage is creditable. If the beneficiary decides to sign up for the Part D program at the end of your plan year, CMS will waive the penalty and accept the creditable coverage notices you send them as proof of coverage.

The government will impose penalties on employers who do not adhere to the creditable coverage determination and notification standards set forth by CMS.

When and How to Send the Creditable Coverage Notices ? 

Disclosure to the employees must be made at the following times : 
  • Prior to October 15 of every year.
  • Prior to a person's Initial Enrollment Period for Part D (as they age in).
  • Prior to effective date of coverage for any Medicare-eligible person who enrolls in the plan.
  • Whenever prescription drug coverage changes or ends so that it is no longer creditable or becomes creditable.
  • At the beneficiary's request.

Items 1 and 2 are satisfied if the disclosure notification of creditable coverage is given to every plan participant. It is a good idea to send the Notice of Creditable Coverage to individuals who will become eligible in the next 12 months together with those who are presently eligible and to any new employees who are Medicare eligible in order to prevent ongoing mailings to members as they become eligible.

It is not necessary to mail the Notice of Creditable Coverage separately. Here are a few options :
  • Include it with other plan materials, such as letters explaining plan changes or enrollment materials. The notification must be mentioned prominently, either in a distinct box with at least a 14-point font, bolded, or as a reference to the part on the first page of the information packing where the notice is located.
  • Send using a regular letter format as a stand-alone mailing. The following is a link to the new model notices for creditable and non-creditable coverage from CMS :
  • Email adhering to the following points : 
  1. Plan sponsor shall get a valid email address and beneficiary consent.
  2. Before giving consent, a beneficiary must be made aware of their right to revoke it, how to change their address, and the necessary software.
  3. The beneficiary must indicate that they have sufficient access to email.
  4. Notice must also be posted on the employer’s website.
  5. Beneficiaries must be made aware of their ability to get a paper version.

How to Sign Up for Medicare After Delaying Enrollment ?

If you delayed enrolling in Medicare because you had creditable coverage when you turned 65, you can do it now without paying a late enrollment fee. Take these actions :
  • Request a Notice of Creditable Coverage from your employer or benefits administrator for each Medicare component you delayed enrolling in.
  • To enroll in person, go to your local Social Security office and present a copy of your Notice of Creditable Coverage.
  • Sign up within 2 months of losing your current coverage.

Please be aware that just because you have creditable coverage doesn't mean it's superior than Medicare or would save you money upfront. Comparing your options is always worthwhile. 

Notice of Creditable Coverage

When you first become eligible for Medicare, the Notice of Creditable Coverage works as proof of your insurance coverage. Every year, a Notice of Creditable Coverage is mailed to people who have creditable coverage through their workplace or union.

You are being notified that your existing coverage is acceptable. For convenient access, keep the notification carefully filed with your personal papers. Prior to the start of the Medicare Annual Enrollment Period, it arrives in the mail every September.

Keep a record of this notice because you will need it if you want to enroll in Medicare Part B after your Medicare Initial Enrollment Period. However, if you misplace the notification, your benefits administrator can provide you with a new copy.

Contact for More Information

  • For more information about creditable coverage, Visit
  • For personalized help call 1-800-633-4227. (TTY users call 1-877-486-2048)
  • For information about extra help, visit Social Security, or call at 1-800-772-1213 (TTY : 1-800-325-0778).

Frequently Asked Questions

What is creditable coverage for medicare?
Creditable coverage is a health insurance or health benefit plan that meets a minimum set of standards. Group and individual health plans, student health plans, and government-provided plans are a few instances.

How can I know if I have creditable coverage?
Most companies selling prescription drug coverage are required to disclose their status as creditable or non-creditable coverage programs. For a coverage plan to be considered creditable, the prescription drug coverage must equal or surpass the value of Medicare Part D.

Will Medicare cover my pre-existing conditions?
Depending on your level of coverage. Companies offering Medigap insurance may decline to pay additional expenses resulting from previous conditions during the first six months of coverage. The Medigap policy will cover your pre-existing condition after six months. You can enroll in Medicare Advantage as an alternative, even if you have prior illnesses.

How the creditable coverage works in Medicare?
Creditable coverage includes prescription medication benefits that cover at least as much as Medicare Part D and health insurance that provides coverage equal to or more than Medicare Parts A and B.

Do I need to enroll in Medicare?
You won't be penalized if you put off enrolling in Medicare if you have creditable coverage and are eligible for it. Your existing insurer would serve as your primary insurer if you want to enroll in Medicare, maintain creditable coverage, and keep your insurance. Your secondary insurer is Medicare. In order to avoid penalties, you must also make sure that you have access to prescription drug coverage, either through your existing insurance plan, a Part C, or Part D plan.

What is a Notice of Creditable Coverage?
You will receive a creditable coverage disclosure notification if your current insurance is creditable. Maintain this letter. When you enroll in Medicare, you'll need to provide it in order to avoid paying late enrollment fees. A non-creditable coverage disclosure notification will be sent to you if your current insurance is not creditable. Normally, these warnings are mailed in September. A Notice of Creditable Coverage form is not necessary for insurance plans via Indian Health Services.

If I have creditable coverage, how do I defer Medicare?
Many people who are eligible for Medicare have good insurance they want to keep, without enrolling in Medicare. You have the choice to put off signing up for Medicare. There are no forms to complete if you have creditable coverage and choose not to enroll in Medicare. Simply refuse to register. If you currently have creditable coverage, you won't be subject to penalties or costs if you decide to enroll at a later time. If your existing coverage is lost, you have eight months to sign up for Medicare. This is a time frame for special enrollment. You will be charged late registration fees if you don't enroll during this window.

What is creditable coverage for Part D?
According to CMS actuarial criteria and using commonly known actuarial principles, coverage is creditable if its actuarial value is equal to or greater than the actuarial value of the typical Medicare Part D prescription drug coverage. The actuarial equivalency test generally determines whether the anticipated payouts under the entity's prescription medication coverage are at least equal to those anticipated under the normal Part D benefit.

Does every employer coverage qualify as creditable coverage?
No, all employee benefits do not count as creditable benefits. The company must employ 20 or more employees in order for your employer plan to be eligible. You (or your spouse) must also be a working individual. As a result, even if you keep your insurance after retiring, it is no longer valid since you are no longer employed. The same holds true if your spouse's job provided the insurance and your partner retires.

Is Creditable Coverage Better than Medicare?
Good coverage doesn't necessarily equate to better coverage. Not even cheaper is implied. With Medicare, you might have better coverage AND reduced out-of-pocket expenses. Always consider all of your alternatives to see which one provides the best coverage at the lowest cost. Using our Find a Plan feature, you can quickly compare your alternatives.

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