Medicare Part D Notice of Creditable Coverage

August is well underway, so employers should be starting to prepare to send their employees the Medicare Part D Notice of Creditable Coverage.

If you have any type of group health plan, whether it be from an employer, a union, or any other group entity, the notice is sent to advise plan participants as to whether their prescription drug coverage is “creditable.”

What is Medicare D Creditable Coverage?
The Medicare Modernization Act made it a requirement that entities that offered plans which included prescription drug coverage had to disclose to all Medicare-eligible individuals whether that prescription drug coverage was “Creditable” or “Non-Creditable.” This allows employees who are eligible to enroll in Medicare Part D to have more information concerning their current prescription plan.

Defining Creditable
For the purposes of this requirement, “creditable” means that the coverage is expected to pay as much as the standard Medicare prescription drug coverage. Among the 2021 parameters for what is considered “standard” under Medicare D are:
Deductible: $445.00
Initial coverage limit: $4,130
Out-of-pocket threshold: $6,550

Determination of Creditable Coverage
The prescription drug plan is deemed to be creditable if it:
Provides coverage for brand and generic prescriptions
Provides reasonable access to retail providers and mail order coverage
Is designed to pay on average at least 60% of participants’ prescription drug expenses
Use this link determining creditable coverage.

The creditable or non-creditable coverage notice must be provided to Medicare Part D eligible individuals who are covered or who apply for, the plan’s prescription drug coverage. This includes active, retired, disabled, and COBRA beneficiaries and dependents. Many employers send the notice to all participants since they may not always know if someone is eligible for Part D.

Providing the Notice

  • It must be provided annually prior to the Part D annual enrollment period beginning October 15
  • It should also be sent to new hires
  • If the employer’s prescription drug benefit ever changes from “Creditable” to “Non-Creditable” or vice-versa, an updated notice must be provided as soon as possible, but no later than 30 days from the change
  • It must be provided upon request

Notices can be sent electronically but need to follow ERISA guidelines. There are model notices available for both ‘Creditable” and “Non-Creditable” plan designs.

While there are no formal penalties attached to non-conformance of the requirement, the Medicare-eligible individual may incur a late enrollment penalty if notification as to non-creditable coverage exists and that individual then attempts to enroll in Medicare Part D plan.