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Understanding Creditable Coverage: Medicare Criteria for Employees and Employers


Employer creditable coverage is an important topic for both employers and employess who become eligible for Medicare. It refers to the health insurance coverage provided by an employer that meets certain criteria set by the Centers for Medicare and Medicaid Services (CMS). The status of creditable coverage determines if an employee needs to enroll in Medicare, or if they can delay it without penalty.

To be considered creditable coverage, an employer's prescription drug coverage must be expected to pay, on average, at least as much as the standard Medicare prescription drug coverage. This means that the coverage must have an actuarial value equal to or greater than the standard Medicare Part D coverage.

Although COBRA/Retiree coverage is not creditable coverage for part B, it may be considered creditable coverage for Part D if it meets the required criteria.

The CMS requires that the coverage:

  • Covers both brand-name and generic prescription drugs
  • Provides reasonable access to retail pharmacies
  • Provides reasonable access to mail-order pharmacies
  • Provides coverage for a broad range of prescription drugs
  • Provides coverage for a minimum of one drug in each therapeutic category

As an employer, it is important to offer creditable coverage to your employees to help them save money on their healthcare expenses and to avoid any late enrollment penalties when they enroll in a Medicare prescription drug plan (part D). The CMS requires that employers disclose the creditable status of their prescription drug coverage to their employees annually. This allows employees to make informed decisions about their healthcare coverage.

Additionally, offering good health insurance benefits can help attract and retain top talent. In today's competitive job market, employees are looking for more than just a good salary. They want benefits such as health insurance, retirement plans, and paid time off. By offering creditable coverage, employers can show their employees that they care about their health and well-being.

If you need assistance determining if your group coverage is considered creditable, please reach out for help!