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Employers sponsoring a group health plan that provides prescription drug coverage are required to determine whether the prescription drug coverage is creditable and then must communicate creditable or non-creditable coverage status annually to eligible employees and their family members and to the Centers for Medicare & Medicaid Services (CMS).����

Special Note: Employers are not required to maintain creditable coverage which means there is no penalty for having non-creditable coverage.��

The information assists Medicare Part D eligible individuals in making an informed decision about whether to enroll in Medicare Part D. Individuals who delay enrollment may face late enrollment penalties for failing to enroll in Part D when they are first eligible if it turns out that the employer’s prescription drug plan is not creditable.����

What’s Changing?��

The Medicare Part D drug benefit has undergone benefit enhancements due to the Inflation Reduction Act of 2022 that, amongst other things, aimed to lower prescription drugs costs for people with Medicare.����

Starting on January 2025, significant improvements to the Part D drug benefit mean that employer-sponsored coverage that was previously creditable may no longer be creditable as of 1/1/25. Particularly, we anticipate some HSA-qualified high deductible health plans (HDHPs) will no longer be creditable.����

Are Employers Penalized for Not Having Creditable Coverage?��

No, prescription drug plans are not required to be creditable. The only requirement is that the employer distribute the notice to Medicare Part D eligible individuals who are eligible to enroll in the plan sponsor’s prescription drug plan.����

Note: IMA recommends distributing to all eligible employees as a best practice because employers may not always know who is Medicare eligible.��

Are Medicare Part D Eligible Individuals Penalized if the Employer’s Plan Doesn’t Have Creditable Coverage?��

If the prescription drug plan they are enrolled in offers creditable coverage, no, they will not be penalized for late enrollment into Part D.����

If the prescription drug plan they are enrolled in is considered non-creditable coverage, then yes, they will be penalized for late enrollment into Part D. This is why it’s important to communicate whether the employer’s drug coverage is creditable or non-creditable.��

How Do We Determine if Our Plan’s Prescription Drug Coverage Is Creditable Starting in 2025?��

Contact your carrier or TPA for assistance.����

Note: IMA clients can rely on their IMA team for assistance. This is especially important for employers offering an HSA-qualified HDHP.��

What do employers need to do now?����

Determine if your prescription drug plan is still creditable starting with the plan year that begins on or after January 1, 2025. We recommend distributing the Medicare Part D notice during open enrollment for the plan year starting in 2025 to avoid confusion.����

There are specific distribution and timing requirements for the Medicare Part D notice:��

• Prior to annual Medicare open enrollment period (October 15)��
• Prior to an individual’s initial enrollment period (age 65)��
• Prior to effective date of coverage under group health plan��
• Whenever creditable status of plan changes��
• Upon request��

“Prior to” means any time in the 12 months preceding the due date – issuing the notice once a year, e.g. at open enrollment, will satisfy notice obligations, other than for new enrollees or if there has been a change in creditable status.��

IMA will continue to monitor regulator guidance and offer meaningful, practical, timely information. This material should not be considered as a substitute for legal, tax and/or actuarial advice. Contact the appropriate professional counsel for such matters. These materials are not exhaustive and are subject to possible changes in applicable laws, rules, and regulations and their interpretations.

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