Employers offering prescription drug coverage in their health plans must determine each year whether the coverage is creditable or non-creditable compared to Medicare Part D. They must then provide notices to all Medicare-eligible employees, spouses, and dependents and also file the plan’s status with CMS. These requirements apply to all group health plans with prescription drug coverage, whether fully insured, level-funded, or self-funded.
- Fully insured plans: Carriers make the creditable coverage determination and provide it to employers for use in required notices and CMS filings.
- Self-funded and level-funded plans: Employers bear greater responsibility. The determination must be made in consultation with the plan’s Third-Party Administrator (TPA), Administrative Services Only (ASO) provider, or Pharmacy Benefit Manager (PBM).
Regardless of the plan structure, the employer is always responsible for:
- Distributing required notices to Medicare-eligible individuals each year before October 14
- Filing the drug plan’s status (plans’ statuses) with CMS
What is Medicare Part D?
Medicare Part D is the federal prescription drug benefit available to Medicare-eligible individuals. Employer drug coverage is considered creditable if it is expected to pay, on average, at least as much as the standard Medicare Part D plan. If coverage is non-creditable, Medicare-eligible individuals may face a lifetime late enrollment penalty if they delay enrolling in Part D for 63+ days without other creditable coverage.
Creditable vs. Non-Creditable Coverage
- Creditable coverage: The employer’s prescription drug benefits are expected to be as generous as (or richer than) Medicare Part D.
- Non-creditable coverage: Less generous than Medicare Part D, triggering potential late penalties for those who delay Part D enrollment.
Employer Notice & CMS Filing Requirements
Employers must:
- Provide written notices:
- Annually before October 15 (the start of the Medicare Annual Enrollment Period)
- At plan enrollment (e.g., new hires, new spouses, etc.)
- Upon status change (creditable ↔ non-creditable)
- Upon request
- File the plan’s drug coverage status electronically with CMS:
- Within 60 days of the start of the plan year
- Within 30 days of plan termination, if applicable
- Within 30 days of a status change, if applicable
Because employers typically don’t know which participants are Medicare-eligible, the safest practice is to distribute notices to all plan participants. Medicare can cover people with certain disabilities, End Stage Renal Disease (ESRD), etc., in addition to people aged 65+.
Model Notices
CMS’s model notices are available in English and Spanish. These notices must be edited by the employer with its corresponding information and distributed to Medicare-eligible employees and dependents.
Helpful References
Word & Brown publishes state- and market-specific resources showing drug status of fully-insured carrier plans, focusing on plans that are not creditable – since most employer plans are creditable. These documents are updated annually, as carriers identify their plans’ statuses around the beginning of each calendar year:
Refer also to our annual column in our WB Newsroom for more perspective on Medicare Part D Creditable Notices.
Key Takeaways for Health Insurance Brokers
- Confirm the creditable status for each client’s drug coverage.
- Remind employers to send notices to Medicare-eligible participants by October 14, 2025.
- Remind employers to file their plans’ drug statues annually with CMS at renewal.
- For self-funded or level-funded employers, confirm the TPA, ASO, and/or PBM provides the determinations, or that testing is performed.
- Watch for upcoming changes under the Inflation Reduction Act (IRA): richer Part D benefits are raising the threshold for what counts as creditable coverage. Plans that previously qualified—particularly High Deductible Health Plans (HDHPs)—may lose creditable status under the new 72% simplified test (effective fully for notices due October 14, 2026).