Determining Whether Prescription Drug Coverage Is Creditable

Employers that provide prescription drug coverage to individuals who are eligible for Medicare Part D must inform these individuals and the Centers for Medicare and Medicaid Services (CMS) whether their prescription drug coverage is “creditable.”

A group health plan’s prescription drug coverage is considered creditable if its actuarial value equals or exceeds the actuarial value of standard Medicare Part D prescription drug coverage. Prescription drug coverage that does not meet this standard is called “non-creditable.”

There are a few different ways for employers to determine whether their prescription drug coverage is creditable. Employers with insured plans should ask their health insurance carriers if they have made this determination for the insured product. If an employer must make the determination itself, it may be able to use a simplified method, depending on the plan’s design. When a plan’s design is not eligible for the simplified method, an actuarial determination must be made.