Do Creditable Coverage Requirements Apply to Medicare or Medicare Supplement Policies?

If you are on Medicare or Medicare Supplement insurance, how do you know whether you are being charged too much for your prescription drugs? You can rely on creditable coverage. Creditable coverage is a health insurance plan, prescription drug, or other health benefit plan that meets a certain set of qualifications.

Creditable Coverage

Creditable coverage is a measure used to determine whether health insurance providers are expected to pay the same or more for the average standard prescription drug coverage which a standard Medicare prescription plan covers. In December 2003, President George W. Bush signed into law Public Law 108-173. It is called the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003.¹

The MMA requires health care issuers whose polices include prescription drug coverage for Medicare-eligible beneficiaries to notify the eligible beneficiaries of whether the prescription drug coverage is creditable coverage. Each September, a notice is sent to the insured indicating whether the insured’s drug coverage is considered creditable coverage.

For a plan to be considered creditable, it must meet the following criteria:

1. Generic and brand prescription drugs are offered.²
2. Must offer a broad range of prescription drugs to the policyholder and/or provide a mail-order option.
3. The policy covers at least 60% of the price.
4. Satisfies at least one of the following:
   1. The prescription drug coverage has no annual benefit maximum or a maximum annual benefit payable by the plan of at least $25,000; or
   2. The prescription drug coverage has an actuarial expectation that the amount payable by the plan will be at least $2,000 annually per Medicare eligible individual.

Initial enrollment and other coverage

In the case of drug coverage, Medicare eligible individuals who have coverage at least as good as what Medicare provides (creditable coverage) may avoid the penalty that results if they don’t get Medicare Part D when first eligible

• Medicare eligible individuals may face late enrollment penalties if they don’t enroll in Medicare Part D when first eligible.
• However, those enrolled in other types of coverage such as employer or union plans may choose to stay in that plan and delay enrolling in Medicare when first eligible.
• In the case of prescription drug coverage, if their other coverage is at least as equal as the Medicare Part D benefit, and therefore considered creditable coverage, the beneficiary can remain in their employer or union coverage and may avoid a late enrollment penalty when they sign up later for Medicare Part D during a special enrollment period.
• Employer and union plans must provide an annual written notice to Medicare eligible individuals disclosing whether their coverage under the plan is creditable coverage (at least as similar as what Medicare provides).³
• Employer and union plans must also notify CMS whether their coverage is creditable or not.

During initial open enrollment, no late penalty or pre-existing conditions are applicable.⁴

1. "https://www.cms.gov/Medicare/Prescription-Drug-Coverage/CreditableCoverage
2. https://www.medicare.gov/drug-coverage-part-d/what-medicare-part-d-drug-plans-cover
3. https://www.medicare.gov/basics/forms-publications-mailings/mailings/costs-and-coverage/notice-of-creditable-coverage
4. https://www.medicare.gov/supplements-other-insurance/when-can-i-buy-medigap

Other sources:

• https://www.medicare.gov/drug-coverage-part-d/how-part-d-works-with-other-insurance