The issue of creditable coverage is an important term to understand because the question of creditable coverage could cost a Medicare beneficiary a substantial penalty. Employees enrolled in employer-based coverage assume their coverage meets the test but this is not always the case. Employers give their employees a letter in advance of the Medicare Annual Enrollment Period stating whether their plan provides creditable coverage, which is defined as coverage through another source (employer group or individual) that is actuarially equivalent or at least as good as the coverage to which it is being compared (Part D or Parts A and B).
If a plan is not creditable, the individual needs to enroll in a Part D plan. An analysis of the company plan and going on Medicare B and a supplement or Medicare Advantage is warranted.
A prescription drug plan is “creditable” based on the following:
- Plan must include coverage for brand and generic prescriptions
- Plan needs to provide “reasonable” access to pharmacies
- On average, the plan pays 60% of enrollees’ prescriptions.
- One of the following must be met:
- Drug coverage has no maximum annual benefit or a maximum annual benefit payable by the plan of at least $25,000.
- Drug coverage has an actual value that the amount payable by the plan is at least $2,000 a year or
- Integrated health coverage has no more than $250 annual deductible; no annual maximum or a maximum of at least $25,000 payable by the plan and has no less than a $1 million lifetime maximum.