Medicare Part D: Creditable Coverage Disclosure Notices Due Before October 15

Employers with group health plans that provide prescription drug coverage must notify Medicare Part D eligible individuals before October 15 of each year about whether the drug coverage is at least as good as the Medicare Part D coverage (in other words, whether their prescription drug coverage is “creditable”).

This notice is important because Medicare beneficiaries who are not covered by creditable prescription drug coverage and do not enroll in Medicare Part D when first eligible will likely pay higher premiums if they enroll at a later date. Although there are no specific penalties associated with this notice requirement, failing to provide the notice may be detrimental to employees.

Action Steps

Employers should confirm whether their health plans’ prescription drug coverage is creditable or non-creditable and prepare to send their Medicare Part D disclosure notices before October 15, 2026, the start date of the annual enrollment period for Medicare Part D. CMS has provided model disclosure notices for employers to use.

To make the process easier, employers often include Medicare Part D notices in open enrollment packets they send out prior to October 15.

Creditable Coverage

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. In general, this actuarial determination measures whether the expected amount of paid claims under the group health plan’s prescription drug coverage is at least as much as the expected amount of paid claims under the Medicare Part D prescription drug benefit. For plans that have multiple benefit options (for example, PPO, HDHP and HMO), the creditable coverage test must be applied separately for each benefit option.

Model Notices

CMS has provided two model notices for employers to use:

• a Model Creditable Coverage Disclosure Notice for when the health plan’s prescription drug coverage is creditable, and
• a Model Non-Creditable Coverage Disclosure Notice for when the health plan’s prescription drug coverage is not creditable.

These model notices are also available in Spanish on the CMS website.

Employers are not required to use the model notices from CMS. However, if the model language is not used, a plan sponsor’s notices must include certain information, including a disclosure about whether the plan’s coverage is creditable and explanations of the meaning of creditable coverage and why creditable coverage is important.

Disclosure to Individuals

Disclosure notices must be provided to all Part D eligible individuals who are covered under or who apply for the plan’s prescription drug coverage, regardless of whether the prescription drug coverage is primary or secondary to Medicare Part D. The disclosure notice requirement applies to Medicare beneficiaries who are active or retired employees, disabled or on COBRA, as well as Medicare beneficiaries who are covered as a spouse or dependent.

An individual is eligible for Medicare Part D if they:

• are entitled to Medicare Part A or are enrolled in Medicare Part B, and
• live in the service area of a Medicare Part D plan.

In general, an individual becomes entitled to Medicare Part A when they actually have Part A coverage, and not simply when they are first eligible. To simplify plan administration, plan sponsors often provide the creditable coverage disclosure notices to all plan participants.

Timing of Notices

At a minimum, creditable coverage disclosure notices must be provided at the following times:

1. Prior to the Medicare Part D annual coordinated election period, beginning October 15 through December 7 of each year
2. Prior to an individual’s initial enrollment period for Part D
3. Whenever prescription drug coverage ends or changes so that it is no longer creditable or becomes creditable
4. Upon a beneficiary’s request

If the creditable coverage disclosure notice is provided to all plan participants annually before October 15 of each year, items (1) and (2) above will be satisfied. “Prior to,” as used above, means the individual must have been provided with the notice within the past 12 months. In addition to providing the notice each year before October 15, plan sponsors should consider including the notice in plan enrollment materials for new hires.

Distributing Notices

Plan sponsors have flexibility in the form and manner of their disclosure notices. Disclosure notices do not need to be sent in a separate mailing. Disclosure notices may be sent with other plan participant information materials, for example, enrollment and/or renewal materials. If a disclosure notice is incorporated with other participant information, it must meet specific requirements for being prominent and conspicuous within the materials.

As a general rule, a single disclosure notice may be provided to the covered Medicare beneficiary and all of their Medicare-eligible dependent(s) covered under the same plan. However, if it is known that any spouse or dependent who is Medicare eligible lives at a different address than where the participant materials were mailed, a separate notice must be provided to the Medicare-eligible spouse or dependent residing at a different address.

Disclosure notices may be provided through electronic means only if the plan sponsor follows the requirements set forth in Department of Labor regulations addressing electronic delivery.

Creditable Coverage

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. In general, this actuarial determination measures whether the expected amount of paid claims under the group health plan’s prescription drug coverage is at least as much as the expected amount of paid claims under the Medicare Part D prescription drug benefit.

The determination of creditable coverage does not require an attestation by a qualified actuary, except when the plan sponsor is electing the Retiree Drug Subsidy for the group health plan. However, employers may want to consult with an actuary to make sure that their determinations are accurate.

For plans that have multiple benefit options (for example, PPO, HDHP and HMO), the creditable coverage test must be applied separately for each benefit option. Account-based plans such as health reimbursement arrangements, health flexible spending accounts, and health savings accounts with coverage beginning on or after January 1, 2027, are exempt from creditable coverage disclosure requirements.

Under existing CMS guidance, there are a few different ways for an employer to determine whether its prescription drug coverage is creditable:

• As a first step, employers with insured prescription drug plans should ask their carriers whether they have made a determination about whether the plan’s coverage is creditable.
• For self-insured plans, or where the carrier for an insured plan has not made a determination about whether the plan is creditable, employers may use a simplified determination—as long as the coverage meets certain design requirements. If it doesn’t, the employer must use an actuarial determination method.

Simplified Determination (Revised)

If a plan sponsor is not applying for the Retiree Drug Subsidy, the sponsor may be eligible to use a simplified determination that its prescription drug coverage is creditable. In light of the significant changes to Medicare Part D made by the Inflation Reduction Act of 2022, CMS has adopted a revised simplified determination methodology for establishing whether prescription drug coverage is creditable. Under this methodology, a group health plan must be designed to pay, on average, at least 72% of a participant’s drug expenses (increased from 60% under the prior methodology) to be considered creditable coverage.

• For calendar year 2026 only, group health plan sponsors that are not applying for the RDS may use either the prior simplified determination methodology or the revised simplified determination methodology to determine whether their prescription drug coverage is creditable.
• For calendar year 2027 and subsequent years, CMS will no longer permit use of the prior simplified determination methodology. For 2027, the revised methodology requires plans to pay, on average, at least 73% of a participant’s drug expenses to be considered creditable, with CMS establishing updated percentages for later years through subregulatory guidance.

A plan’s prescription drug coverage will be deemed creditable under the revised simplified determination method if it satisfies all of the following criteria:

1. It provides reasonable coverage for brand name and generic prescription drugs and biological products;
2. It provides reasonable access to retail pharmacies; and
3. It is designed to pay, on average, at least 72 percent (for 2026; increased to 73 percent for 2027) of participants’ prescription drug expenses.

How the Revised Simplified Methodology Differs from the Original Simplified Methodology

CMS updated the simplified methodology to better reflect how modern group health plans are designed. While the revised approach retains key elements of the prior methodology, such as requirements for reasonable coverage of brand name and generic drugs and access to retail pharmacies, it now also includes biological products.

CMS also removed several outdated requirements. Annual and lifetime benefit-limit standards were eliminated because such limits are largely prohibited under the Affordable Care Act. In addition, CMS removed requirements related to an annual deductible, acknowledging that most employer plans integrate medical and prescription drug coverage. As a result, plans with higher deductibles (including high‑deductible health plans) may, depending on their overall design, be able to satisfy the criteria for creditable coverage under the revised methodology.

Actuarial Determination

If a plan sponsor cannot use the simplified determination method to determine the creditable coverage status of the prescription drug coverage offered to Medicare-eligible individuals, then the sponsor must make an actuarial determination annually of whether the expected amount of paid claims under the entity’s prescription drug coverage is at least as much as the expected amount of paid claims under the standard Medicare prescription drug benefit.

The actuarial determination does not require an attestation by a qualified actuary, unless the plan sponsor is an employer electing the Retiree Drug Subsidy. Nonetheless, an employer may need to hire an actuary to make the determination.

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The above information does not constitute advice. Always contact your employee benefits broker or trusted advisor for insurance-related questions.