What is Creditable Coverage for Medicare?

Have you heard the phrase creditable coverage when it comes to Medicare? When talking about creditable coverage for Medicare, it usually refers to prescription drug coverage, and it's an important factor when it comes to determining what type of coverage is best for you, especially if you plan to continue working past becoming eligible for Medicare.

In this article, we'll explain what you need to know about creditable coverage, answer some of the most frequently asked questions, and provide guidance on the steps you can take to ensure you avoid unnecessary penalties and stay on track with your Medicare coverage.

What is Creditable Coverage for Medicare?

Creditable coverage is a designation for types of health and drug coverage you would have prior to enrolling in a Medicare Advantage or Part D plan. This could be an employer-sponsored plan or retiree health plan. Creditable coverage indicates that the plan is expected to pay, on average, as much as Medicare’s standard prescription drug coverage.

Do I Need to Enroll in Medicare if I Have Creditable Coverage Through my Job?

Not necessarily. If you have creditable coverage through your or your spouse’s current employer, you can delay enrolling in Medicare Part B and/or Part D without penalty. Be sure to enroll during your Special Enrollment Period when that coverage ends.

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What is a Notice of Creditable Coverage?

You will often receive a notice of creditable coverage each year if you have drug coverage from an employer/union or other group health plan. The notice of creditable coverage is sent out every September, and it is sent by employer/union plans. If you get this notice, it’s important to keep it (you may need it if you decide to join a Medicare drug plan in the future). If it states that the plan is not creditable, please give us a call.

How is Creditable Coverage Enforced?

Creditable coverage is enforced by the Medicare Modernization Act (MMA). The Medicare Modernization Act (MMA) requires entities (whose policies include prescription drug coverage) to notify Medicare-eligible policyholders whether their prescription drug coverage is creditable. 

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Frequently Asked Questions About Creditable Coverage

What happens if I don’t have creditable drug coverage when I become eligible for Medicare?

If you go without creditable Part D coverage for 63 days or more after your initial eligibility, you may face a permanent late enrollment penalty added to your Part D premium.

How do I know if my current plan is creditable?

Your health plan should send you a Notice of Creditable Coverage every year. If you’re unsure, contact your HR department or benefits administrator.

Can COBRA coverage be considered creditable for Medicare?

COBRA may or may not be creditable. It’s especially important to check if the prescription drug portion meets Medicare’s standard. Don’t assume COBRA coverage will protect you from penalties.

Do I need to keep proof of creditable coverage?

Yes. Always save your annual Notice of Creditable Coverage and any related documents. You may need to show proof if you delay Medicare enrollment and want to avoid penalties.

Need Help Understanding Your Medicare Coverage?

Navigating the complexities of Medicare can feel overwhelming, but you don’t have to do it alone. Working with an experienced Medicare professional can help you understand your options, avoid penalties, and make informed decisions about your coverage and enrollment timelines.

Have questions about creditable coverage or your next steps? Our team is here to help, reach out to us today.

References:

https://www.cms.gov/Medicare/Prescription-Drug-Coverage/CreditableCoverage/index.html

This is an updated blog post that was originally published in 2019.

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