Any employer who offers prescription drug coverage under a group health plan must inform both the CMS and Medicare-eligible individuals as to whether the plan’s prescription drug coverage is “creditable” with regard to Medicare Part D. In other words, employers must inform the CMS that its prescription drug offerings either are or are not at least as generous as the offerings made by Medicare. 

The deadline for disclosure for calendar year health plans to the CMS is February 29, 2020. Employers who are required to give this disclosure should visit the CMS website for instructions and the necessary forms. 

Determination of “Creditable Coverage” 

The determination of “Creditable Coverage” can usually be made in a simplified manner. The CMS has created a 4-factor test that employers may use to make this important determination. The first three factors are a uniform determination among all prescription drug plans:

1. Does the prescription drug plan provide coverage for both brand name and generic prescriptions?

2. Does the prescription drug plan provide reasonable access to retail providers?

3. Is the plan designed to pay  an average of at least 60% of participants’ prescription drug expenses?

4. The fourth factor is dependent on the kind of prescription drug plan the employer offers:

  - If the prescription drug plan is integrated with benefits other than prescription drug coverage (such as medical or dental): does the integrated coverage:

  o Have no more than a $250 deductible per year?  o Have a maximum annual benefit payable of at least $25,000? o Have a lifetime combined benefit maximum of at least $1,000,000?

- If the prescription drug plan is not integrated: does the prescription drug coverage:

o Have an annual maximum benefit payable by the plan of at least $25,000? OR o Have an actuarial projection that the plan will pay at least $2,000 per Medicare-eligible individual?

If the answer to all questions is YES, then the plan is considered creditable for the purposes of Medicare Part D. If the answer to even one of the questions is NO, then the plan is considered non-creditable. 

Every year for the next ten years, 10,000 Baby Boomers become eligible for Medicare benefits. You can trust FNA to help make impactful insurance choices based on your client's medical needs. Visit our Senior Services page for programs and services available to help you guide your clients through the Medicare maze and provide you with the best fit for you or your client’s Medicare needs. 


For further navigation through the Medicare maze, please contact:


Randy Frey
Vice President, Senior Services
FNA Insurance Services
516-348-7130 | [email protected]