This is the Medical category of the Broad REach Benefits blog. At Broad Reach Benefits, we focus on employers that have between 30 and 500 benefit eligible employees. We’re employee benefit specialists, not a big box brokerage firm or payroll company with a sales force peddling policies.
Medicare Part D Changes May Impact Creditable Coverage Status of Employer Plans
The Inflation Reduction Act of 2022 (IRA) includes several cost-reduction provisions affecting Medicare Part D plans, which may impact the creditable coverage status of employer-sponsored prescription drug coverage beginning in 2025.
Employers that provide prescription drug coverage to individuals who are eligible for Medicare Part D must inform these individuals and the Centers for Medicare and Medicaid Services (CMS) whether their prescription drug coverage is creditable, meaning that the employer’s prescription drug coverage is at least as good as Medicare Part D coverage.
CMS’ Draft Part D Redesign Program Instructions state that given the significant changes that the IRA made to Medicare Part D, one of the methods for determining whether employer-sponsored prescription drug coverage is creditable will no longer be valid as of calendar year 2025. These draft program instructions are subject to change, and CMS will issue final program instructions for 2025 after considering the public comments received in response to the draft program instructions.
Creditable Coverage Determination
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, as demonstrated through the use of generally accepted actuarial principles and in accordance with CMS guidelines. 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, PPOs, HDHPs and HMOs), the creditable coverage test must be applied separately for each benefit option.
Under existing CMS guidance, there are a few different ways for an employer to determine whether its …