Insurance companies that provide coverage to Medicare-eligible beneficiaries must disclose their status as creditable or non-creditable coverage. Disclosure is mandatory whether the insurer is primary or secondary to Medicare.
Medicare Creditable Coverage
The Medicare Modernization Act (MMA) requires insurers, whose policies may or may not include prescription drug coverage, to notify Medicare-eligible policyholders whether their coverage is considered creditable coverage.
Entities that are required to provide proof of creditable coverage include, but are not limited to:
- group health plans
- department of veterans affairs
- federal state and
- local governments
Notice of Creditable Coverage
You’ll get this notice each year if you have drug coverage from an employer/ union or other group health plan.
Keep this notice, you may need it if you decide to join a Medicare drug plan later.
In the Medicare space, it’s mostly applicable to prescription drug plans. However, it does include Medicare Advantage plans and Medicare Supplements.
Having creditable coverage notifies your new insurance company that you had similar benefits under a prior insurance plan.
It means you get credit for the coverage you had previously.
It’s a way the insurance company can provide you health care and prescription protection while being able to expect that you would have reached out for medical treatment should the need have arisen.
It’s a reassurance that you are not simply purchasing coverage because you are now sick.
Creditable Coverage for Medicare Part B
With Medicare Part B, the portion that covers physicians, outpatient services and durable medical equipment, you pay a monthly premium.
If you don’t enroll in Medicare Part B when you are eligible, you will pay a penalty. Unless you have creditable coverage through another plan.
If you’re going to delay enrolling in Part B, your creditable coverage needs to be from a current employer-sponsored plan, yours or your spouse’s.
The Part B penalty is 10% each year that you do not have creditable coverage. This penalty is added to your premium when you do enroll in Medicare Part B and it never ceases.
Creditable Coverage for Medicare Prescription Drug Plans
Creditable coverage means the coverage is expected to pay on average as much as the standard Medicare prescription drug coverage.
For each month that you are eligible for Medicare and do not have a prescription drug plan in place, a 1% penalty will be assessed when you do enroll in a Part D drug plan.
If you wait a full year to enroll in a prescription drug plan, you will pay an additional 12% in premium, forever.
For example, if you continue to work and your employer is providing your prescription drug coverage or through the employer-sponsored plan available to a spouse.
You’ll receive a disclosure notice in the mail to advise if you have creditable coverage.
In addition, you can contact your insurance provider at the number listed on the back of your ID card.
Requirements for Medicare to Consider Your Prescription Coverage Creditable:
Provides coverage for brand and generic prescriptions
- Provides reasonable access to retail providers
- The plan is designed to pay on average at least 60% of participants’ prescription drug expenses
Satisfies at least one of the following:
- The prescription drug coverage has no annual benefit maximum benefit or a maximum annual benefit payable by the plan of at least $25,000, or
- The prescription drug coverage has an actuarial expectation that the amount payable by the plan will be at least $2,000 annually per Medicare individual
- For entities that have integrated health coverage, the integrated health plan has no more than a $250 deductible per year, has no annual benefit maximum or a maximum annual benefit payable by the plan of at least $25,000 and has no less than a $1,000,000 lifetime combined benefit maximum
These figures were released May 23, 2005, in the Creditable Coverage Guidance. The maximum deductible amount can change yearly.
Additional Questions About Creditable Coverage
Can I stay on my partners’ insurance until they retire?
I’m currently 66 and employed, I’m insured through my partners’ insurance. I have Part A. I plan to retire at 70 and collect Social Security then. My partners’ insurance told me that I can stay on the insurance until they retire. Is that considered creditable coverage for Part B?
Yes, this would be considered creditable coverage.
Get Free Help Understanding Creditable Coverage
The Medicare rules and regulations regarding creditable coverage can be a little intimidating, considering all the penalties.
It would be prudent to seek guidance from a licensed insurance agent that can assist you in navigating the options available. Contact us today, or complete our online rate form to see rates in your area now.