Medicare creditable coverage is health insurance that is at least as good as Medicare. Insurance companies may offer non-creditable and creditable coverage.
Many Medicare-eligible individuals have primary and secondary insurance. Medicare creditable coverage may be secondary insurance when provided through an approved company.
What is Medicare Creditable Coverage
Medicare creditable coverage is qualifying health insurance or drug plans. Creditable coverage meets a list of requirements.
A variety of government programs are also considered creditable coverage. Other plan types are individual, group, and student health plans.
Creditable coverage determines levels of coverage and costs linked to pre-existing health conditions. Also, creditable coverage may decide when you must pay the late enrollment penalty.
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
- Local governments
Medicare Part D Creditable Coverage
Prescription plans are most common for creditable coverage. A Part D plan is a creditable coverage as long as it first meets four qualifications.
Creditable Part D must pay at least 60% of the prescription cost. Also, it must cover both brand-name and generic medications.
Plans must offer a variety of pharmacies. Creditable coverage must not have an annual benefit cap amount, or it must have a low deductible.
The notice of creditable coverage comes in the mail each year to members that are NOT using Medicare. You may have drug coverage through an employer, union, or other group health plan.
Further, you may want to hang on to the notice in case you decide to join a Part D plan in the future. The Notice of Creditable Coverage applies to prescription drug policies.
Also, it includes Medicare Advantage plans and Medigap.
Medicare Part B Creditable Coverage
Under Part B, you pay a monthly premium cost for the part that pays for medical services. Part B covers doctor visits, outpatient services, and Durable Medical Equipment.
Enroll in Part B when you first become eligible for Medicare. But, you may face a penalty for enrolling late. The only exception is if you have creditable coverage through another plan.
Delaying Part B enrollment is common. Yet, creditable coverage must come from a current employer plan. The Part B penalty is 10% every year that you don’t have creditable coverage.
Then you pay the penalty cost plus your premium when you finally enroll in Part B, and it never goes away.
Creditable Coverage FAQs
Can I stay on my partners’ insurance until they retire?
I’m currently 66 and employed; I have insurance through my spouses’ insurance. I have Part A and plan to retire at 70.
My spouses’ insurance told me that I could stay on the coverage until they retire.
Is that considered creditable coverage for Part B? Yes, this is creditable coverage.
What is Proof of Creditable Coverage for Medicare?
The Notice of Creditable Coverage works as proof for Medicare. So, keeping this notice in a safe place is a good idea.
Proof of coverage notifies new insurances about benefits under an old insurance plan. Meaning, you get credit for the coverage you had before with an outdated policy.
What Happens if you Don’t Have Creditable Coverage?
Delaying past 63 days without creditable coverage may result in higher monthly costs. You must pay the late-enrollment fee.
The penalty is equal to 1% of the “national base beneficiary premium.” Take that number times the number of months you went without Part D or creditable coverage. The total is your late penalty cost.
As long as you have prescription drug coverage, you must pay a late-enrollment penalty. Also, Part D has a monthly premium amount. You must pay both for coverage to apply.
Ann-Marie didn’t have Part D or equal creditable coverage for two years in 2017. Her penalty was $8.55 every month for the entire year.
In 2018 her cost per month was higher. The national base premium amount is subject to change every year. In turn, the value of your penalty may increase over time.
The Part B Penalty is 10% for every year you go without coverage. Neither of the penalties ever go away as long as your enrollment is active.
What’s Considered Creditable Coverage for Medicare?
Health insurance coverage that’s as good as Medicare is creditable coverage. Which means that the plan pays as well as Medicare.
When a person has creditable coverage, they may postpone enrollment in Medicare. Creditable coverage allows these beneficiaries to delay without worrying about the late-enrollment penalty.
The most common type of creditable coverage is a large employer group plan. Meaning, a company employs 20+ people. When working for an employer, you likely receive health coverage through the company.
If the company you work for has more than 20 employees, you have creditable coverage for Medicare. The same is true when you’re on your spouse’s large employer group health plan.
An employer with small group insurance is a company with less than 20 employees. Small group plans may not offer creditable coverage for Medicare Parts A & B., Yet it may be available for Part D plans.
Is Cobra Creditable Coverage for Medicare Part B?
Many reasons surround why you should enroll in Part B instead of or also, COBRA. Some COBRA policies are creditable for drug coverage but not for medical services.
Those with creditable COBRA plans may enroll in Part D using the Special Enrollment Period. Due to the SEP, beneficiaries may find a policy without getting penalized after COBRA ends.
Any credible drug coverage information you get from your policy in a safe place; you may need it in the future.
You may need this information if you join Part D later. Do not send creditable coverage letters or notices to Medicare.
Does my Employer Count as a Creditable?
Employer size determines how Medicare coordinates with employer benefits. Employer coverage is creditable when there are 20+ employees.
An employer with a small group plan has less than 20 employees. Medicare doesn’t consider these insurance groups to be creditable coverage.
So, employer group insurance may include outpatient benefits and prescription drug coverage. In this case, it makes more financial sense to wait to enroll in Part B or Part D.
Get Free Help Understanding Your Medicare
The Medicare rules and regulations about creditable coverage can be a little intimidating. You can avoid hassles by working with an agent.
It would be smart to seek counsel from an insurance agent. Our agents at MedicareFAQ can assist you with your Medicare coverage.
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