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What is Creditable Coverage for Medicare?


For a health plan to be considered creditable coverage for Medicare, it must provide benefits at least as good or better than those the Medicare plan you wish to delay offers.

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When you have creditable coverage, you may delay enrolling in  Medicare without accruing late enrollment penalties. Typically, creditable coverage allows you to delay Medicare Part B and Medicare Part D.

Below, we review common forms of coverage and discuss their creditability for Medicare.

Examples of Creditable Coverage Under Medicare

If you are approaching Medicare eligibility and wish to delay Medicare Part B without penalty, you must have creditable health coverage. Some of the most common types of creditable coverage include:

If your employer or union covers more than 20 people and you are actively employed, your group health plan is creditable coverage to delay Medicare Part B. Additionally, the same is true when you are on your spouse’s union or large group health plan while they are employed. Thus, you will also have creditable coverage for Medicare under this circumstance.

What is Creditable Coverage for Medicare Part B?

It is not uncommon to delay Medicare Part B due to creditable coverage. However, delaying Medicare Part B without creditable coverage can be detrimental to your wallet in the future. Once eligible for Original Medicare, if you do not enroll in Medicare Part B, the Medicare Part B penalty increases incrementally for every year you lack creditable coverage.

Thus, you will pay the penalty plus your Medicare Part B premium each month once you finally enroll in Medicare Part B.

To know if your coverage is creditable or not, you should receive a letter from your insurance carrier each year to notify the Medicare-eligible members of your household of the credibility of your coverage.

What is Creditable Coverage for Medicare Part D?

Prescription drug plans are the most common type of creditable coverage. A plan is creditable for Medicare Part D if it meets four qualifications.

  • Pays at least 60% of the prescription cost
  • Covers both brand-name and generic medications
  • Offers a variety of pharmacies
  • Does not have an annual benefit cap amount or has a low deductible

If you are eligible for Medicare Part D but delay enrollment, you accrue a penalty for each month you are eligible but do not enroll. This penalty will be assessed when you enroll in the future and you will need to pay it, in addition to your premium, each month you have Medicare Part D.

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Entities Required to Provide Proof of Creditable Coverage for Medicare

If you decide to keep your current health coverage once you reach Medicare eligibility, your plan is required to provide proof of creditable coverage for Medicare. The following entities must provide this proof:

  • Group health plans
  • Department of Veterans Affairs (VA)
  • Unions
  • Federal, state, and local governments

Once you decide to enroll in Original Medicare, you may need to show this proof to avoid the late enrollment penalty.

Notice of Creditable Coverage

The Notice of Creditable Coverage works as proof of your coverage when you first become eligible for Medicare. Those who have creditable coverage through an employer or union receive a Notice of Creditable Coverage in the mail each year.

This notice informs you that your current coverage is creditable. Keep the notice filed safely with your personal documents for easy access. It comes in the mail each September before the Medicare Annual Enrollment Period begins.

It is essential to keep track of this notice, as it is required when enrolling in Medicare Part B after your Medicare Initial Enrollment Period. However, if you misplace the notice, you can obtain a new copy through your benefits administrator.

What Happens if You Do Not Have Creditable Coverage?

If you delay Medicare enrollment without credible coverage, you must pay a late enrollment penalty in addition to your monthly premium.

The penalty for Medicare Part D is 1% of the national base beneficiary premium times the number of months you went without creditable coverage. In addition, the Medicare Part B penalty is 10% for every 12-month period you go without coverage. Keep in mind, these penalties never go away. Hence, the importance of understanding your coverage type to avoid penalties.

Many employees are under the impression that their group health plan through work will allow them to delay enrollment in Medicare until they retire. Yet, if you work for an employer with fewer than 20 employees, your group health insurance will not be creditable for Medicare.

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Don’t be like Bob, who assumed his health plan with his small company would cover him until retirement at 70. Now, he is responsible for paying the Medicare Part B penalty indefinitely.

Examples of Coverage NOT Creditable for Medicare

When it comes to creditable coverage, not all plan types qualify. You will want to be sure that your health care plan is creditable for Medicare Part B when delaying Part B coverage.

Examples of coverage that is not creditable for Medicare Part B include:

  • TRICARE
  • Veterans Benefits
  • COBRA
  • CHAMPVA
  • Retiree plans

Additionally, when looking at Medicare Part D, you will want to be sure your coverage is creditable to avoid the late enrollment penalty.

Examples of coverage that is not creditable for Medicare Part D include:

·       Prescription discount programs

·       Prescription coupon programs

·       Drug coverage that does not cover at least as much as Medicare Part D

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In some cases, coverage may be creditable for Medicare Part D but not creditable for Medicare Part B. Thus, it is easier to delay Part D without being subject to the late enrollment penalty.

When is COBRA Creditable for Medicare?

COBRA can be creditable for Medicare Part D, but COBRA is NOT creditable under Medicare Part B. If you lose group or employer coverage and receive COBRA benefits, you will have an eight-month Special Enrollment Period to sign up for Original Medicare without penalty.

Once this Special Enrollment Period ends, you must wait until a valid enrollment period and will be subject to the late enrollment penalty.

Are Veterans Benefits Creditable Coverage?

VA benefits are not creditable coverage for delaying Original Medicare. However, these benefits are creditable for Medicare Part D. This is something that is very often miscommunicated to veterans.

Even if you have medical coverage under the VA, there are still many reasons to enroll in Medicare coverage to work with your VA benefits. Remember, your VA benefits only work at a VA facility. So, if you receive care outside of the VA health system, Medicare will help cover those costs.

How to Find Out if Your Coverage is Creditable Under Medicare

Once you understand if your coverage is creditable or not, you will have an idea of the Medicare parts you can delay in order to avoid a penalty. Otherwise, you may need to pay a late enrollment penalty if you do not enroll in Medicare as soon as you are eligible.

The guidelines and regulations concerning creditable coverage can be a little intimidating. At MedicareFAQ, we are fluent in the terminology and our agents have incredible knowledge and resources to help you quickly navigate your coverage.

Whether you are inquiring about creditable coverage or wish to review additional plans, we can help. Give us a call today or use our rate form to see all your Medicare options in one place.

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Jagger Esch

Jagger Esch is the Medicare expert for MedicareFAQ and the founder, president, and CEO of Elite Insurance Partners and MedicareFAQ.com. Since the inception of his first company in 2012, he has been dedicated to helping those eligible for Medicare by providing them with resources to educate themselves on all their Medicare options. He is featured in many publications as well as writes regularly for other expert columns regarding Medicare.

50 thoughts on “What is Creditable Coverage for Medicare?

  1. Dear Sir, I have been on my husband’s insurance plan for the last nine-plus years. We have had an HSA plan with $6000 deductible. The prescription coverage kicked in when the deductible was met. Is that considered “Creditable Prescription Drug Coverage”? Many thanks, Gail Harrison

    1. Hi Gail! This depends on the plan you have. Some are considered creditable coverage under Part D, but not all. I would call your carrier, they should be able to tell you if it’s creditable coverage or not.

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