Changes to Medicare Part D Creditable Coverage Determination

The Inflation Reduction Act of 2022 (“IRA”) made several changes that will affect the structure of the Medicare Part D prescription drug benefit program beginning in 2025. The Centers for Medicare and Medicaid Services (“CMS”) released final instructions around the redesign of the program and:

• acknowledge that some group health plans offering prescription drug benefits that have met Part D creditable coverage requirements in prior years may no longer meet those requirements for plan years beginning in 2025.

• permit group health plans to continue to use the simplified determination method for determining creditable (or non creditable) status of the prescription drug program in 2025.

Background

Employers sponsoring group health plans with prescription drug benefits are required to notify their Medicare Part D-eligible participants and beneficiaries as to whether the drug coverage provided under the plan is “creditable” or “non-creditable.” This notification must be provided prior to October 15th each year. Also, following the plan’s annual renewal (among other times), the employer must notify CMS of the creditable status of the drug plan.

Group health plan coverage is considered “creditable” if the actuarial value of the coverage provided equals or exceeds the value of standard prescription drug coverage provided under Medicare Part D. For most employer-sponsored group health plans, there are two ways to determine creditable status: use CMS’s simplified determination tool, or obtain a certification from an actuary.

The CMS tool allows a plan to determine creditable status based on plan design features such as deductible and out-of-pocket max, while the actuarial certification method requires an analysis of claims information.