The Centers for Medicare & Medicaid Services (CMS) runs Medicare for the U.S. Government. “Creditable Coverage” is the fancy term CMS came up with to determine if the prescription medicine coverage (Rx) of your employer-sponsored group health plan is as good as or better than the minimum Part D (Rx) plan. If it’s not as good as the minimum Part D plan and it is “non-creditable coverage” then Medicare eligible employees/dependents will have to pay a big penalty.

CMS requires that employers notify Medicare eligible employees and dependents whether their prescription drug coverage is creditable or non-creditable. Every year, before October 15th, employers must send Medicare eligible employees a Disclosure Letter with this information. In addition, employers must submit an online Disclosure to CMS Form. It is important that everything is completed before October 15th because the Medicare Drug Plan open enrollment takes place from October 15th through December 7th. During this time, employees/dependents can shop around for a different drug plan.

Nobody wants to pay a penalty. For people who are enrolled in Medicare, the penalty for having non-creditable coverage is one percent per month of the Part D (Rx) “national base rate” for each month one has had non-creditable coverage. If someone had non-creditable coverage for a year, then he/she would pay a penalty of 12 percent every month for as long as that person has Medicare. The government applies the penalty because they don’t want people to have limited or no Rx coverage and wait to sign up for coverage when they get really sick. The penalty prevents people from gaming the system. To avoid this penalty, it is important that Medicare Eligible enrollees enroll in creditable coverage.

Our goal is to keep you in compliance with all the rules and regulations relating to your employee benefits. When you set up a medical policy with Benefits Cafe, we will send you an annual email that includes the names of the employees/dependents that are Medicare eligible, the Creditable Coverage Disclosure Letter and instructions on how to submit the Disclosure to CMS Form. Along with this information, we will include our contact information in case you have any questions or would like to schedule a call to go over the requirements. would love to work on your behalf as your agent/consultant/broker. Give us a call (800) 746-0045.