Medicare Part D, the prescription drug benefit program, is undergoing some changes in 2025 due to the Inflation Reduction Act (IRA). One important aspect affected is “creditable coverage,” which is relevant for those with employer or retiree drug plans. Let’s explore what’s changing and what you need to know.

What is Creditable Coverage?

Creditable coverage means your current drug plan (through your employer or a retiree plan) is at least as good as the standard coverage under Medicare Part D. This is crucial because if you delay enrolling in Part D due to having creditable coverage, you won’t face late enrollment penalties when you eventually sign up. Without creditable coverage, you may incur penalties when you join Part D later.

How is the IRA Impacting Creditable Coverage?

The IRA is enhancing Medicare Part D by making it more comprehensive, which in turn raises the bar for what qualifies as “creditable coverage.” The standard Part D plan’s actuarial value (a measure of plan vs. your cost-sharing) is increasing. Consequently, some plans considered creditable in 2024 might not meet the new standard in 2025 unless they improve their benefits.

What Should Insurers and Benefit Providers Do?

Insurers and benefit providers must re-evaluate their plans to ensure they still align with the new, higher standard for creditable coverage. If they fall short, they’ll need to enhance their benefits to remain creditable. They have a few options: improving their existing plan’s benefits, switching to an Employer Group Waiver Plan (EGWP), offering a defined contribution plan, or seeking the Retiree Drug Subsidy (RDS).

I’m enrolled in a plan through private insurance or employer benefits – what should I do?

As a plan holder, pay close attention to any notices from your plan regarding creditable coverage for 2025. If your plan loses its creditable status, enroll in Medicare Part D during the next enrollment period to avoid penalties. If you’re unsure about anything, contact your plan provider or HR department. If you’re nearing Medicare eligibility, carefully consider your prescription drug coverage options.

What if I’m Already Enrolled in a Medicare Part D Plan?

If you’re already enrolled in a Part D plan you’re already taking care of your prescription drug coverage through Medicare. These changes mainly impact people who are delaying enrollment in Part D because they have creditable coverage through their employer or former employer. If your carrier does not terminate that plan for 2025, you should receive updates on what is changing to make sure it aligns with the new Part D regulations.

However, it’s still a good idea to stay informed. Pay attention to any communication from Medicare about potential changes to Part D benefits or costs. You can also reach out to your plan provider if you have any questions about your specific coverage.

Remember:

• These are changes to Medicare Part D due to the IRA.
• These changes could affect individuals with employer or retiree drug plans.
• Stay informed and be prepared to make necessary changes to your coverage.
• If you have any concerns about whether your coverage will be creditable — and you’re eligible for Medicare — ensure you contact a licensed agent at SmartConnect who can help you evaluate your current coverage, and what options you have going forward.

By staying informed and taking proactive steps, you can ensure that you have the right prescription drug coverage to meet your needs in 2025 and beyond.

Related Resources:

• CMS: Creditable Coverage & Part D Guidance
• CMS: 2025 Part D Redesign Program Instructions
• CMS: 2025 Part D Redesign Program Instructions Fact Sheet