What is Creditable Drug Coverage?
The term “creditable coverage” is health insurance or prescription drug coverage that meets certain minimum specifications. Creditable drug coverage refers to the term Medicare uses to describe prescription drug benefits that are at least as good as the current basic Medicare Part D plan that is available.
Medicare Benefits Solutions
Sep 16, 2020
How creditable drug coverage works
Medicare Part D helps lower out-of-pocket costs associated with prescription medications. In order for coverage to be considered creditable, it must meet the same requirements and provide equal or better coverage as Medicare’s most basic prescription plan.
There are a few different requirements that prescription drug plans must fulfill to be creditable. First, the plan must offer coverage for both generic and prescription medications. In addition, the plan must provide the individual with a range of providers to choose from or include the option for mail-order prescriptions. Creditable coverage options must also provide coverage for at least 60 percent of the costs of medications and must have no annual benefit maximum or a low deductible.
How creditable drug coverage may affect your Medicare benefits
When you sign up for Medicare, you will have the opportunity to enroll in prescription drug coverage. If you choose not to enroll in Part D coverage during this initial period and decide later to enroll, you may incur late enrollment fees.
However, if you are have other health insurance at the time you enroll in Medicare through a union or an employer, you may be able to delay enrolling in a Medicare drug plan as long as your current drug coverage is creditable.
If you are currently using alternative drug coverage when it is time to sign up for Medicare, your current insurer is required to provide notice of whether or not your current coverage qualifies as creditable. This notice is mandatory regardless of whether the insurer is functioning as primary insurance or secondary to Medicare.
This notice provides individuals who are eligible for Medicare benefits important information regarding their prescription coverage. The notice of creditable coverage is arguably more important for individuals who do not currently have a creditable plan. If you get notified that your current coverage is not creditable, you will not qualify for delayed enrollment for Medicare prescription drug coverage.
It is important to hold onto any notices you receive from your current health insurance provider and to keep records of all your insurance coverage documents. This documentation may be needed when you sign up for Medicare at a later date to avoid late enrollment penalties.