The Centers for Medicare & Medicaid Services (CMS) requires employers that offer prescription drug coverage to notify Medicare-eligible health plan participants whether their coverage is creditable or non-creditable. Prescription drug coverage is considered creditable if the benefits pay, on average, at least as much as Medicare Part D prescription drug coverage.
2026 simplified determination methodologies
For calendar year 2026, employers* may use one of two simplified determination methodologies to determine creditable status. Groups unable to use either determination option are required to perform more robust actuarial equivalence testing. For fully insured and most level-funded plans, the carrier generally makes the creditable coverage determination on the plan sponsor's behalf.
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Revised Determination |
Existing Determination |
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Rx coverage |
Provides reasonable coverage for brand, generic and biologic prescriptions |
Provides drugs for brand and generic prescriptions |
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Retail pharmacy access |
Provides reasonable access to retail pharmacies |
Provides reasonable access to retail pharmacies |
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Plan expense responsibility |
Plan pays at least 72% of participants’ prescription drug expenses, on average |
Plan pays at least 60% of participants’ prescription drug expenses, on average |
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Additional plan-design requisites |
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Stand-alone/non-integrated plans must satisfy an annual benefit maximum or actuarial expectation requirement. Integrated plans must also meet the $250 deductible, $25,000 annual maximum and $1 million lifetime maximum requirements. |
*Plan sponsors participating in the CMS Retiree Drug Subsidy Program are not able to use a simplified determination methodology to determine creditable coverage status.
Who must receive a notice?
Employers must provide a creditable or non-creditable coverage notice to all Medicare-eligible individuals by October 15, 2026, including:
- Active employees and their Medicare-eligible dependents.
- Retirees and their Medicare-eligible dependents.
- COBRA participants and their Medicare-eligible dependents.
- Medicare-eligible individuals covered under the employer's prescription drug plan.
There is no employer penalty simply for offering non-creditable prescription drug coverage. However, Medicare-eligible individuals who delay enrolling in Medicare Part D while covered by non-creditable prescription drug coverage may incur a late enrollment penalty. Employers must still determine their plan's creditable coverage status, provide required notices to Medicare-eligible individuals and complete the applicable CMS disclosure.
What should employers do?
- Confirm the creditable or non-creditable status of your prescription drug coverage.
- Identify all Medicare-eligible individuals who must receive a notice.
- Distribute the appropriate notice by October 15, 2026.
- Retain documentation of the determination and notice distribution.
Model notices are available to download from CMS.
Online disclosure also required
An online disclosure requires employers to verify whether their company’s prescription drug coverage is creditable or non-creditable as defined by CMS. The disclosure requirement must be completed no later than 60 days after the beginning of a plan year. This is an annual requirement.
For additional information, contact your Bukaty benefits consultant at 913.345.0440.
