- On April 14, 2025
On April 7, 2025, the Centers for Medicare & Medicaid Services (CMS) finalized instructions regarding changes to the Medicare Part D program that take effect in 2026. These updates, stemming from the Inflation Reduction Act of 2022, affect how employer-sponsored prescription drug plans will be evaluated for “creditable coverage” status.
What is Creditable Coverage?
Employers offering prescription drug benefits to individuals eligible for Medicare Part D must disclose whether their coverage is “creditable.” This means the plan is expected to be as good as, or better than, the standard Medicare Part D benefit in terms of overall value.
CMS provides several ways for employers to assess this:
- For fully insured plans: Employers can ask their insurance carrier whether the coverage qualifies as creditable.
- For self-funded plans or if the insurer provides no determination, employers can use either a simplified or actuarial method, depending on the plan’s structure.
Updates to the Simplified Plan
CMS is implementing a revised, simplified determination method for 2026 to better align with the enhanced Medicare Part D benefits introduced by the IRA. The key change is an increase in the expected coverage value: plans must now be structured to cover at least 72% of participants’ prescription drug costs, up from the previous 60%, to meet the creditable coverage standard.