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On April 7, 2025, the Centers for Medicare and Medicaid Services (CMS) released the Final Part D Redesign Program Instructions for 2026, detailing changes from the Inflation Reduction Act of 2022 that affect employer-sponsored prescription drug coverage.
Employers offering prescription drug coverage to Medicare Part D-eligible individuals must notify them and CMS if their coverage is creditable, meaning it meets or exceeds Medicare Part D standards. CMS’ existing guidance provides several methods for determining creditable coverage:
CMS is finalizing a new method to align with the enhanced Part D benefits under the IRA, as detailed in its Draft Part D Redesign Program Instructions. Under the new guidelines, group health plans must cover at least 72% of prescription drug costs to qualify as creditable coverage, up from 60%.
CMS will allow the use of the simplified determination method for 2025 for group health plan sponsors not applying for the retiree drug subsidy (RDS).
In 2026, non-RDS group health plans can choose between the existing or revised simplified determination methods to assess if their prescription drug coverage is creditable.
Employers face no penalties for offering non-creditable prescription drug coverage, which can still benefit employees. However, it's crucial for individuals to know if their coverage is creditable. Medicare-eligible individuals with non-creditable coverage who delay enrolling in Part D may incur higher premiums later.
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