When you prepare for Medicare coverage, you start hearing lots of terminologies that you may not be familiar with. Creditable coverage is one of these.

We’ll explain creditable coverage in a way that will leave you confident that you understand what it is and how it applies to your Medicare coverage.

What is Considered Creditable Coverage For Medicare?

Creditable coverage for Medicare is coverage that’s considered equal or better than the Medicare standard model. If you have creditable coverage, you can opt to delay your enrollments into parts of Medicare without incurring a penalty. The benefits and costs of Medicare should be weighed when deciding which way to go.

The most common use of creditable coverage is to delay Medicare Parts B and/or D.

Creditable Coverage for Part B

Unlike Medicare Part A, Part B requires a monthly premium for most beneficiaries. If you have creditable coverage for Medicare Part B, you can delay starting your Part B and paying for it. If you don’t have creditable coverage, you’ll incur penalties for delaying Part B coverage.

Coverage that qualifies as creditable for Medicare Part B includes large employer group plans, federal employee health plans, and union coverage plans. You should check with your benefits coordinator for your plan to find out for sure if your plan qualifies.

Creditable Coverage for Part D

Medicare Part D covers your prescriptions — if you don’t take it when you’re first eligible, you’ll see penalties. However, you can delay Part D without a penalty with creditable coverage.

Coverage considered creditable for Part D must offer a variety of pharmacies and cover both brand and generic drugs. In addition, the insurance must pay at least 60% of the drug costs, have a low deductible, and cannot have a benefit cap.

Examples of creditable coverage for Part D would include the following:

  • Employer coverage from large groups
  • VA coverage
  • Federal insurance
  • Union insurance
  • Any drug plans that meet the creditable coverage criteria

You should check with your plan’s benefits administrator to confirm if your coverage is creditable before delaying Medicare Part D coverage.

Creditable Coverage Notice

Some insurers are required by law to send a notice of creditable coverage. This was part of the Medicare Modernization Act. Companies that may or may not have creditable drug coverage must notify Medicare-eligible beneficiaries annually.

These usually come out around September. If you plan on delaying coverage for Medicare, you must save this notice. Medicare can require a copy of this letter to prove creditable coverage status. Failure to provide proof of creditable coverage could result in a permanent monthly penalty.

If you lose your notice, you can request another from your benefits administrator.

FAQs

Is Tricare considered creditable coverage?

Tricare isn’t considered creditable coverage for Medicare Part B but it is for Medicare Part D.

Are VA benefits considered creditable coverage?

VA benefits are creditable coverage for Medicare Part D only.

Can I use my COBRA as creditable coverage?

COBRA isn’t creditable for Medicare Part B. COBRA coverage can be creditable for Medicare Part D.

Is my retirement plan considered creditable coverage for Medicare?

Typically retiree plans aren’t considered creditable coverage for Medicare Part B. However, they can be creditable for Medicare Part D.

What happens if I delay my Medicare Part B and don’t have creditable coverage?

You’ll receive a 10% penalty for every 12 months you don’t enroll in Medicare Part B and don’t have creditable coverage. This is a permanent penalty which applies to your Medicare Part B premium.

What happens if I delay my Medicare Part D and don’t have creditable coverage?

You’ll accrue a penalty of 1% for every month that you don’t take a drug plan and don’t have creditable coverage. The penalty applies to your Medicare drug coverage and never goes away.

How can I find out if my current coverage is considered creditable for Medicare?

You should reach out to your plan’s benefits administrator. They’ll let you know if your insurance is creditable coverage.

Why do I need creditable coverage?

The only time this applies is if you intend to delay your Medicare. Without credible coverage, delaying your Medicare coverage will result in a penalty.

Can the Notice of Creditable Coverage be emailed instead of mailed?

Yes, if the company has a valid email address and has prior consent.

Will I get a notice of creditable coverage if my employer plan does not have drug coverage?

No. Suppose your plan doesn’t include drug coverage. In that case, there’s no requirement for companies to provide the annual Notice of Creditable Coverage. Since you don’t have drug coverage, you must take a Part D prescription drug plan when first eligible for Medicare. Failure to do so will result in a penalty.

Why would I want to delay Medicare coverage?

In most cases, this would be a situation where you plan to work past the age of 65. A couple of reasons you may want to delay would be if group coverage is:

  • The employer is paying 100% of the premiums.
  • You have a younger spouse or a child reliant on your group coverage. Your retirement plan has better coverage than you can get from Medicare.

Even if you’re healthy, it’s wise to seek the advice of a licensed agent that specializes in Medicare coverage.

Need Help Looking For Medicare Supplemental Plans?

Because of the potential penalties, the choice to delay Medicare coverage is not one to take lightly. Luckily, we have licensed insurance agents that can arm you with the facts you need to confidently come to the right conclusion for your personal situation.

Agents specializing in Medicare are standing by to assist you with your Medicare questions and needs. Give us a call or fill out our online request form to get access to the best rates for your area.

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by Lindsay Malzone, Lindsay Malzone is the Medicare expert for Medigap.com. She's been contributing to many well-known publications as an industry expert since 2017. Her passion is educating Medicare beneficiaries on all their supplemental Medicare options so they can make an informed decision on their healthcare coverage.