One of my neighbors, a retired school teacher, recently asked me if she should hold onto her prescription drug coverage that she has through her former employer or switch to Medicare Part D when she turns 65. As soon as I started to explain that it all depends on whether or not she has “creditable coverage,” her eyes began to go cross-eyed. So let me see if I can make this easier to understand for you and her.
Creditable coverage is coverage that is considered as good as or better than the standard coverage provided by Medicare Part D. Standard Medicare prescription drug coverage is actually very good, so if your employer’s plan is not that great—for example, if it has a very high deductible, very high co-payments, or a small list of covered drugs (formulary)—it may not be considered creditable coverage. If that’s the case, then you will need to switch to Medicare Part D (or a Medicare Advantage plan with prescription drug coverage, MA-PD) when you become eligible.
On the other hand, if your employer’s prescription drug benefit is considered creditable coverage, it’s wise to stick with that plan. In fact, in some cases you run the risk of losing your employer-group prescription benefit and your employer-group health insurance if you join a Medicare Part D plan!
How do I know if I have creditable coverage or not?
The easiest way to find out if you have creditable coverage is to look through the plan materials provided by your employer-group plan. At least once a year, your employer must send you a letter called a Notice of Creditable Coverage (or Notice of Non-Creditable Coverage). If you cannot find this letter, contact your plan’s benefits advisor and request the document be mailed or e-mailed to you.
If the letter states that the coverage being offered by your employer is “as good or better” than Medicare’s Part D coverage, you have creditable drug coverage. Make sure you keep a copy of this document on file. You should also request a copy of this document every year so you have proof that you have maintained creditable drug coverage. If you ever need to join a Medicare Part D plan in the future, you will need to provide these documents to the plan so you do not incur a late enrollment penalty.
However, if the drug coverage that is being offered through your employer is not as good as Medicare’s standard coverage, you will need to evaluate your options carefully. First, talk with your employer’s benefit advisor to find out if you can keep your group health insurance and enroll in Medicare Part D. If you can, ask for this in writing. As I mentioned before, some employer-group plans will not let you keep your health coverage if you elect Part D rather than sticking with the drug coverage provided in the health plan.
I really can’t stress enough how important it is to talk to your plan’s benefit advisor before making any moves at all. Every employer has different kinds of coverage and different rules pertaining to that coverage. Family and friends can give you some advice, but only your benefit advisor can give you the facts.
Reminder: Medicare Open Enrollment is now through December 7th.