What Is Creditable Coverage?

In Medicare, you may hear the term “creditable coverage” used every once in a while, especially when you are new to Medicare or plan on delaying your Part B. Having creditable coverage means you can delay enrollment in Medicare without having penalties. But – creditable coverage for Medicare is very specific, so it is very important to determine if your current coverage is creditable or not. Not all coverage is creditable.

Know that you must have creditable coverage for Part B and Part D (if you decide to wait to enroll). What is considered creditable coverage differs between the Part B and Part D, so pay close attention.

Part B

Just as a refresher, Part B is your coverage at a doctor or other healthcare provider offices. It is very important to enroll in Part B at the proper time to avoid a late enrollment penalty. The Part B late enrollment penalty is 10% added to your monthly Part B premium for each 12-month period you were eligible for Medicare Part B but did not enroll or did not have creditable coverage. Since Part B does come at a cost ($170.12 in 2022), this is why some people decide to delay their Part B if they currently have insurance.

Picture this scenario:

At age 65, you decide to delay your Part B because you will remain working, but you go ahead and enroll in Part A since it is free. You hear of many of your neighbors doing this, as well. Then, five years later, you decide you are ready to retire. Now you go to enroll in Part B, and you are then told that since the company you worked for has less than 20 employees, your coverage was not considered creditable for Medicare. Now, you will not be able to enroll until the General Enrollment Period in January, but the coverage will not begin until July. You also discover that you now have to pay a penalty for delaying your Part B coverage that will never go away.

We want you to avoid the scenario above at all costs. That is why it is important to speak with a Medicare advisor who knows your situation. Read further to know what types are considered to be creditable.

Forms of Creditable Coverage:

• Large employer group plans (20 employees or more)
• Union health plans
• Federal Employee Health Benefits (FEHB)

NOT Forms of Creditable Coverage:

• Employer plans with less than 20 people
• COBRA
• Veteran’s Affairs (VA) Coverage

Part D

Part D is coverage for prescription medications you fill at a pharmacy. If you do not have creditable coverage, and enroll at a later time, you will have a Part D penalty that remains forever. The Part D penalty is 1% of the national base premium ($33.37 in 2022) multiplied by the number of months you did not have Part D coverage or creditable coverage.

Forms of Creditable Coverage:

To be creditable for a Part D prescription drug plan, it must meet four requirements:

1. Pay at least 60% of prescription costs
2. Cover both brand name and generic medications
3. Offer a range of pharmacies to choose from to fill your medications
4. Does not have an annual benefit cap or low deductibles

Note: Veterans Affairs (VA) coverage is considered creditable for Part D, but NOT for Part B.

As you can see, when it comes to determining if your coverage is creditable, it is always wise to speak with a licensed insurance advisor who specializes in Medicare. At MWG Direct, you will have one advisor assigned to you. They will be able to speak with you about your specific situation to determine what is best for you. Make sure to schedule an appointment before turning 65. Even better, our services are always free! Give us a call at (877) 759-5762 opt. 2 or email us at direct@morganwhite.com. We look forward to walking you through this next step and being your #1 Retirement and Medicare Resource!