Medicare defines “creditable coverage" as coverage that is at least as good as what Medicare provides. Therefore, creditable drug coverage is as good as or better than Medicare Part D.
Why Creditable Drug Coverage Matters in Medicare
Creditable drug coverage matters because it may allow you to delay enrolling in Medicare and avoid the Part D late enrollment penalty. The penalty is charged if you enroll in a Medicare Part D plan after your Initial Enrollment Period (IEP) ends and don’t qualify for an exception.
What to Know About Medicare Part D When Still Working
On-screen text: What to know about Part D when working past 65.
On-screen text: Phil Moeller, Author and Medicare Expert
Hi, I'm Phil Moeller. I write articles and books about retirement and healthcare. I've written a lot of articles about Medicare over the years. I want to talk today about making sure you handle your Part D drug coverage properly.
This can get tricky with Medicare so let me break down a few things. First of all, whether you have sufficient coverage.Secondly, and most importantly, whether or not you've enrolled in that coverage at the right time. These things seem pretty self-evident but they're not. They can have some hidden traps for you.
On-screen text: How do I know if my employer drug plan is good?
In the issue of the quality of your health coverage, Medicarerules say that an employer health plan's drug coverage must be at least as good as a typical Part D drug plan. So, if it is and you have employer drug coverage, it's fine. You can keep your employer drug coverage.
However, if you don't have employer drug coverage that's creditable, either because your employer plan doesn't provide good coverage or your employer plan may no longer provide drug coverage, especially if you work for a small employer with fewer than 20 employees. So, your first job is to say, "What is my drug coverage going to be like when I turned 65?"
Your employer is supposed to provide you a statement certifying whether or not the drug coverage in your plan is creditable compared with a Part D plan. Make sure you get that statement because it's going to protect you down the road if you have any differences of opinion.
On-screen text: What if my employer plan isn’t creditable?
So, let's assume that your plan is not creditable and you have to get Part D. Even though you're going to keep your employer plan, you've got to get a Part D drug plan. In this case, you have some other considerations to worry about.
When you get that Part D plan, you may also have to give up your HSA plan if you have one because to get Part D, you have to get Part A of Medicare. And Part A of Medicare invalidates continued contributions to an HSA. Although, you can still use the money that's in your plan, you can't put any new money in. You just need to be aware of that.
On-screen text: When do I need to enroll in a Part D plan?
The other issue I want to make sure you're aware of is that you enroll in Part D on a timely basis. There are two approaches here. In the first case, you may need to enroll in Part D if your employer's drug coverage is not creditable when you turn 65.
If that's the case, you have a seven-month initial enrollment period that three months before your 65th birthday and extends three months after. Even though you have seven months, I want to make sure you don't be in a situation where you're not covered at all.
So, you need to worry about health insurance, in this case Part D drug plan, taking effect so that you don't have a period of time when you're not covered for your medications. Even if you're complying with the initial enrollment period, that's not as important, in my mind, as it is that you have good coverage throughout.
On-screen text: What happens when my employer coverage ends?
The second situation is when you continue to work with employer drug coverage that is creditable, but then you need to retire or you lose your job, and you then will need to get Part D.
When that happens, you will have what's called an eight-month special enrollment period that begins when you lose your employer coverage. That's in Medicare enrollment coverage, but the enrollment period for Part D is a little bit different. It really only extends for about two months after you lose your employer coverage. So, I want to make sure you don't unintentionally fail to get Part D on a timely basis.
When you do enroll in Medicare, you need to make sure you have an employer statement that testifies that you've had employer health coverage from the time you turned 65 until you've decided to either retire or you've lost that coverage. If you don't have that certified statement, you might end up paying a penalty and you want to avoid that.
On-screen text: So, what’s the takeaway?
Let's recap what we've learned about Part D drug plans. If your employer drug coverage is not creditable, you will need to get a Part D drug plan and do so on a timely basis. If your employer plan does have creditable drug coverage, you don't have to worry about getting Part D.
However, when you do retire or otherwise lose that insurance, you will have to get a Part D plan and you need to do that on a timely basis as well. If you don't sign up for Part D when you need to, you could get hit with substantial late enrollment penalties which you'd like to avoid.
On-screen text: What if I still have questions?
I'm Phil Moeller. I thank you for spending some time with me today. I hope I've answered some of your questions.
On-screen text: MedicareMadeClear.com If you have some more questions, you can go to MedicareMadeClear.com to get additional information.