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Employers that provide prescription drug coverage are not required to offer creditable coverage but are required to determine whether the coverage is creditable and to communicate creditable status annually to eligible individuals and to the Centers for Medicare & Medicaid Services (CMS). 

Prescription drug coverage is creditable if the actuarial value of the coverage equals or exceeds the actuarial value of Medicare Part D coverage. 

Most plan sponsors have the option to determine creditable status by obtaining an actuarial determination or by using a “simplified method” as defined by CMS. CMS final instructions released earlier this week set forth revised criteria for the simplified method. A plan must meet all the following to be creditable: 

• Must provide reasonable coverage for brand name and generic prescription drugs and biological products; 
• Must provide reasonable access to retail pharmacies; and 
• Must be designed to pay on average at least 72% (formerly 60%) of participants�� prescription drug expenses. 

For 2026 plan years, CMS will permit plans to use either the existing simplified determination methodology or the revised simplified determination methodology described above. The final instructions can be found .

Employer/Plan Sponsor Action

Plan sponsors typically rely on their carrier, TPA/PBM or broker to calculate creditable coverage status during renewal each year. Due to this, it’s unlikely employers will need to take any action related to the changes described herein. As a reminder, employers/plan sponsors have existing compliance obligations related to Part D which includes the CMS Part D Creditable Coverage notification and disclosure.

ob���� will continue to monitor regulator guidance and offer meaningful, practical, timely information. This material should not be considered as a substitute for legal, tax and/or actuarial advice. Contact the appropriate professional counsel for such matters. These materials are not exhaustive and are subject to possible changes in applicable laws, rules, and regulations and their interpretations.

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