What Is Creditable Coverage for Medicare

For Medicare to consider a health plan to be creditable coverage, it must provide benefits at least as good as those Medicare provides. When a person has creditable coverage, they may delay enrollment in Medicare without accruing penalties. Below, we review common forms of coverage and discuss their creditability for Medicare.

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Examples of Creditable Coverage Under Medicare

If you are approaching Medicare eligibility and wish to delay your Medicare Part B without penalty, you must have creditable coverage. Some of the most common types of creditable coverage are:

If your employer or union covers more than 20 people, your health plan is creditable coverage for Medicare. Additionally, the same is true when you are on your spouse’s union or large group health plan. Thus, you will have creditable coverage for Medicare as well.

What is Creditable Coverage for Medicare Part D?

Prescription plans are the most common type of creditable coverage. A plan is creditable for Medicare Part D if it meets four qualifications.

  • Pays at least 60% of the prescription cost
  • Covers both brand-name and generic medications
  • Offers a variety of pharmacies
  • Does not have an annual benefit cap amount or has a low deductible

If you are eligible for Medicare Part D but delay enrollment, you accrue a penalty for each month you are eligible but do not enroll. This penalty will be assessed when you enroll in the future and you will need to pay it, in addition to your premium, each month you have Medicare Part D.

What is Creditable Coverage for Medicare Part B?

It is common to delay Medicare Part B enrollment due to creditable coverage. However, delaying Medicare Part B without creditable coverage has a different result. Once eligible for Medicare, if you do not enroll in Medicare Part B, the Medicare Part B penalty increases incrementally for every year you lack this coverage.

Thus, you pay the penalty cost plus your premium each month once you finally enroll in Medicare Part B.

The Medicare Modernization Act requires insurers whose policies may or may not include prescription drug coverage to notify Medicare-eligible policyholders whether their coverage is creditable for Medicare.

Entities Required to Provide Proof of Creditable Coverage for Medicare

  • Group health plans
  • Department of Veterans Affairs (VA)
  • Unions
  • Federal, state, and local governments

Notice of Creditable Coverage

The Notice of Creditable Coverage works as proof of your coverage when you first become eligible for Medicare. Those who have creditable coverage through an employer or union receive a Notice of Creditable Coverage in the mail each year.

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This notice informs you that your current coverage is creditable. Keep the notice filed safely with your personal documents for easy access. It comes in the mail annually each September before the Annual Enrollment Period begins.

It is essential to keep track of this notice, as it will be required when enrolling in Medicare Part B after your Initial Enrollment Period. However, if you misplace the notice, you can obtain a new copy through your benefits administrator.

What Happens if You Do Not Have Creditable Coverage?

If you delay Medicare enrollment without credible coverage, you must pay a late enrollment penalty in addition to your premium. Therefore, delaying beyond 63 days without creditable coverage may result in higher monthly costs.

The penalty for Medicare Part D is 1% of the national base beneficiary premium times the number of months you went without creditable coverage. In addition, the Part B penalty is 10% for every 12-month period you go without coverage. Neither of the penalties ever go away. Hence the importance of understanding your coverage type to avoid penalties.

Many employees are under the impression that their group health plan through work will allow them to delay enrollment in Medicare until they retire. Yet, if you work for an employer with fewer than 20 employees, your group health insurance will not be creditable for Medicare.

Don’t be like Bob, who assumed his health plan with his small company would cover him until retirement at 70. Now, he is responsible for paying the Medicare Part B penalty indefinitely.

Examples of Coverage that is NOT Creditable Under Medicare

  • Veterans Benefits
  • Retiree plans

When is COBRA Creditable for Medicare?

COBRA can be creditable for Medicare Part D, but COBRA is NOT creditable under Medicare Part B.

Is Veterans Benefits Creditable Coverage?

VA benefits are only creditable coverage under Medicare Part D. VA benefits are NOT creditable under Medicare Part A and Part B. This is something that is very often miscommunicated to veterans.

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Even if you have medical coverage under the VA, there are still many reasons to enroll in Medicare coverage to work with your VA benefits.

Is TRICARE or CHAMPVA Creditable Coverage?

Whether you have CHAMPVA or TRICARE, you will need to enroll in Medicare Part A and Part B when you are first eligible for Medicare to keep your CHAMPVA or TRICARE benefits and avoid late enrollment penalties.

How to Find Out if Your Coverage is Creditable Under Medicare

Once you know which parts of Medicare you currently have creditable coverage for, you can determine the parts of Medicare in which you'll need to enroll. Otherwise, you may not be able to delay Medicare without penalties.

Medicare guidelines and regulations regarding creditable coverage can be a little intimidating. At MedicareFAQ, we're fluent in the terminology and have the knowledge and resources to help you quickly navigate the Medicare maze.

Whether you have creditable coverage or not, we can help. Give us a call today or use our rate form to see all your Medicare options in one place.

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Jagger Esch

Jagger Esch is the Medicare expert for MedicareFAQ and the founder, president, and CEO of Elite Insurance Partners and Since the inception of his first company in 2012, he has been dedicated to helping those eligible for Medicare by providing them with resources to educate themselves on all their Medicare options. He is featured in many publications as well as writes regularly for other expert columns regarding Medicare.

50 thoughts on “What Is Creditable Coverage for Medicare

  1. Dear Sir, I have been on my husband’s insurance plan for the last nine-plus years. We have had an HSA plan with $6000 deductible. The prescription coverage kicked in when the deductible was met. Is that considered “Creditable Prescription Drug Coverage”? Many thanks, Gail Harrison

    1. Hi Gail! This depends on the plan you have. Some are considered creditable coverage under Part D, but not all. I would call your carrier, they should be able to tell you if it’s creditable coverage or not.


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