• Creditable coverage is defined as health insurance that meets or exceeds what Medicare covers.
  • If you have creditable coverage, you can delay signing up for Medicare without penalty.
  • If you lose your creditable coverage, you must sign up for Medicare within 8 months; otherwise, penalties and late fees may apply.

If you’re eligible for Medicare but already have health insurance, you may be wondering whether you should keep it or switch.

It’s important to understand what creditable coverage means — or you may wind up paying lifelong penalties for keeping your current insurance.

Creditable coverage is defined as health insurance or prescription drug coverage that meets or exceeds the coverage provided by Medicare.

Not all health or prescription drug plans provided through groups or employers meet the criteria for creditable coverage. The size of your employer or your spouse’s employer may affect whether your coverage qualifies.

In this article, we’ll give an in-depth look at creditable coverage, so you can accurately decide your best next steps.

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Creditable coverage refers to health insurance that covers as much as or more than Medicare Part A and Part B. Creditable coverage also refers to prescription drug benefits that cover as much as or more than Medicare Part D.

Some providers of creditable coverage include:

Should I enroll in Medicare?

If you have creditable coverage and are eligible for Medicare, you won’t receive a penalty if you postpone Medicare enrollment.

However, many people do enroll in at least Part A, since it’s typically premium-free and may reduce hospitalization costs.

Some people also choose to enroll in Part B as soon as they’re eligible. If the monthly Part B premium is less than what you’re paying for your current plan, this may be a better option for you.

If you enroll in Medicare, have creditable coverage, and keep your insurance, your current provider would be your primary insurer. Medicare would be your secondary insurer.

You may decide to let your current insurance lapse.

Before you do, make sure to compare your current out-of-pocket costs to those associated with Medicare to see which plan offers you the best and least expensive coverage.

It may also help to compare your:

  • deductibles
  • copays
  • premiums

You must also ensure that you have prescription drug coverage, either through your current insurance plan or through a Part C (Medicare Advantage) or Part D plan to avoid penalties.

When and whether you should sign up for Medicare can be a challenging decision, especially if you don’t know the specifics of your current coverage. Talking with your plan provider directly or reaching out to your local State Health Insurance Assistance Program (SHIP) can help clarify the details, so you can decide which coverage option is best for you.

What is a Notice of Creditable Coverage form?

Once you become eligible for Medicare Part D, your current insurer is required to let you know if your insurance provides creditable coverage for prescription drugs.

If your current insurance is creditable, you’ll receive a creditable coverage disclosure notice. Keep this letter. You’ll need to show it to Medicare when you enroll to avoid having to pay late enrollment penalties.

If your current insurance is not creditable, you’ll receive a noncreditable coverage disclosure notice.

These notices typically mail out each September.

Insurance plans through Indian Health Services aren’t required to provide a Notice of Creditable Coverage form.

Medicare defines a “large employer” as any company that has 20 or more full-time employees. You may be covered through your own large employer or through your spouse’s large employer.

Is it creditable for original Medicare?

If you have health insurance through a large employer, it will qualify as creditable coverage for Medicare Part A and Part B, provided it covers as much as or more than original Medicare.

Is it creditable for Part D?

Most large employers include prescription drug coverage in their health insurance plan.

If you have prescription drug coverage through a large employer, it will qualify as creditable Part D coverage, provided it covers as much as or more than Medicare Part D.

Medicare defines a “small employer” as any company that employs fewer than 20 full-time employees. Part-time employees and independent contractors are not included in this number.

Is it creditable for original Medicare?

Most small employers don’t provide health insurance that qualifies as creditable coverage for Part A and Part B.

There are, however, exceptions to this. Ask your human resources (HR) department or your insurance provider if your coverage qualifies as creditable coverage.

Is it creditable for Part D?

The same is also true for Part D. Most small employers do not provide prescription drug coverage that qualifies as creditable coverage.

There may be some exceptions. Your HR department or insurance company should be able to provide you with the most accurate information.

Veterans Affairs (VA) health insurance is available for people who served in the active military, naval force, or air service and didn’t receive a dishonorable discharge. There are minimum duty requirements that apply. Family members may receive these benefits as well.

There are several different types of VA health insurance programs. They include:

  • Veterans Health Care Program
  • TRICARE and TRICARE for Life
  • Spina Bifida Health Care Benefits Program
  • Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA), for the families of veterans

VA health insurance covers medical care you receive at a VA facility. If you receive medical care outside of a VA facility, it must be authorized first by the VA or it won’t be paid through your VA insurance.

Is it creditable for original Medicare?

VA health insurance doesn’t qualify as creditable coverage for original Medicare (Part A and Part B).

Keep in mind that your VA coverage and your Medicare coverage can work together, if you choose to have both. The VA pays for services you receive at a VA facility, and Medicare pays for services you receive at a non-VA facility.

However, you’ll still have to pay for Medicare cost sharing — such as deductibles or copayments — even if you have VA coverage.

Is it creditable for Part D?

VA benefits qualify as creditable Part D coverage. You can change to Medicare Part D, keep your current VA drug coverage, or have both.

The VA covers only medications received through a VA pharmacy or facility. Medicare Part D covers prescriptions received at most non-VA pharmacies.

Not all forms of health insurance qualify as creditable coverage. Those that don’t qualify include:

  • COBRA (Continuation of Health Coverage). COBRA is designed to prolong your health insurance coverage if you’re no longer employed. It isn’t creditable coverage for original Medicare but may be creditable coverage for Part D. If you decide to take COBRA, you must enroll in Medicare when you become eligible to avoid lifetime penalties.
  • Retiree insurance. Some insurers offer specific types of health insurance to their employees who retire. These plans don’t count as creditable coverage.
  • Medicaid. Medicaid isn’t creditable coverage for Medicare. You may, however, have Medicaid and Medicare simultaneously. This is known as being dual eligible. In this case, Medicare would be your primary insurance.

Many Medicare-eligible people have excellent insurance coverage they wish to keep, without signing up for Medicare. You have the right to defer Medicare enrollment.

If you have creditable coverage and don’t want to sign up for Medicare, there are no forms to fill out. Simply don’t sign up.

If you choose to sign up at a later date, you won’t receive penalties or fees if you have current creditable coverage.

If you lose your current coverage, you should enroll in Medicare within 8 months. This is known as a special enrollment period. Not signing up during this window will cause you to incur late enrollment penalties.

Keep in mind that declining Medicare coverage when you are eligible will cause you to forfeit your Social Security or Railroad Retirement benefits.

Part A

If you are eligible for premium-free Part A, it may make sense to sign up for it, even if you like your current insurance.

If you’re not eligible for premium-free Part A and choose to sign up at a later date, your monthly premium may go up by 10 percent.

You’ll be required to pay this higher premium amount for twice the number of years you didn’t sign up.

Part B

For Part B, you’ll be required to pay a late enrollment fee of an extra 10 percent of your monthly premium amount for each 12-month period you didn’t sign up. This penalty lasts for as long as you have Medicare Part B coverage.

Part D

For Part D, you’ll pay a permanent late enrollment penalty. This fee is 1 percent of the average monthly prescription premium cost, multiplied by the number of months you were late enrolling.

If you receive a late enrollment penalty and believe that you had creditable coverage, you may appeal the penalty. You typically have 60 days to submit your appeal once you’ve received the penalty notification letter from Medicare. The letter will explain exactly how much time you have and where to send the necessary documents.

  • Creditable coverage refers to health insurance that covers at least as much as — or more than — Medicare.
  • If you have creditable coverage, you may choose to keep it instead of or in addition to Medicare.
  • If you lose your current coverage, this triggers a special enrollment period during which you can sign up for Medicare without penalty.
  • If you don’t have creditable insurance coverage and delay signing up for Medicare, late fees and penalties may apply.

The information on this website may assist you in making personal decisions about insurance, but it is not intended to provide advice regarding the purchase or use of any insurance or insurance products. Healthline Media does not transact the business of insurance in any manner and is not licensed as an insurance company or producer in any U.S. jurisdiction. Healthline Media does not recommend or endorse any third parties that may transact the business of insurance.

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