What Employers Must Send, and What's New for 2026
If your business offers health insurance that includes prescription drug coverage, there's an important annual deadline coming up. Before October 15, you need to tell your Medicare-eligible employees whether your drug coverage counts as “creditable.” It's a short notice, but skipping it can cost your employees real money down the road. Here's what you need to know, including an important change that may affect you this year.
What is the Creditable Coverage Notice?
Each year, employers that offer prescription drug coverage must let Medicare-eligible plan members know whether that coverage is creditable or non-creditable. Creditable means your drug coverage is expected to pay, on average, at least as much as standard Medicare Part D coverage. Non-creditable means it pays less.
This matters because of timing. If someone delays enrolling in Medicare Part D while they have creditable coverage through you, they avoid paying a late enrollment penalty later. But if they go 63 days or more without creditable coverage and don't realize it, they can face higher Part D premiums for the remainder of their plan years. The notice gives them the information they need to make the best decisions regarding their plan.
Who Needs to Send One
The requirement is broad. It applies to employers of all sizes that offer prescription drug coverage to Medicare-eligible individuals, whether your plan is fully-insured or self-funded, and regardless of grandfathered status. In other words, if your health plan includes drug coverage and any of your members could be eligible for Medicare, this applies to you.
Who Should Receive It
You must provide the notice to all Medicare-eligible individuals covered under your plan, regardless of whether they are actually enrolled in Medicare or not. That includes active employees, retirees, and COBRA participants who qualify for Medicare, along with their covered spouses and dependents. They may qualify according to age (65 and up), disability, or by having end-stage renal disease.
Because you may not always know which of your members are Medicare-eligible, a common best practice is to send the notice to everyone on the plan. It's simpler and helps ensure no one is missed.
What Changed for 2026
Recent Medicare Part D updates under the Inflation Reduction Act have made drug coverage more generous, including a new annual cap on out-of-pocket costs. This has raised the bar for what counts as creditable coverage.
CMS introduced a stricter method for testing creditable status for 2026. While some plans may still use older standards for now, the new test will eventually become the rule. Consequently, some plans that were creditable in previous years, particularly high-deductible health plans, may no longer qualify as creditable.
The main lesson here is: Don't assume your plan's status from last year still holds. It's best to confirm it every year.
How to Confirm Your Plan's Status
If your plan is fully insured, your insurance carrier usually determines creditable status and shares it with you, often around the time of renewal. If your plan is self-funded or level-funded, the responsibility generally falls to you, working with your third-party administrator, pharmacy benefit manager, or an actuary.
Once you know your status, CMS offers free sample notices in English and Spanish that you can adapt and use, so you don't have to draft it from scratch. You can also fold the notice into your open enrollment materials, as long as members receive it within the prior 12 months.
Don't Forget the Separate CMS Disclosure
The October 15 notice to employees is distinct from the requirement to disclose your plan's status to CMS via an online form. This CMS disclosure is due within 60 days of the plan year's start (March 1 for calendar-year plans). It's a good idea to keep both dates on your compliance calendar to ensure full alignment.
What to Do Now
With the October 15 deadline approaching, now is the time to confirm your plan's status and notify Medicare-eligible members. While employers must provide this notice before October 15, keep in mind that licensed agents can begin assisting beneficiaries with plan comparisons as early as October 1. If you are unsure how the 2026 changes affect your business, we are here to help you navigate the requirements and avoid costly surprises for your employees.
