When we look at Medicare Creditable Coverage, we are really looking at how to avoid more penalties as it relates to Medicare. Unfortunately, the system allows for so many minor missteps and pitfalls that most folks are not aware of, nor does Medicare adequately inform or educate people on. The consequence of not having Creditable Coverage for a period of time is a lifetime of financial penalties for Medicare. This again is where your good local Independent Agent comes in. Our job is to constantly research and understand all the potential hazards related to creditable coverage and educate you on how to avoid them. Insert here your local rockstar agent……
What Does Creditable Coverage Mean?
Creditable Coverage is essentially medical and drug coverage by other means than Medicare that is ‘equal to or better than’ Medicare coverage. When an individual becomes eligible for Medicare, many times they have a choice between Medicare coverage and other types of coverage they are eligible for or already using. For example, some are still working and have the option of staying on an employer plan. Some people may have COBRA coverage in place for a period of time. Others may have VA benefits or access to a Federal Retiree program of health benefits. There are also many individuals utilizing a Marketplace plan or Private individual health plan. It is important to know what you have and whether it is deemed ‘Creditable’ in Medicare’s eyes.
Employer Coverage – The Package Deal
This is the most common health coverage we encounter with a new client looking to evaluate whether or not the coverage is considered Creditable and whether or not they should leave the employer plan and pick up their Medicare coverage. Early on, the rule of thumb agents hear about is regarding the size of the employer. Basically, we are told if the employer has greater than 20 employees, it is considered a large employer and provides Creditable Coverage. This would mean you can stay on the employer plan even after you turn 65 and pick up Medicare later with no penalty. WARNING – we have found in real life cases that this is not necessarily true! In some cases, with a large employer, and we mean HUGE, the medical coverage is considered Creditable for Part B of Medicare; BUT the prescription drug coverage is NOT considered Creditable for Part D of Medicare. Read that again. In essence, even though the medical and drug coverage is a ‘package deal’ with the employer, the creditability for Medicare is separate. And most HR departments do not realize this. So, if you stayed on this type of employer plan and later enroll in Medicare, you do not have a penalty for Part B, BUT you may incur a penalty for Part D – the prescription drug coverage.
Other Types To Include….
We’ll break it down easily here:
COBRA – not Creditable at all,
Marketplace/ACA – not Creditable at all,
Private Individual Plans – not Creditable at all
VA Benefits – Creditable for Part D (prescription drug) but NOT Part B (medical)
Federal Retiree Plans – Same as VA
How Will I Know What To Do?
To avoid any lifetime penalties, it is important to know when you turn 65 whether or not your current coverage is Creditable so you can decide if you should continue on it or enroll in Medicare. Do not assume what you have is good and not consider Medicare at 65.
Verify with your employer’s HR Department that the employer plan is Creditable for BOTH Medicare A and B. You will want to specify Medical and Drug coverage. Even if you work for a very large employer, verify it with them. In addition, the employers are required to notify you when you and/or a covered dependent turn 65 as to whether the coverage is Creditable. Many people throw away or discard these letters. So be sure to look for documentation from your employer! In fact, they are supposed to send the communication annually thereafter as well since their benefits may change year over year. Keep these communications for possible later use!
There are many options to consider and ultimately avoid any future penalties! Reach out to a local Independent Agent to help you navigate these complexities. We will protect you and save you money! Email me at carrie@cdi-cares.com or check me out on www.cdi-cares.com