New Simplified Rules for Medicare Part D Creditable Coverage—What HR Professionals Need to Know in 2025

A New Era of Simplicity for Creditable Coverage Notices

In the first and second quarters of 2025, the Centers for Medicare & Medicaid Services (CMS) finalized changes to how employer-sponsored group health plans determine if their prescription drug coverage is “creditable” for Medicare Part D purposes. For HR professionals, this marks a shift to simplified processes, more precise actuarial determinations, and clearer compliance pathways.

What’s Changed?

Under previous rules, plan sponsors were required to determine whether their prescription drug coverage was creditable—meaning the plan was expected to pay, on average, at least as much as standard Medicare Part D coverage. This involved actuarial analysis, especially for plans that didn’t closely resemble Medicare Part D in benefit design.

There are currently two sanctioned methods to find out if coverage is creditable for Medicare Part D: a simplified determination method and an actuarial method. Many employer plan sponsors use the former to assess creditable coverage status for their prescription drug coverage.

Key Features of the Simplified Determination Method

The updated method outlines several plan design features deemed creditable by default. If your prescription drug plan meets these criteria, you can use the simplified determination from CMS and skip the actuarial certification process.

Here’s a quick overview of those plan design features:²

• Offers reasonable coverage for brand-name and generic prescription drugs and biological products
• Provides reasonable access to retail pharmacies
• Designed to pay on average at least 72% of participants’ prescription drug expenses
  • This is up from 60% due to the Inflation Reduction Act (IRA), which significantly enhanced the Part D benefit
  • Note that the simplified determination methodology no longer reflects actuarial equivalence with defined standard Medicare Part D coverage due to enhancements to the Part D benefit under the IRA

CMS has also published model notices and checklists to help employers self-assess whether they meet the simplified criteria.^{3, 4} These include guidance on high-deductible health plans and plan design recommendations exceeding the 72% threshold.

The notices from CMS clarify that for calendar year 2026 only, non-Retiree Drug Subsidy (RDS) group health plan providers can choose to use either the current simplified determination method or the revised simplified determination method to decide whether or not their prescription drug coverage is creditable.¹

For 2027, the notice states that CMS intends no longer to allow the use of the current simplified determination method. If finalized, non-RDS group health plan providers will need to use either the actuarial method or the revised simplified determination method for the 2027 calendar year.¹

As a reminder, employer plan sponsors will generally determine the creditable coverage status of their group health plans as outlined below:

• Fully insured plans: Employers who sponsor fully insured group health plans can typically rely on their insurance carriers to determine the creditable status of their prescription drug coverage.
• Self-funded plans: For employers with self-funded health plans (including level-funded plans), your employee health and benefits consulting team can help determine the creditable status of your prescription drug coverage if the plan’s third-party administrator or pharmacy benefit manager does not provide that determination.

Why This Matters for HR

HR professionals and those overseeing benefits for employers with Medicare-eligible employees or retirees, are responsible for distributing creditable coverage notices each year. That usually occurs by October 15, before the annual Medicare open enrollment period begins.

Failing to accurately determine and disclose creditable status can result in significant employee confusion and even financial penalties for Medicare-eligible individuals who delay Part D enrollment based on incorrect assumptions about their employer coverage.

The simplified rules reduce the burden on HR teams by:

• Eliminating the need for actuarial reports in many cases
• Improving compliance efficiency
• Helping employers stay audit-ready with clearer documentation standards

Action Items for HR Teams in 2025

1. Review your current prescription drug plan designs.

   Check whether your plans meet one of the five simplified criteria. If so, document your findings internally.

2. Update your annual creditable coverage notices.

   CMS has issued revised model notices aligned with the new rules—be sure to use them.³

3. Coordinate with legal and compliance teams.

   Make sure the new simplified rules are reflected in your compliance calendar and employee communications protocols.

4. Educate employees.

   Use this opportunity to refresh your Medicare communications strategy—especially for employees approaching age 65 or already Medicare-eligible.

Looking ahead

While CMS has indicated that actuarial determinations will still be required for “non-standard” plan designs (e.g., high-deductible or limited coverage), most employer-sponsored group health plans should now fall within the simplified framework.

If you’re not already preparing to implement the new simplified creditable coverage rules, now’s the time. With the 2025 open enrollment season approaching, leveraging these changes can streamline compliance and enhance employee support.