Medicare Part D Creditable Coverage: The 72% Test Is About to Be Mandatory

Every October, employers send a notice to Medicare-eligible employees saying whether the prescription drug coverage on the group plan is creditable, meaning at least as good as standard Part D. For years that notice was a formality. It is not anymore.

What changed

The Inflation Reduction Act capped Part D out-of-pocket costs at $2,000 in 2025, and that cap is $2,100 for 2026. Standard Part D got a lot more generous, which means the bar for an employer plan to be "as good as" Part D got higher.

CMS responded by revising its simplified determination method. Under the old simplified test, a plan was creditable if it was expected to pay at least 60% of participants' prescription drug costs. The revised test raises that to 72%. For 2026, CMS let plans use either method. For 2027, the revised method is expected to be the only one, and the threshold may move again.

Why employees care

If your plan is not creditable and a Medicare-eligible employee stays on it instead of enrolling in Part D, they pay a late enrollment penalty for the rest of their life once they do enroll. That penalty is 1% of the national base premium for every month they went without creditable coverage. Your 66-year-old controller who delayed Part D because the group plan was supposedly creditable will not be happy to find out it was not.

What to do before October 15

Ask your carrier or PBM for a written creditable coverage determination for 2026 under the revised method, not just the old one, so you know where the plan stands going into 2027. High-deductible plans and plans with high pharmacy coinsurance are the ones most likely to fail. If the plan is not creditable, the notice has to say so clearly, and I would also send a plain-language note to anyone 65 or older explaining what that means for their Part D decision.

Then get the notice out by October 15, keep a copy, and do not forget the online disclosure to CMS within 60 days of the start of the next plan year, which is March 1 for a calendar-year plan.

Looking ahead

If your plan fails the 72% test, the fix is usually a modest change to the pharmacy benefit for the following year: lower the deductible on prescriptions or improve the coinsurance tier. That costs something. But it is cheaper than the alternative, which is a separate Medicare-coordinated option for your older employees, and both are better than a notice that says "not creditable" to a group of people you would like to keep.

This is general guidance, not legal advice. If you have not seen a creditable coverage determination for your plan this year, ask for one, or ask us to.