On April 6, 2026, CMS issued a final rule updating several Medicare program regulations. Among other changes, the final rule excludes all account-based plans from Part D creditable coverage reporting.
Group health plan sponsors who offer prescription drug coverage to people eligible for Part D (such as employees, retirees, COBRA participants, and beneficiaries) must inform these individuals and CMS whether their coverage is deemed creditable. CMS noted that account-based plans, such as Health Reimbursement Arrangements (HRAs) and Individual Coverage HRAs (ICHRAs), do not provide prescription drug coverage. Instead, employers use them to help individuals save on healthcare costs through pre-tax contributions and reimbursements, usually as supplements to other coverage. Therefore, CMS concluded that applying creditable coverage concepts to these plans is inapplicable and burdensome. Accordingly, for coverage beginning January 1, 2027, account-based plans such as HRAs and ICHRAs are no longer required to provide disclosures of creditable coverage to Medicare Part D-eligible individuals and CMS.
In addition, the final rule updates the simplified process for group health plans not taking the retiree drug subsidy to prove they offer creditable coverage. For most plans with a prescription drug copay schedule, creditable drug coverage can be determined using a non-actuarial test developed by CMS to simplify the process. For coverage beginning January 1, 2027, a plan’s prescription drug benefits will be considered creditable if it: 1) provides reasonable coverage for brand name and generic prescription drugs and biological products; 2) provides reasonable access to retail pharmacies; and 3) is designed to pay on average at least 73% of participants’ prescription drug expenses (which can be updated by the agency in the future).
Employer Takeaway
This is welcome news for employers: for coverage beginning January 1, 2027, account-based plans (including HRAs and ICHRAs) will no longer be subject to the Part D creditable coverage disclosure and reporting requirements. As a result, employers that sponsor account-based plans will find their related administrative burdens much reduced. Employers that include prescription drug coverage in their benefit plans should also review the final rule’s updates to the simplified methodology for determining whether their coverage is creditable.
For more information, view the CMS final rule on Medicare program regulations in the Federal Register.