Compliance News Week Ending April 11, 2025

In this Article

Final CMS Instructions - Changes to Simplified Method Determinations for 2026

Employers that provide prescription drug coverage are not required to offer creditable coverage but are required to determine whether the coverage is creditable and to communicate creditable status annually to eligible individuals and to the Centers for Medicare & Medicaid Services (CMS).

Prescription drug coverage is creditable if the actuarial value of the coverage equals or exceeds the actuarial value of Medicare Part D coverage.

Most plan sponsors have the option to determine creditable status by obtaining an actuarial determination or by using a “simplified method” as defined by CMS. CMS final instructions released earlier this week set forth revised criteria for the simplified method.

A plan must meet all of the following to be creditable:

Must provide reasonable coverage for brand name and generic prescription drugs and biological products;

Must provide reasonable access to retail pharmacies; and

Must be designed to pay on average at least 72% of participants’ prescription drug expenses.

For 2026 plan years, CMS will permit plans to use either the existing simplified determination methodology or the revised simplified determination methodology described above to determine whether prescription drug coverage under their CY 2026 plans is creditable.

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