On April 2, 2026, the Centers for Medicare & Medicaid Services (CMS) finalized previously proposed rules that:
- Exempt certain account-based plans, including Health Reimbursement Arrangements (HRAs) and Individual Coverage HRAs (ICHRAs), from Medicare Part D creditable coverage notice requirements; and
- Increase the actuarial value threshold used to determine whether prescription drug coverage is considered creditable beginning in 2027.
Applies To:
- Employers sponsoring an HRA or ICHRA
- Employers offering prescription drug coverage where creditability must be determined using a simplified actuarial method
Go Deeper:
HRA/ICHRA Exemption from Creditable Coverage Notices
CMS finalized a rule exempting certain account-based plans from:
- Providing annual Notices of Creditable (or Non-Creditable) Coverage to Medicare Part D-eligible individuals, and
- Reporting creditable coverage status to CMS each plan year
This exemption applies to account-based arrangements that may reimburse prescription drug expenses, including:
- Health Reimbursement Arrangements (HRAs), including ICHRAs
- Health Savings Accounts (HSAs)
- Flexible Spending Accounts (FSAs)
While this change reduces administrative burden for these plan sponsors, it does not apply to traditional group health plans. Employers sponsoring group health plans must continue to provide required notices and report creditability status annually, as required since 2006.
Revised Actuarial Value Percentage
CMS also finalized an increase to the actuarial value threshold used to determine whether prescription drug coverage is creditable.
Under the revised simplified determination method:
- Beginning in 2027, plans must cover at least 73% of expected prescription drug costs to be considered creditable (meaning participants pay no more than 27% on average).
- Additional incremental increases are expected for 2028 and 2029, with the threshold ultimately reaching 75% by 2030.
It is important to note:
- Employers are not required to offer creditable prescription drug coverage; however, they must accurately disclose whether coverage is creditable or non-creditable.
- Most employers rely on insurance carriers, third-party administrators (TPAs), or pharmacy benefit managers (PBMs) to make this determination.
- If an employer performs its own analysis, actuarial tools must be updated to reflect the new 73% threshold for 2027 and future indexed increases.
Key Compliance Reminder
Regardless of how creditability is determined, employers must:
- Provide Medicare-eligible individuals with the appropriate notice (Creditable or Non-Creditable), and
- Report creditability status to CMS annually (unless exempt, as outlined above)