There’s a lot to navigate when it comes to healthcare coverage, whether you’re getting coverage from an employer or Medicare.  Credible coverage is essentially health insurance that is “as good as” a potential insurer down the road.

For example, if you work for an employer now and have health insurance with them, but you apply for Medicare when you turn 65, it’ll benefit you if your current health insurance is “as good as” or “credible” as Medicare health insurance. If it isn’t, you may have to pay a penalty for it down the road.

Why Credible Coverage Matters

Medicare has it so that if you enroll in Medicare Part D coverage after your enrollment date (three months before and after you turn 65), then you’ll be penalized for the delay.  As of now, you’ll have to pay 1 percent higher each month you wait to enroll, so if you wait 12 months to enroll, your monthly premium will be 12 percent higher.

The reason Medicare does this is because some people will try to play the system, not signing up for Medicare Part B if they aren’t needing prescriptions right away.  They figure they’ll sign up later when they do need pricey prescriptions.

Legitimate Delays

The hike in the premium due to late enrollment kind of puts a stop to most people from doing this. However, not everyone who isn’t privy to enrolling in Part D right away is trying to play the system. Some legitimately have excellent prescription plans through their spouse, employer, or some other plan.  They figure since they already have good coverage, why should they have to pay Part D premiums?

This is where creditable coverage comes in. If you’re in a situation where you have similar prescription drug coverage, you’ll get credit for such coverage. Then, later on when you do decide to enroll in Medicare Part D, you’ll only have to pay the normal premium, plus a one-time late fee. You won’t have to pay that 1 percent hike for each month delayed. 

How To Tell If You Have Creditable Coverage?

If you wonder if your current health plan counts as creditable coverage, talk to your health insurance provider. They should be able to tell you or send you notice of whether you have creditable coverage or not.  If you do get a notice, hold onto it for when you do enroll in Medicare.

What About Medicare Part B?

The same concept applies to Part B. However, the penalty for late enrollment if you don’t have a current health insurance provider is different. Your premium would increase 10 percent for each year you delay, so if you delay two years, your premium would increase 20 percent and you’d pay that increase each month.

But if you have creditable coverage through your spouse’s insurance provider, or another source, you will not be charged extra. You’ll still have to pay a one-time penalty though when you do enroll in Medicare Part B down the road. 

Read more about creditable coverage at the official government site for Medicare. 

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