Medicare Part D Creditable Coverage: What Employers Need to Know Before 2027
2026 is the last year employers can use the simplified method for determining whether prescription drug coverage is “creditable” under Medicare Part D. Starting in 2027, plan sponsors must adopt a revised evaluation approach to confirm actuarial equivalence, and the Inflation Reduction Act has already raised the bar for what qualifies, meaning some plans that passed before may not anymore.
This matters: employees who enroll in non-creditable coverage face a permanent late-enrollment penalty if they defer Medicare enrollment. For plans with a January 1 anniversary date, creditable coverage disclosure notices must reach Medicare-eligible employees before October 15. Employers should proactively review plan designs now to prepare for the transition.
The Surge in Level-Funding and Self-Funding
A growing number of midsize employers in New Jersey and Pennsylvania are stepping away from traditional fully insured plans in favor of level-funded and self-funded models. The appeal is straightforward for companies with healthier-than-average workforces: these structures can reduce the premium markup carriers build in for risk, while letting employers hold onto pharmacy manufacturer rebates that would otherwise go to the carrier.
Click here to learn more about why NJ employers explore self-funded health plans to save.
New Jersey’s New Medicaid Penalty Tax
New Jersey has introduced a new state-level charge aimed at employers with 50 or more workers who have staff enrolled in Medicaid, intended to help offset the cost to the state’s budget. The policy is drawing national attention as a potential model other states could adopt. Midsize employers near that 50-employee mark should start monitoring how many part-time or lower-wage staff rely on Medicaid, since that count could trigger the new assessment.
Compliance Corner! 2026 MLR Rebate Checks to Be Issued Soon to Fully Insured Plans
Insurance carriers must meet minimum medical loss ratio thresholds, spending 85 cents of every large-group premium dollar (80 cents for small group) on medical care and quality improvement. Carriers that fall short owe rebates to fully insured employers by September 30, 2026. Employers must then distribute any portion attributable to employee contributions within three months and handle the resulting tax impacts, evaluating allocation options under ERISA fiduciary guidelines. Self-funded plans are exempt.