CMS finalized the CY 2026 Part D Redesign Program Instructions on April 7, 2025, raising the actuarial value floor in the simplified creditable coverage determination from 60% to 72%. The agency derived the new threshold from 2023 Part D claims experience adjusted to projected 2026 benefit levels.
The number that matters more is 73%, the projected 2027 threshold, because 2026 is a transition year in which the old 60% test is still available and most employers are using it.
Key Takeaways
- 60% to 72% is a 12 percentage point jump in the actuarial value floor, driven by the enrichment of the standard Part D benefit rather than by any change in employer plan design.
- $2,100 is the 2026 Part D out-of-pocket cap, up from $2,000, above which cost sharing drops to zero. The HSA-compatible HDHP minimum family deductible is $3,300, which sits above the cap.
- 73% is the projected CY 2027 threshold, at which point CMS intends to withdraw the old simplified method entirely, leaving the revised test or a full actuarial equivalence analysis.
- Roughly 27% is the drug actuarial value of a $3,300-deductible HDHP with 20% coinsurance for a member spending $5,000 a year, against a 72% requirement.
- $38.99 per month is the 2026 national base beneficiary premium, and the late enrollment penalty of 1% of it per uncovered month is permanent for the employee, not the employer.
What Changed and When the Bridge Ends
Coverage is creditable when its actuarial value equals or exceeds that of the standard Part D benefit, and the standard benefit got substantially richer. The Inflation Reduction Act eliminated the coverage gap as of January 1, 2025 and replaced unlimited catastrophic-phase cost sharing at 5% with a hard out-of-pocket cap, $2,000 in 2025 and $2,100 in 2026.
The old 60% floor was set when Part D still had a donut hole and 5% catastrophic coinsurance. CMS recalculated it against the redesigned benefit and landed at 72%, while also removing obsolete test parameters such as annual and lifetime benefit maximums that the ACA had already made irrelevant.
For CY 2026 only, non-RDS group health plans may use either the existing 60% method or the revised 72% one. That bridge is why the scale of the problem is not yet visible. CMS has stated it intends to propose eliminating the existing method for plan years beginning in CY 2027, at a projected 73% threshold, leaving employers with the revised simplified test or a full actuarial equivalence analysis. RDS plans always used equivalence testing, so for them the change is that the benchmark they test against moved.
Brown & Brown's analysis of the final instructions warns the changes "could cause many existing employer-sponsored plans considered creditable in 2024 or 2025 to no longer meet minimum requirements in 2026, subject to an actuarial review."
Why the HDHP Arithmetic Does Not Reach 72%
The failure is structural rather than marginal, and the deductible is the whole of it.
| Plan Design Element | Typical HDHP | Standard Part D (2026) |
|---|---|---|
| Deductible | $3,300 (family) | $615 |
| Coinsurance after deductible | 20% to 30% | 25% (initial coverage phase) |
| Out-of-pocket maximum | $8,050 (family, IRS limit) | $2,100 |
| Cost sharing after OOP max | $0 | $0 |
| Annual/lifetime maximums | None (ACA) | None |
The IRS minimum deductible for HSA-compatible HDHPs is $1,650 self-only and $3,300 family in 2026, so a family-tier deductible exceeds the entire $2,100 Part D out-of-pocket cap by more than $1,000. The plan pays nothing on drug claims below that deductible, then typically applies 20% to 30% coinsurance above it. Part D by comparison runs a $615 deductible, 25% coinsurance in the initial phase, and zero cost sharing past the cap.
Run it for a member with $5,000 of annual drug spend against a $3,300 deductible and 20% coinsurance. The plan pays ($5,000 minus $3,300) times 0.80, or $1,360, which is roughly 27% of drug spending against a 72% requirement. That is not a gap a preventive-drug safe harbor closes. EHD Insurance's reading is that all HSA-compatible HDHPs potentially lose creditable status for 2026 on this mismatch alone.
The one defensible lever is deductible allocation. An HDHP runs a single combined medical and pharmacy deductible, and only part of it is attributable to drug claims. If pharmacy is 25% of a plan's total claims, the allocated pharmacy deductible on a $3,300 family plan is roughly $825, which changes the actuarial value materially. The methodology has to be supportable from the plan's own claims experience, because an aggressive split is the part an auditor will test. Hylant's advisory flags the same population, plans with higher member cost sharing and HDHPs in particular, as carrying the most risk.
The Penalty Accrues to Someone Who Cannot See It
The employer bears the redesign cost. The employee bears the consequence of not doing it, and the two are separated by a notice cycle.
An individual who goes 63 or more continuous days without creditable coverage after their Initial Enrollment Period accrues a penalty of 1% of the national base beneficiary premium, $38.99 for 2026, for each full uncovered month, added to their Part D premium permanently. Five years of non-creditable employer coverage is 60 uncovered months, a 60% loading, roughly $23.40 a month. Across a 20-year retirement that is about $5,616 before annual base premium increases.
Disclosure notices go out before October 15 each year, and a mid-year change to non-creditable status requires a new notice within 30 days. The timing is where the exposure sits. An employer using the 60% test through 2026 and failing at 73% for its 2027 plan year notifies employees ahead of the October 2027 open enrollment. Those employees will have spent the intervening period believing coverage that met one standard met the one that now applies.
The rulemaking itself is also not finished. CMS stated an intent to eliminate the old method for 2027, and as of May 2026 that proposal has not been finalized; the 73% figure is a projection from the annual actuarial value recalculation and can move. So the plans most exposed are being asked to redesign benefits against a threshold that is not yet fixed, in the one year when the old test still lets them pass without doing the work.
Further Reading
- Medicare Part D 2026: Year-One Redesign Data Flips Key Actuarial Assumptions: The first full year of CMS Part D financial data under the IRA redesign, showing 14% unfavorable bid variance and 22% catastrophic phase utilization overshoot that quantifies the benefit enrichment driving the creditable coverage threshold increase.
- CBO Flags a $500 Billion Part D Spending Gap: How the Part D redesign's cost overruns compound into a decade-long projection gap, with the benefit enrichment documented here driving both plan-level and federal spending variance.
- GLP-1 Drug Trend Is Repricing Employer Health Plans: The GLP-1 cost pressure that compounds the creditable coverage challenge, as high-cost specialty drugs increase the actuarial value gap between employer plans and the enriched Part D benefit.
- ACA Carrier Exits Reprice Shrinking Risk Pools: The broader health plan market dynamics that interact with employer drug benefit design decisions and creditable coverage compliance.
- 3 Million Face Medicare Advantage Disenrollment in 2026: The Medicare Advantage disruption that pushes more beneficiaries into standalone Part D plans where the creditable coverage determination becomes directly relevant to their enrollment decisions.
Sources
- CMS: Final CY 2026 Part D Redesign Program Instructions (April 7, 2025)
- Brown & Brown: CMS Adopts Final CY 2026 Part D Creditable Coverage Redesign Program Instructions
- Hylant: Medicare Part D Changes May Cause Some Employer Plans to Lose Creditable Coverage Status
- EHD Insurance: CMS Updates Simplified Method for Determining Creditable Coverage Status for 2026
- Baldwin Group: Navigating Medicare Part D 2026 Creditable Coverage Changes and Disclosure Essentials
- Mintz: IRA Update, Redesigning Part D for CY 2026
- Risk Strategies: CMS Finalizes Revised Simplified Determination Method for 2026
- KFF: Analyzing Changes in Medicare Part D Enrollment for 2026
- ASPE: Medicare Part D Enrollee Out-of-Pocket Spending
- CMS: Creditable Coverage Overview and Model Notices