The Inflation Reduction Act of 2022 (IRA) continues to reshape the Medicare Part D program in 2026 and 2027, with changes aimed at lowering prescription drug costs for beneficiaries that may also affect employer-sponsored drug coverage.
2026 Updates
- Annual out-of-pocket (OOP) limit: Increased to $2,100, reflecting an inflation adjustment to the $2,000 cap introduced in 2025.
- Updated liability structure: Part D liability is revised to account for negotiated prices on selected drugs.
- Creditable coverage flexibility: For 2026 only, non-retiree drug subsidy (RDS) plans may use either the previous simplified method or the revised simplified method to determine creditable coverage.
2027 Updates
- Coverage gap eliminated: The Part D “donut hole” remains eliminated under the redesigned benefit.
- OOP limit continues: The annual OOP cap stays in place and will continue to be adjusted for inflation. Once the limit is reached, enrollees pay no additional cost sharing for covered drugs.
- New creditable coverage requirement: Beginning in 2027, non-RDS plans must use the revised simplified method to determine creditable coverage.
Employer Considerations
Employers offering prescription drug coverage to Medicare-eligible individuals should review these changes, particularly the updated creditable coverage requirements. It’s also a good time to evaluate prescription drug cost trends and existing cost-management strategies. Contact us to learn more.