A regulatory requirement that has long created confusion for HRA plan sponsors and their participants is going away. On April 2, 2026, the Centers for Medicare & Medicaid Services (CMS) issued a final rule officially exempting account-based health plans – including Health Reimbursement Arrangements (HRAs) and Individual Coverage HRAs (ICHRAs) – from Medicare Part D creditable coverage disclosure requirements. The change is effective January 1, 2027.
For employers and third-party administrators (TPAs) who have navigated the annual creditable coverage notice process for HRA participants, this is a meaningful administrative simplification…and a recognition by CMS that the existing rules created more confusion than clarity.
What Were the Old Requirements?
Under regulations in place since 2005, entities providing any form of prescription drug coverage (including group health plans) were generally required to:
- Provide annual “Notice of Creditable Coverage” (or non-creditable coverage) to all Medicare Part D-eligible individuals covered under the plan, and
- Disclose creditable coverage status to CMS each plan year.
The intent was to ensure Medicare-eligible individuals had the information needed to make informed enrollment decisions and to avoid penalties if their existing coverage was non-creditable.
HRAs were swept into this requirement under the prior framework, even though as CMS has now formally acknowledged, their design makes a meaningful “creditable coverage” determination nearly impossible.
Why the Change Makes Sense
The core issue is a structural mismatch. HRAs and ICHRAs are reimbursement accounts – not insurance plans. They don’t directly cover prescription drugs; they provide tax-free funds that employees can use toward qualified medical expenses or individual health insurance premiums (in the case of ICHRAs).
CMS stated that continuing to require creditable coverage notices from these arrangements created more problems than it solved. In particular, the reporting obligation placed administrative burden on employers and TPAs for a disclosure that provided little meaningful guidance to participants.
This change aligns HRAs and ICHRAs with Health FSAs and HSAs, which were already excluded from Part D creditable coverage requirements.
However, the final rule does not change requirements for traditional group health plans that directly offer prescription drug coverage. Those plans (major medical plans with a pharmacy benefit) remain fully subject to the Part D creditable coverage notice and CMS reporting requirements. The exemption is targeted specifically at account-based arrangements that do not provide direct drug coverage.
What Employers and Plan Sponsors Should Do Now
There are two practical considerations between now and January 1, 2027:
- Continue current obligations through the 2026 plan year. Until the effective date of the final rule, all existing Part D creditable coverage disclosure requirements remain in force for HRAs and ICHRAs. Notices must still be provided, and CMS disclosures must still be filed as applicable.
- Work with your TPA and broker to confirm your 2027 compliance posture. Once the rule takes effect, the administrative steps associated with creditable coverage determination and notice delivery for your HRA or ICHRA will no longer be required.
At Diversified Benefit Services, administering account-based plans is what we do every day. Regulatory changes like this one are part of what we monitor on behalf of our clients and broker partners so you can focus on what matters most.
Brokers Note
This is a useful conversation to have proactively with your employer clients who sponsor HRAs and ICHRAs…particularly those with any Medicare-eligible participants. The finalized exemption removes a compliance task that was always somewhat awkward to explain, and it signals continued regulatory recognition of account-based plans as structurally distinct from traditional group health coverage. ICHRA adoption, in particular, continues to grow and regulatory developments like this one help streamline the employer experience.