Preparing For Medicare In 2025
How New Part D Rules Affect Employers And Employees
by Andrew Lee
As you may have noticed from the wave of commercials on TV, we are well into Medicare’s annual enrollment period, running from October 15th to December 7th each year. During this time, Medicare-eligible individuals can sign up for a plan or make changes to their current coverage.
Medicare has a complex set of rules about eligibility, costs, and coverage—enough to fill a guidebook. However, 2025 brings major changes, particularly to Medicare Part D, that both individuals and employers need to be aware of.
Key Changes in 2025
- Medicare Part B Premiums – The standard monthly premium is increasing from $174.70 to $185. This amount is paid directly to the Centers for Medicare & Medicaid Services (CMS).
- Medicare Part B Deductible – The annual deductible will rise from $240 to $257, the amount enrollees pay out-of-pocket before Medicare begins covering 80% of their medical expenses.
- Medicare Part D: $2,000 Out-of-Pocket Cap – The Inflation Reduction Act is introducing a historic change to Part D prescription drug coverage by capping out-of-pocket costs at $2,000 annually. This replaces the previous “donut hole” phase, where beneficiaries faced higher costs after reaching an initial spending threshold.
Additionally, enrollees can spread their out-of-pocket costs over the year, and Medicare will negotiate prices for select high-cost drugs, reducing expenses for beneficiaries.
How Does This Impact Medicare Beneficiaries?
- These changes will significantly benefit those with high prescription drug expenses, saving them up to $5,000 annually.
- On the other hand, the average Part D plan cost is increasing by 6%, a limit also set by the Inflation Reduction Act.
What Does This Mean for Employers?
For employers offering health benefits, these changes present challenges and opportunities:
- With the improved value of Medicare Part D plans, many employer-provided health plans may no longer qualify as offering creditable coverage for prescription drugs (coverage as good as or better than Medicare Part D).
- If your plan isn’t creditable, Medicare-eligible employees need to understand their options to avoid penalties. The Part D late enrollment penalty adds 1% of the national base premium for every month without creditable coverage.
Example:
An employee on a plan with non-creditable coverage delays enrolling in Part D for 24 months. In 2025, the Part D base premium is $36.78/month. Upon enrolling, they would face an additional $8.83/month penalty for life (24 months x $36.78 x 1%).
Given these changes, it’s essential for employers to review their benefits plans to prevent employees from being exposed to penalties. Contact us today to begin preparing for the upcoming Medicare updates. We can assist in evaluating your current plan, educating your employees about their options, and ensuring compliance with Medicare requirements.