Initial Coverage Limit (ICL) is a measure of the retail cost of covered drugs purchased using a Medicare Part D plan. It is used to determine when you enter the Coverage Gap period of your drug plan.

To put it another way, ICL is essentially a type of deductible for Part D plans. However, instead of counting what you spend out-of-pocket, it counts the retail cost of drugs (the amount shared between you and your insurer).

So for example, if you purchase a drug with a retail cost of $50 during your Initial Coverage Period, and your copay (your share of costs) is $10, the full $50 goes toward your ICL.

Once you exceed your Initial Coverage Limit and exit your Initial Coverage Period of your drug plan, you’ll enter the Coverage Gap Period or ‘Donut Hole’ Period.

In the Coverage Gap Period, you’ll pay no more than a minimum percentage of a plan’s cost for covered brand-name prescription drugs.

That amount was 25% in 2019, but it is subject to change each year.

With the above covered, plans can offer better cost-sharing than the minimum percentage for that year.

The Four Phases of a Part D Plan: All part D plans have four phases or periods. Each phase essentially has a different type of deductible / out-of-pocket maximum. They are the deductible period, Initial Coverage Period, Coverage Gap period, and Catastrophic Coverage Period. The Initial Coverage limit is simply the dollar amount that must be exceeded to transition from the Initial Coverage period to the Coverage Gap period. Learn more about the four phases.

TIP: ICL also applies to Part C plans with drug coverage.