Cobra and Medicare Coverage
I am often ask by clients when they retire if it is better to elect Cobra coverage for the next 18 months and delay signing up for Medicare Part B and what are the rules surrounding Cobra and Medicare. The simple answer is do not delay signing up for Part B if you lose your group health plan coverage. The following real life example will explain what can happen.
John, and his wife Mary, both 68, thought they were doing everything right. When John retired he enrolled in Cobra for both of them. With John’s former employer’s COBRA health insurance due to run out after 18 months, he believed he could sign up for Medicare when his Cobra coverage ended and this would require a routine visit to Social Security. He was wrong. They were told they wouldn’t be able to get Medicare coverage until the following July. Suddenly, in their late 60s, they faced the prospect of 13 months without health insurance. John and his wife had run afoul of an obscure rule that is little understood by Medicare beneficiaries, employers, health insurance companies and even some Social Security and Medicare officials.
COBRA can provide continuation of health insurance for 18 months and sometimes up to 36 months. It can be a literal lifesaver for people who lose their jobs and health coverage or lose access to group coverage because of a divorce. What it does not do, however, is take the place of employer group coverage in the eyes of Medicare.
An employer plan may excuse someone from needing to sign up for Medicare when they turn 65. However, COBRA does not qualify as group health coverage from an active employer. Even if a person’s COBRA coverage is identical to their former group plan, they cannot delay signing up for Medicare when they turn 65 or lose their employer coverage after 65 in the mistaken notion that COBRA qualifies as an employer plan. So John and Mary, while covered under COBRA, missed the eight month deadline to enroll in Part B after losing his employer plan, and were forced by Medicare to wait for the annual open enrollment period with an effective date of July of the next year. In addition, they both received a late enrollment penalty for not enrolling in Part B within the window. The only good news for John and Mary, was they were not charged a late enrollment penalty for not having creditable drug coverage, since COBRA drug coverage is considered creditable coverage by Medicare!
Quick facts about COBRA and Medicare
- Medicare is always primary to COBRA coverage.
- You should enroll in Part B if eligible.
- You will have to pay a Part B late enrollment penalty if you decide to delay enrolling in Medicare because you had COBRA.
- Rules are different for people with ESRD.
- Note: COBRA is creditable coverage for Part D
- If you have Medicare first and then are offered COBRA, you can enroll in COBRA.
- Keep your Medicare coverage.
- COBRA may act like a Medigap policy and fill in the gaps not covered by Medicare.
What if I retire after turning 65 and sign up for Medicare, can my spouse enroll in Cobra?
When the qualifying event is the end of employment or reduction of the employee’s hours, and the employee became entitled to Medicare less than 18 months before the qualifying event, COBRA coverage for the employee’s spouse and dependents can last until 36 months after the date the employee becomes entitled to Medicare …
COBRA requires that continuation coverage extend from the date of the qualifying event for a limited period of 18 or 36 months. The length of time depends on the type of qualifying event that gave rise. For more information read the cobra-continuation-health-coverage-consumer from the Department of Labor