Getting health insurance through an employer is the way most people cover themselves and their dependents outside of Medicare coverage. If the employee gets let go, the company folds or they just quit, COBRA coverage kicks in.
But what happens if the covered employee and / or their covered dependent(s) becomes eligible for Medicare?
The term COBRA stands for the Consolidated Budget Reconciliation Act of 1985. In short, private employers that offer employee group health insurance coverage must offer coverage to employees and their dependents following certain events.
There are several situations that could cause the loss of group health insurance coverage, and in turn, that can qualify an individual and / or his or her dependents for extended COBRA coverage. These can include:
The COBRA coverage offered to qualified beneficiaries and / or their dependents must be identical to the coverage that was or is currently being offered to the company’s current eligible employees.
In this case, though, if the employer-sponsored health insurance coverage is either expanded or reduced for the current employees of the company, then it must also be modified for the COBRA enrollees. Likewise, the COBRA coverage may not limit coverage to an enrollee based on his or her health or medical status. If there is no health insurance being offered through the former employer because the business has closed, then there will be no COBRA coverage offered.
A qualified COBRA beneficiary will typically have 60 days from the receipt of their COBRA eligibility notice to either elect or reject this extension of coverage.
Health insurance coverage through COBRA can last either for 18 or 36 months. The length of the coverage is dependent on the covered individual’s qualifying event. If an employee is covered, based on a qualifying event, then the benefits can last for up to 18 months. The coverage start date is the date in which the individual elects COBRA coverage.
However, a covered employee’s dependents may continue their COBRA coverage for up to 36 months in certain situations, including if the covered employee passes away, gets divorced or becomes eligible for, and switches coverage over to, Medicare.
COBRA coverage may end early in certain situations, too. These scenarios could include:
Whether or not you have the right to COBRA in addition to Medicare coverage will depend on whether you had Medicare before or after you began to receive COBRA. As an example, if you have qualified for – and chosen – COBRA before you enroll in Medicare, then you will lose your right to COBRA when your Medicare coverage becomes effective.
In this case, your employer / former employer has the option of canceling your COBRA coverage when you enroll in Medicare. (Note, however, that the employer can only terminate COBRA coverage when you actually start receiving your Medicare benefits).
On the other hand, if you enroll in Medicare first – even if you are just enrolled in Medicare Part A coverage – then you may also be eligible to obtain COBRA benefits. Here, your enrollment in Medicare is considered to be a “qualifying event” for the purpose of COBRA coverage when it causes you to lose your existing health care benefits.
Therefore, if you want COBRA coverage in addition to Medicare, then it is important that you enroll in Medicare coverage before the COBRA qualifying event. (In this case, the qualifying event could be enrolling in Medicare, or it could be the termination of your employer-sponsored health insurance coverage due to your retirement).
It is important to note that Medicare does not require you to have prior health insurance coverage as a condition for Medicare eligibility.
If you are currently covered by both Medicare and COBRA, it is also important to know which is the primary payor (the coverage that pays for a health care service first), and which will be the secondary payor of a claim.
In this case, if you have Medicare coverage because you are age 65 or over, or because you have a qualifying disability (other than End Stage Renal Disease), Medicare will be the primary payor.
However, if you have Medicare based on your having End Stage Renal Disease (ESRD), then your COBRA coverage will be the first payor on the claim. In this situation, Medicare will pay second – to the extent that your COBRA coverage overlaps the first 30 months of Medicare eligibility or entitlement, based on your ESRD condition.
The decision about whether or not to elect CBORA coverage can be complicated – and there are many items to consider if you are also eligible for Medicare, such as your COBRA election period, your Medicare Part B enrollment period, and your Medicare Supplement open enrollment period.
All of these can have different deadlines, which may or may not overlap with each other. And because of that, making certain decisions could end up causing you to lose your rights under one or more of these forms of coverage.
For instance, the consequences of delaying your Medicare Part B enrollment can be severe. In this case, you may incur a 10% late enrollment penalty that is added to your Part B premium. This penalty can increase for every 12 months that you delay your Medicare Part B enrollment.
Likewise, there may also be a late enrollment premium penalty incurred with Medicare Part D, which provides coverage for prescription medication. In this case, a Medicare enrollee will be required to pay a late penalty if there is a continuous period of 63 days or more at any time after the initial enrollment period where the individual meets all of the following criteria:
With that in mind, prior to making an election for COBRA coverage, you may wish to discuss your options regarding Medicare Part B and Part D, as well as regarding Medicare Supplement insurance coverage, with your State health Insurance Assistance Program (SHIP). In order to locate the phone number for the SHIP contact(s) in your area, you can go to: www.shiptacenter.org.
COBRA provides a method of maintaining health insurance that is offered via a recent employer. By offering coverage for a set period of time, former employees and / or their covered dependents can have time to find another avenue for paying high health care expenses.
If you and / or a covered dependent will soon be eligible for Medicare – and you are currently covered for your health insurance needs through COBRA – it can be helpful to know how your benefits may or may not coordinate.
In order to find out more, you can visit Medicare’s website at: https://www.medicare.gov/supplements-other-insurance/how-medicare-works-with-other-insurance/which-insurance-pays-first/cobra-7-important-facts.
You may also wish to discuss any additional questions with a Medicare professional in your local area and / or contact the Medicare Benefits Coordination and Recovery Center (BCRC) at: 1-855-798-2627.
If your previous employment – and in turn, your health insurance coverage – was through the federal government, you can visit the Office of Personnel Management’s website at: www.opm.gov. Your employer’s (or former employer’s) employee benefits administrator could also be a good source of information regarding your specific COBRA options.
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Author Bio: Ben started Prepare for Medicare in 2014 to help people help people get objective answers to questions about Medicare. He’s held leadership roles at numerous Fortune 500 Medicare health insurers in product development, sales, marketing and strategy for over 20 years.
COBRA: 7 important facts. Medicare.gov. https://www.medicare.gov/supplements-other-insurance/how-medicare-works-with-other-insurance/which-insurance-pays-first/cobra-7-important-facts
Medicare & Other Health Benefits: Your Guide to Who Pays First. Centers for Medicare & Medicaid Services. https://www.medicare.gov/sites/default/files/2018-12/02179-Medicare-Coordination-Benefits-Payer.pdf
COBRA: A Summary. Center for Medicare Advocacy. https://www.medicareadvocacy.org/cobra-a-summary/
People with Medicare Beware: COBRA is Not Coverage as a “Current” Employee. Center for Medicare Advocacy. https://www.medicareadvocacy.org/people-with-medicare-beware-cobra-is-not-coverage-as-a-current-employee/
COBRA and Medicare, Part ll. Center for Medicare Advocacy. https://www.medicareadvocacy.org/cobra-and-medicare-part-ii/
COBRA lll: Cautions for Employees of Small Businesses. Center for Medicare Advocacy. https://www.medicareadvocacy.org/cobra-iii-cautions-for-employees-of-small-businesses/