Hi Matt,
I want to relay a cautionary tale about Medicare and COBRA coverage.
The background: I’m over age 65 and eligible for Medicare, so I took Medicare Part A and waived Medicare Part B and kept my employer’s group health insurance while I was still working. As you mention, there was no real need to pay the monthly Medicare Part B premium while I was still working and on my employer’s health insurance plan.
I was laid off. As part of my separation agreement, I received several months of COBRA coverage.
When COBRA coverage was first offered, the program administrator indicated that if you were eligible for Medicare and did not currently have it, you could not participate in the COBRA program. The assumption was you should sign up for Medicare instead. (This is wrong, and I’ll address that below – Matt).
In my case, I had Medicare Part A but no Part B (since I had been under a company plan). Later, I was told that, given this situation, I could take part in the COBRA plan.
What nobody mentioned up front was that because I already had Medicare, it would be considered the primary insurance, and the COBRA coverage would only provide secondary coverage.
Unfortunately, this did not become clear until claims started being denied. I got the Department of Insurance to investigate this since there seemed to be a fair amount of misinformation, but their conclusion was, “You should have read the full policy.” So, this mistake cost us several thousand dollars in the end.
My wife and I have both moved onto Medicare and left employer-sponsored health insurance behind. But folks need to be cautious once they reach eligibility age and deal with COBRA or changes in private insurance: there are assumptions about Medicare-eligible folks that aren’t necessarily well-advertised.
All the best,
Randy B.
Randy,
Yes, you fell into a weird, confusing and ill-defined part of how Medicare works – or doesn’t – which is – you got Medicare FIRST – before COBRA, which meant Medicare would pay primary, COBRA secondary. But you only got Medicare Part A, not Medicare Part A and B. That’s your issue.
How Medicare and COBRA Work Together
How Medicare and COBRA work together depends on which type of coverage you have first, but as you point out, you deferred Medicare Part B. So, in your case, the COBRA administrator saw you were “on” Medicare and therefore paid secondary. But they couldn’t pay secondary to Medicare Part B, because you didn’t have Part B. That’s why you found yourself likely paying Medicare Part B charges, that “should” have been covered under Medicare Part B that you didn’t have. So, while you were “on” Medicare, you were only “on” Medicare Part A, not Medicare Parts A and B! So you had a gap.
You can have COBRA and Medicare, together. If you have COBRA first and then become eligible for Medicare, your COBRA coverage will end. If you have Medicare first, then become eligible for COBRA, your Medicare benefits will pay first, COBRA second.
Medicare Before COBRA
If you’re on Medicare and still working and get laid off or are otherwise offered COBRA coverage, you can have both Medicare and COBRA. Medicare will be your primary insurer and COBRA will be your secondary. Is it worth it to keep paying COBRA premiums? Choosing to supplement your coverage with COBRA is entirely up to you, and the decision should be based on your unique health care needs, any dependents you may have to provide coverage for who aren’t on Medicare, and personal financial situation. Should you opt for COBRA, it’s crucial to maintain your Medicare coverage as well.
Again, Medicare will serve as your primary insurance provider, a role it keeps even if you decide to add COBRA to your health care coverage. This means Medicare steps in first to cover eligible health care expenses. COBRA then has the potential to cover certain additional costs that Medicare does not. This layered approach may ensure a more comprehensive coverage plan, providing a safety net that can give you peace of mind during times when health care needs become more complex.
It may not, and taking COBRA while on Medicare might be nothing more than a massive waste of money. If you’re on Medicare Parts A and B, you can find a Medicare Supplement plan, plus a stand-alone Medicare Pard D Prescription Drug Plan (option #2 in the book) or a MAPD plan (option #3 in the book) that will provide comprehensive coverage, likely better than your employer’s plan or COBRA (likely cheaper, too!).
Medicare After COBRA
If you get COBRA first and then become eligible for Medicare, COBRA will stop providing primary insurance coverage to you.
Should you initially opt for COBRA coverage and then turn 65, thereby becoming eligible for Medicare, it’s important to understand how the dynamics of your coverage will shift. When you take Medicare after already being on COBRA, Medicare becomes your primary insurance provider. If you choose to retain your COBRA benefits (because you have dependents, for example), COBRA will serve as secondary coverage.
COBRA can last 18-36 months; however, this may be adjusted should you become eligible for Medicare sooner. Like before, whether you should take COBRA depends on the type of coverage you want and can afford. Your COBRA coverage may include extra benefits that are not covered by Original Medicare, like coverage for routine dental care or eyeglasses, which can be found embedded within Medicare Advantage plans, for example.
COBRA and Medicare Timing
Your loss of group employer coverage should have given you a Medicare Part B open enrollment period, which gives you the opportunity to join over the following several months. If you did that, Part B would go into effect at the time your group benefits ended, and in your case, Medicare would have to reprocess claims as would the COBRA administrator. But I get your point – that’s not a scenario or series of steps I could find clearly laid out anywhere, either. Sounds like you didn’t do that and paid out-of-pocket for healthcare utilization Part B “normally” would have paid for.
It’s important to ask your HR folks and the COBRA administrators about the specific timeline for your COBRA coverage to end, especially since eligibility for Medicare before the standard 18 months of COBRA coverage could potentially shorten its duration. But from your email, it looks like even they were unclear.
It’s a common misconception that COBRA coverage will cover you over age 65, eliminating the need for signing up for Medicare at age 65. But as I just covered, this is not the case, and it’s even more common to have folks tell you it won’t cover you over age 65, which is what you were told.
The key takeaway here is the importance of timely Medicare A and B enrollment once you become eligible, particularly for those transitioning from or into COBRA.
- If you’re on Medicare Part A only, enroll in Medicare Part B once you’re eligible, as soon as you know you’re going to go on COBRA. You have an eight-month window to do so and can time up signing up for Medicare Part B with the end date of your employer’s health insurance. That way, Medicare pays first, and you avoid paying a Part B late enrollment penalty. This 8-month period is one of many Special Enrollment Periods.
COBRA and Medicare Part D
Don’t forget about Medicare Part D! Many COBRA and even employer-sponsored plans don’t have what Medicare deems “creditable” coverage for prescription drugs. You may be able to delay enrolling in Medicare Part D prescription drug coverage without penalty if you can keep COBRA coverage and it includes creditable prescription drug coverage. Many employer HR folks and COBRA administrators won’t know this, and if they do, they won’t know if it counts as “creditable” coverage.
If the prescription drug benefits embedded within your employer’s plans or COBRA offering do aren’t “creditable,” you will have only 63 days to enroll in Medicare Part D (either a stand-alone Medicare Part D plan or embedded within an MAPD plan) without penalty once you lose COBRA drug coverage (if it’s creditable) or your employer’s health insurance plan. Note that the timeframe is much shorter than it is for adding Medicare Part B after you’ve stopped working, are off your employer’s plan and are transitioning to Medicare coverage.
Thanks for the email, Randy!
About the Author
Matt Feret is the author of the Prepare for Social Security – The Insider’s Guide and the Prepare for Medicare – The Insider’s Guide book series and launched PrepareforSocialSecurity.com and PrepareforMedicare.com to help people get objective answers to questions about Social Security and Medicare. Matt is also the host of The Matt Feret Show. He has held leadership roles at numerous Fortune 500 Medicare health insurers in sales, marketing, operations, product development, and strategy for over two decades.
Check Out Matt’s Podcast for updates & advice
