Is COBRA Creditable Coverage for Medicare?

What is COBRA?

COBRA is a federal law that allows eligible employees, their spouses, and dependents to continue their employer-sponsored group health plan coverage for a limited time after a qualifying event, such as job loss or divorce. While COBRA coverage is typically more expensive than health coverage for active employees, it can be a more affordable option compared to individual health coverage. This continuation of group health plan coverage ensures that individuals do not experience a sudden loss of health insurance during transitional periods.

What is Medicare?

Medicare is a federal health insurance program designed for individuals who are 65 or older, have collected Social Security Disability Insurance (SSDI) for more than 24 months, or have been diagnosed with end-stage renal disease (ESRD) or ALS. Medicare provides coverage for a wide range of medical services, including hospital stays, doctor visits, and other essential healthcare needs. As a primary insurance for eligible individuals, Medicare plays a crucial role in ensuring access to necessary medical care.

Eligibility for COBRA and Medicare

Eligibility for COBRA coverage and Medicare depends on individual circumstances. Understanding the eligibility requirements for both programs is essential for making informed decisions about health insurance.

Becoming Eligible for Medicare

To become eligible for Medicare, an individual must meet specific criteria, such as being 65 or older, having collected SSDI for more than 24 months, or being diagnosed with ESRD or ALS. When an individual becomes eligible for Medicare health coverage, it can significantly impact their COBRA coverage. If an individual is already enrolled in COBRA, their coverage may end upon becoming eligible for Medicare. However, if an individual is eligible for both Medicare health insurance coverage and COBRA coverage simultaneously, they may have the option to enroll in both programs.

It’s important to note that for individuals 65 or older, Medicare pays first, and COBRA pays second. This means that Medicare will cover the primary portion of healthcare expenses, while COBRA coverage will cover secondary costs. Individuals in this situation should contact their COBRA plan to understand the specific details of their coverage and the percentage they are responsible for paying.

In summary, understanding COBRA and Medicare is crucial for making informed decisions about health insurance. Eligibility for both programs depends on individual circumstances, and it’s essential to understand how the two programs interact. By knowing the eligibility requirements and how COBRA and Medicare work together, individuals can make informed decisions about their health insurance coverage.

Should I Elect COBRA Continuation Coverage?

Opting for COBRA depends heavily on your specific circumstances. The advantages and disadvantages vary depending on factors like your age, Medicare eligibility timing, COBRA premiums, and other details of the COBRA plan.

One of the factors to consider when opting for COBRA is whether it provides creditable prescription drug coverage, which can affect future Medicare enrollment and penalties.

To research and compare your Employer Plan or COBRA to Medicare coverage, use this link or call us at 800-847-9680 to speak with a licensed Medicare specialist.

COBRA coverage is also not considered creditable coverage for Medicare Part A and Medicare Part B. Although COBRA coverage is the same coverage as your group health plan, COBRA benefits are not a creditable coverage substitute for Medicare. Both Original Medicare and Medicare Part D require a person have creditable coverage in order to delay enrolling in Meidcare without penalty.

Can I have Both Employer Insurance and Medicare Coverage?

You can have both Medicare and employer health insurance coverage (or COBRA) at the same time, but it is seldom a good idea. The reason for this is that you cannot have a Medicare supplement and employer group health plan coverage at the same time. But when you enroll in Medicare Part B, you have just 180-days to get a Medicare supplement without being required to qualify medically. You can lose your ability to get a Medicare supplement if you use employer group health plan coverage instead of a supplement plan.

Medicare and COBRA Coordination

Medicare coordination of coverage with COBRA depends on the sequence in which you acquire each type of insurance. While obtaining COBRA after having Medicare is possible, if you become Medicare eligible while on COBRA, the covered employee will lose their COBRA coverage. In essence, the possibility of having both COBRA and Medicare hinges on the order in which you initially acquire each form of insurance.

Having creditable prescription drug coverage through COBRA can provide a Special Enrollment Period for Medicare Part D, helping to avoid penalties.

Not to mention that COBRA is expensive relative to a supplement plan.

1) If You are on COBRA Before Medicare

If you have COBRA and then become Medicare eligible, your COBRA usually ends when you start Medicare. You will want to enroll in Part B right away because there’s no Special Enrollment Period (SEP) once COBRA ends. Your spouse and dependents can continue COBRA for 36 months, regardless of your Medicare enrollment.

If you have COBRA before Medicare, ensuring that your COBRA includes creditable prescription drug coverage can help you avoid penalties when you transition to Medicare Part D.

COBRA might cover services not included in Medicare. For instance, if you have COBRA dental coverage. Talk to your Medicare broker about replacing dental coverage with a permanent policy.

2) If you Have Medicare First, then COBRA

If you have Medicare prior to qualifying for COBRA, then you should have the option to enroll in COBRA. Your primary insurance becomes Medicare, while COBRA takes a secondary role. That means Medicare pays first, with COBRA secondary.

Maintaining Medicare is crucial as it covers most of your healthcare expenses. Medicare and COBRA is seldom a winning combination. COBRA is often costly. Replacing COBRA with a Medicare supplement (Medigap Plan) can improve your coverage and lower your cost.

3) If You Only Have Part A then Become Eligible for COBRA

If you have just Medicare Part A and then get COBRA you may be able to defer enrolling in Medicare Part B and Part D for a brief period of time.

In this scenario, it’s necessary to sign up for Part B within 8 months of your employment ending to prevent incurring the Part B late enrollment penalty. This 8-month interval is referred to as a Special Enrollment Period.

Caution: when your employer coverage ends you only have 63-days to enroll in Medicare Part D. Not the 8-months you have with Part B.

Do I Enroll in Part B if I Already Have COBRA?

If you continue working beyond the age of 65 and subsequently retire later, you must enroll in Medicare Part B within the initial 8 months losing employer coverage, regardless of whether your COBRA coverage extends beyond this 8-month period. Failure to enroll within this timeframe can result in a late enrollment penalty for Part B.

If you are under the age of 65 and are covered by COBRA, you are required to enroll in both Part A and Part B during your Initial Enrollment Period. Your Initial Enrollment Period commences three-months before your 65th birthday month and ends three-months after. If you do not enroll during this 7-month window, you may be subject to penalties.

Part D of Medicare and COBRA Prescription Drug Coverage

If you decide not to opt for COBRA health coverage, you’ll generally have 63 days after your employer coverage ends, to enroll in Part D.

Having creditable prescription drug coverage through COBRA can provide a Special Enrollment Period for Medicare Part D, helping to avoid penalties.

Who Pays First, Medicare or COBRA Continuation Coverage?

Medicare pays first, and then COBRA. But if you are dealing with End-Stage Renal Disease, COBRA pays first for your health care costs during the 30-month coordination period.

Keep in mind, if you have COBRA when you become eligible for Medicare, your COBRA coverage will end when your Medicare starts.

How Long Can Family Member Stay on COBRA When I Start Medicare?

An employee’s enrollment in Medicare qualifies as a COBRA-qualifying event. This implies that if you enroll in Medicare, your spouse and a dependent child can still have COBRA coverage.

In the majority of scenarios, the covered employee’s spouse and dependents can maintain coverage for a duration of up to 18 months, even if your own COBRA coverage concludes.

However, a few exceptions apply. If there was a second qualifying event, one may be eligible for an 18-month COBRA extension.

One of these arises if you fulfill both of the following criteria:

• You became eligible for COBRA due to job termination or reduced working hours.

• Your eligibility for Medicare started less than 18 months before you qualified for COBRA.

In this case, your spouse and dependents would have the opportunity to access COBRA continuation coverage for a period of 36 months, starting from your Medicare eligibility date.

Alternatively, your family members can explore health insurance options via your state’s Health Insurance Marketplace, which might offer more cost-effective alternatives compared to a COBRA plan.

When COBRA insurance is exhausted, thanks to the Health Insurance Portability and Accountability Act, you may also qualify for special enrollment in the Marketplace, 60 days prior to or following losing your insurance.

Can I get a Medigap Plan?

Well, you can purchase any Medigap policy available in your region, regardless of your health status, within 6 months of enrolling in Medicare Part B (your Medicare Supplement Initial enrollment Period).

When you have a Medicare supplement, Medicare is your primary insurer and the medigap plan is secondary. You can only have one primary insurer and one secondary insurer.

Original Medicare plus a supplement is considered the best medical insurance you can get in the U.S. Your medical coverage is is complete. Between what Medicare pays and your supplement, your out of pocket limit for medical bills reduced to just a few hundred dollars per year.

Avoid Making a Permanent Mistake

COBRA and Medicare is one of the most complex and confusing topics in Medicare. Medicare coverage alone can be complicated. If you are soon to be eligible for Medicare or are a covered employee in need of advice, contact Medigap Seminars so our team can help you with Medicare and COBRA.

Our dedicated team is just a click or call away. We remember all the Medicare rules so you don’t have to!