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Importantly, COBRA coverage is not considered a group health plan based on current employment when enrolling in Medicare. If an employee becomes entitled to Medicare but elects to stay under COBRA until its end, the employee will be required to wait until the next General Medicare Enrollment Period to enroll in Medicare.
Delaying Medicare enrollment until COBRA’s conclusion could cause an employee to incur a permanent late-enrollment penalty for Medicare Part B and Part D. There is no future “special enrollment rights” for Medicare at COBRA’s conclusion.
In today’s environment, where employers may be subsidizing COBRA to minimize financial hardship for employees, this consideration is especially relevant. Employer-subsidized COBRA may cause an employee to forget about their Medicare entitlement during their COBRA coverage, as they could be more focused on the low cost and not on enrollment in Medicare.
This can then create a dilemma for a terminating employee as to whether to take COBRA first and then enroll in Medicare OR immediately enroll in Medicare. A review of Medicare Secondary Payer rules provides some clarification. Keep in mind that unreimbursed medical expenses are a real possibility if the employee does not enroll appropriately. With Medicare and COBRA, there will be coordination and any claims will be paid following a specific order.
What about an employee’s dependent(s) and their spouse?
If an employee elected COBRA but then becomes entitled to and enrolls in Medicare, their enrollment will terminate COBRA early. This, however, does not affect the COBRA rights of their spouse/dependent(s) as long as they are not entitled to Medicare themselves. Rather, they could be eligible for an additional 18 months of COBRA, for a total of up to 36 months.
The Department of Labor and Medicare provide a number of resources that employers can leverage to assist employees with these decisions.
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By Brandon Ross
Insights from Ayco InnerCircle 2021