Medicare and COBRA, Problems and Fixes

Medicare is primarily for those 65 and over. Individuals under 65 that are disabled due to injury or illness may qualify for Medicare as well. COBRA extends employer group coverage for up to 18 months to employees that leave a company with 20 or more employees. The former employee pays the premium.

History

In 1985 COBRA was passed into law, protecting those that needed health insurance after leaving a group plan. Before 1985 those with serious pre-existing conditions could not purchase coverage in the individual market.

There are two issues with COBRA for people who are 65 and over and are Medicare-eligible.

1.) COBRA is secondary to Medicare. Most people are not aware of this. The 65+ employee chooses COBRA instead of enrolling in Medicare because they are familiar with their employer group coverage and not Medicare. Realizing their mistake after a claim has occurred, the employee finds themselves paying the majority of the claim because their COBRA coverage is secondary.

2.) If the 65+ employee stays on COBRA the full 18 months they will miss their 8 month special enrollment period to enroll in Medicare Part B. The result, a gap in coverage and Medicare Part B premium penalties… for life! The moral of the story is that no one should ever elect COBRA at age 65 or over.

Fixing The Issues

1.) Don’t allow COBRA to be offered to those 65 and over.

2.) Or, make COBRA primary and extend the Special Enrollment Period to coincide with the ending of COBRA.