Trouble Ahead If Retiring And Elect COBRA

If you are 65 and over and are Medicare eligible, trouble may be ahead if you are offered COBRA at retirement and elect such coverage.

TWO ISSUES:

ONE: COBRA is considered secondary coverage, Medicare primary. Enrolling in COBRA instead of Medicare Part B, you run the chance of incurring large medical bills.

TWO: If you keep the COBRA coverage in place the full 18 months allowed you will miss the 8 month SEP (Special Enrollment Period) for Medicare Part B. Your only option then is to use the General Enrollment Period (GEP.) The GEP comes with a lifetime Medicare Part B premium penalty, and typically a gap in coverage. The GEP was initially designed to penalize those that chose not to enroll in Medicare Part B when first available to them, hence avoiding the Part B monthly premium, and choosing instead to enroll in Part B when claims are likely on the horizon. Keep in mind that Medicare was created in the mid-sixties and COBRA in the mid-eighties. The GEP rules were created before COBRA was even a thought. Yet the GEP penalties are the law of the land to this day, even for those with COBRA. The same can be said for Part D prescription benefits. If you don’t enroll in Part D when first available to you, expect a lifelong premium penalty.

For many years there has been talk in Washington to finally fix this problem, but nothing so far. Many people are working past the age of retirement these days. When they decide to retire and are offered COBRA (especially if COBRA is subsidized by the employer) some will choose COBRA instead of enrolling in Medicare Part B. Little do they know this can be a costly decision. For nearly one million individuals in America it has been a costly decision.