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COBRA and Medicare

If you are already on COBRA then enroll in Medicare, you may lose your COBRA benefits.

If you already have Medicare (A and/or B) when you enroll in COBRA, Medicare will become your primary insurance on the day your employment is no longer active.

It is very important to note that under the Medicare rules COBRA coverage is not considered coverage based on current employment. As such, an individual is not eligible for a Medicare Special Enrollment Period when the COBRA coverage ends.  Individual has 8 months from termination of employment to enroll in Medicare without penalty.

Q&A About Medicare and Cobra

Medicare eligibility & COBRA

Additional information about using COBRA for the under age 65 spouse when an employee elects Medicare instead of group health insurance:

  • If the previous employer indicates that the employee leaving the group plan for Medicare triggers a COBRA qualifying event for the spouse, the spouse is eligible for a minimum of 18 months and can extend up to 36 months.  Two factors that come into play are:  the date the employee became eligible for Medicare not necessarily enrolled and if Medicare is the deemed qualifying event and not a change in the employee’s benefit eligibility.   We would recommend that the spouse talk with the COBRA provider for how they handle this situation administratively.  We have seen differing interpretations in applying the rules.  In addition, I would be careful of when the spouse turns 65.  This would terminate COBRA coverage on the date of Medicare entitlement for the spouse.

18 to 36-Month Period related to Medicare eligibility (Special Rule for Dependents):

If a covered employee becomes entitled to Medicare benefits (either Part A or Part B) and later has a termination of employment or a reduction of employment hours, the period of COBRA coverage for the employee’s spouse and dependent children lasts until the later of the 36-month period that begins on the date the covered employee became entitled to Medicare, or the 18- or 29-month period that begins on the date of the covered employee’s termination of employment or reduction of employment hours.

IRS Information Letter Addresses Interaction of COBRA and Medicare (July 31, 2017)

The letter explains generally that a covered employee’s spouse can receive COBRA continuation coverage for up to 36 months if the employee became entitled to Medicare benefits before termination of employment. The spouse’s maximum COBRA coverage period ends 36 months after the employee’s Medicare entitlement or 18 months after the termination of employment, whichever is later. The letter further notes that the extension applies regardless of whether the employee’s Medicare entitlement is a qualifying event under COBRA.

EBIA Comment: When the qualifying event (termination of employment or reduction of hours) occurs within the 18-month period after the employee becomes entitled to Medicare, the employee’s spouse and dependent children—but not the employee—become entitled to COBRA coverage for a maximum period ending 36 months after the covered employee became entitled to Medicare. The covered employee remains entitled to the basic maximum coverage period ending 18 months after the termination of employment or reduction of hours. For more information, see EBIA’s COBRA manual at Sections VIII.B.4 (“Fourth Extending Rule: Pre-Termination or Pre-Reduction Medicare Entitlement”) and XXX.B (“The Interactions Between COBRA and Medicare”). See also EBIA’s Group Health Plan Mandates manual at Section XXIV.C (“Overview of Medicare”).

Contributing Editors: EBIA Staff.

© 2017 Thomson Reuters/EBIA. All rights reserved.

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