Medicare and COBRA Can Cause Confusion

Employees – and their employers – are often confused when the employee who is Medicare-eligible retires. Some employees want to continue their coverage under COBRA because they’ve met their deductible for the year or simply because they’re familiar with the employer plan in which they were enrolled while working.

But, making the decision to take COBRA can have unforeseen consequences. COBRA is not creditable coverage for Medicare Part B. An employee who goes on COBRA rather than enrolling in Medicare is not eligible for a Special Enrollment Period for Medicare Part B when COBRA ends. COBRA is not considered “coverage based on current employment.” Someone in this situation will face the Part B late enrollment penalty of 10% per year for life.

Employees may not realize that the rules for COBRA are different when it comes to Medicare Part D. As such, if an employee researches how COBRA interacts with Medicare Part D, they’ll find that COBRA may be creditable coverage for Medicare Part D, prescription drug coverage. In the case of  Medicare Part D, a person will have a Special Enrollment Period to join a Medicare drug plan without paying a penalty when COBRA coverage ends.

So, COBRA is not creditable coverage for Medicare Part B, but it is creditable coverage for Medicare Part D. No wonder there’s confusion.

NAHU has been working with Congressional leaders on a legislative fix to the Medicare Part B problem. Legislation that would make COBRA coverage creditable for Medicare Part B is expected to be introduced in the next weeks.

A knowledgeable insurance broker can help navigate these tricky transitions from work to retirement. Also, the website and book Medicare & You from the Centers for Medicare & Medicaid Services is an excellent resource. The book is updated annually and covers a wide variety of Medicare related information including enrollment, benefits and the like.

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