“Many retirees are unexpectedly exposed to out-of-pocket liability for any costs paid under COBRA benefits on or after date of Medicare eligibility and penalties for late enrollment in Medicare. Some of this risk would be eliminated if COBRA notices addressed the interaction with Medicare, and vice versa. Unfortunately, such information is not required under either Medicare or COBRA, and thus, transparency and clear information about the interaction between the two is lacking.”
The above is a quote from a recent letter written by the bipartisan leaders of the House of Representatives who have come together to advocate for solutions to eliminate the COBRA-to-Medicare transition trap.
In this transition trap, as written about in our earlier blog, COBRA can “bite” people who become eligible for Medicare, and the consequence can hurt financially. COBRA – the Consolidated Omnibus Budget Reconciliation Act – gives people the legal right to continue group health benefits when they might otherwise end due to job loss, divorce or death. They are the same benefits as those a person had when in the employer plan. Yet, federal rules that apply while someone is working and eligible for Medicare are very different when someone stops working and is on COBRA. And currently neither Medicare nor COBRA provide any written notices about Medicare’s enrollment rules, late enrollment penalties and consequences for staying with COBRA coverage when eligible for Medicare. This creates a ripe situation for COBRA to bite.
How the Bite Happens
Basically, if someone is eligible for Medicare when they sign up for COBRA, their COBRA benefits will be secondary to Medicare, even if they haven’t actually signed up for Medicare yet. And they could be subject to Medicare late enrollment penalties when they do sign up for Medicare later. In addition, a COBRA carrier can recover from them any benefits that were mistakenly paid as primary coverage while they were eligible for Medicare. This is true even though the person paid the entire premium that they and their employer paid while they were working. This “bite” can add up to a lot of money, both in the COBRA carrier’s recoveries and in any Medicare late enrollment penalties.
For example, Bonnie Burns, our Training and Policy Specialist at California Health Advocates, worked with a client who ended up owing her COBRA coverage provider $150,000 in repayments for health care expenses that the carrier had paid after she stopped working. The carrier told the woman that Medicare should have been her primary coverage provider after she stopped working, even though she hadn’t yet enrolled in Medicare.
Possible Solutions ~ H.R. 2564 and H.R. 1657
To remedy this conundrum and prevent further “bites”, bipartisan leaders of the House have introduced two bills, H.R. 2564 and H.R. 1657. “The Medicare Enrollment Protection Act” (H.R. 2564), introduced by Rep. Kurt Schrader, D-Ore., and Rep. Gus Bilirakis, R-Fla, attempts to solve the COBRA-to-Medicare trap by creating a special Medicare enrollment period for individuals who have, or are moving out of, COBRA continuation coverage. It would also exempt the people making that transition from the usual Medicare Part B late-enrollment penalties.
The “Seniors’ Health Care Choice Act of 2019″ (H.R. 1657), introduced by Rep. Lloyd Smucker, R-Pa., would also create a special Medicare enrollment period for COBRA users but would not eliminate the Medicare Part B late-enrollment penalty.
For more information on the existing COBRA-to Medicare transition trap, see:
- Our article, COBRA Warning for People Eligible for Medicare
- Letter from Ways & Means Committee, Interaction between COBRA Benefits & Medicare Eligibility & Enrollment
- COBRA section of our website
For questions or assistance with COBRA and Medicare issues, contact your local Health Insurance Counseling and Advocacy Program (HICAP).