Did you know it’s possible to be eligible for COBRA health insurance coverage and Medicare benefits at the same time? It depends on which one you have first.
Before we get into that, though, here’s a quick refresher on the Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA. It’s the law that created the option for workers to continue group health insurance plan coverage temporarily if they leave an employer under certain circumstances. (It also covers the former employee’s dependents.)
COBRA comes with a cost
However, COBRA is not cheap. Qualified parties may have to pay the entire insurance premium, up to 102% of the cost to the plan. For individuals, monthly premiums can run into the hundreds of dollars. For families, that number can go significantly higher.
Typically, COBRA is available via employers with 20 or more workers. However, there are states requiring employers with fewer employees to allow group coverage for a limited period.
Because of the numbers of people unemployed by the coronavirus pandemic, in March of 2021, President Joe Biden signed the American Rescue Plan Act into law. Among other provisions, it fully subsidizes COBRA for six months, ending in October 2021.
Coordinating Medicare and COBRA
If you have COBRA at the time you become eligible for Medicare, your COBRA coverage usually expires on your Medicare coverage date. Therefore, it’s important to enroll in Medicare Part B right away.
Why? Because you won’t be entitled to a Special Enrollment Period after your COBRA health coverage ends. Your family members can keep COBRA up to 36 months (three years), no matter if you enroll in Medicare.
Furthermore, it’s possible you can keep COBRA coverage for services not covered by Medicare.
Say you have COBRA dental coverage, for instance. The COBRA insurance carrier could permit you to drop your medical coverage – but still pay your dental premium for the period you’re covered by COBRA.
In addition, if you have Original Medicare Part A or Part B when you become COBRA-eligible, you must be allowed to enroll in COBRA – as a secondary coverage provider. While COBRA is expensive, it may be worth having if you are incurring or expect to incur costly medical bills, and your plan covers Medicare cost-sharing, or offers other helpful benefits.
Primary vs. secondary coverage
This brings us to who pays and when. If you have Medicare and COBRA, as in the example above, Medicare is the primary payer and COBRA is the secondary.
Medicare will pay what it is contractually obligated to cover, then send any remaining bills to the COBRA insurance carrier.
In some cases, Medicare may make a conditional payment. This is a payment for services that COBRA (or another plan) could be responsible for, and it’s done so the Medicare beneficiary does not have to pay out of pocket. If you receive payment later in any form, you’ll have to repay Medicare.
If your Medicare Part A or Part B becomes effective the day you choose COBRA coverage, you can have both Medicare and COBRA coverage.
AARP points out that you can start receiving Part A benefits prior to COBRA and sign up for Part B later. In this case, Medicare is primary, and COBRA is secondary.
But you’ll lose your COBRA coverage if you become entitled to Medicare after you sign up for COBRA. Yet your spouse or dependent children can continue to receive COBRA for up to three years (36 months) after you qualify for Medicare.
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