HEALTHCARE
M E D I C A R E I N S I D ER
When COBRA Bites Medicare Eligible Workers What Agents and Brokers Need to Know About COBRA and Medicare Eligibility
P
By Bonnie Burns
rior to COVID-19, more people past the age of 65 were employed than at any time in the last 55 years. Federal projections from 2019 expected as many as one third of American’s to be working between the ages of 65 and 70 by 2024. Following COVID-19, it remains to be seen how older workers will fare in the job market for the next several years. What is COBRA? The loss of a job, or leaving one, often means losing an employer’s health benefits. Employers of a certain size are required by federal law to offer COBRA coverage, an extension of their existing health benefits. COBRA is the Consolidated Omnibus Budget Reconciliation Act of 1996. COBRA benefits are often an expensive option since the employee has to pay their own premium, plus the employer’s share, plus an administrative fee. Taking COBRA benefits when you’re eligible for Medicare can create coverage problems later that few people understand. This article discusses conflicts between Medicare eligibility and COBRA. It does not cover any other issues when COBRA eligibility may apply. Which coverage is primary? Federal law prohibits employers from treating a Medicare eligible employee differently than other employees in regard to group health benefits or continued employment at age 65. Federal Medicare Secondary Payer (MSP) rules require: • An employer group health plan to be the primary healthcare coverage for any Medicare-eligible employee, spouse, or dependent who is 65 years or older when the employer has 20 or more employees. • If an employer has an employee younger than 65 (or their spouse or dependent) who is eligible for Medicare
14 | CALIFORNIA BROKER
due to a disability, this same MSP requirement applies only if the employer has 100 or more employees. • If an employee has permanent kidney failure, known as ESRD, their employer plan, regardless of the company’s size, is required to be primary during a 30-month coordination of benefit period. • Employers with less than 20 employees (or less than 100 for a disabled beneficiary) are allowed to provide secondary coverage to Medicare for their Medicare-eligible employees. This is because the MSP rules don’t apply to smaller employer health benefits. In these cases, Medicare is automatically deemed to be primary coverage. Medicare eligibility and enrollment— rules and timing not always clear In recent years, Medicare eligibility has become detached from eligibility for full retirement benefits under Social Security. Medicare eligibility begins at age 65 unless a person qualifies for benefits earlier as a result of a disabling condition. And, for decades, Social Security eligibility for full retirement benefits also began at age 65. However, beginning in 1983, the age of eligibility for full Social Security retirement benefits began to increase by two months each year. By 2027, full retirement benefits will begin at age 67. As a result, the ages of eligibility for Medicare and full Social Security retirement benefits no longer match. While an individual can enroll for early, reduced Social Security retirement benefits at age 62, they will not be eligible to enroll in Medicare until their 65th birthday under current law. Medicare eligible individuals are often unaware that Medicare begins long before they are eligible for Social Security benefits. If they have employer health care coverage under their own or spouse’s employment, they often ignore Medicare until they no longer have employer
- CalBrokerMag.com -
NOVEMBER 2020
