Over the last few weeks we have seen a handful of people who have unknowingly made a crucial Medicare mistake.
I’m not sure why, but there a lot of confusion surrounding COBRA and Medicare. So much so that many employers are not sure how to advise their employees on what to do when they face choices between Medicare or COBRA or even a combination of the two.
The reality is Medicare and COBRA really don’t go hand-in-hand, but few people understand this.
If you’re planning to enroll in COBRA and are eligible or will be eligible for Medicare benefits (due to retirement, loss of insurance, etc.), it’s important to understand how your Medicare eligibility will impact your COBRA coverage.
The reality is COBRA is a great service for the right person. Flashback to 1985 and the Consolidated Omnibus Budget Reconciliation Act, also known as COBRA. This act is health care coverage that helps reduce health insurance gaps for those who are losing coverage and was a huge step forward in health care. COBRA helps provide coverage for people when they leave an employer plan that have more than 20 employees.
One of the challenges with COBRA is that while you can stay on COBRA after 65, COBRA doesn’t meet all the Medicare rules.
Employers are obligated to inform you of your right to COBRA coverage, but they are not required to tell how your Medicare status could result in 80 percent of your medical bills to go unpaid.
In our experience, we’ve found that most employers do not mention to employees that by joining COBRA your Medicare coverage could be delayed for up to 15 months, and that these delays could cause you Medicare penalties that will apply for life if you miss timelines.
Another common Medicare mistake is whether you qualify for a “special enrollment period (SEP)” or not. An SEP will have to occur if you enroll in Medicare after age 65. An SEP usually happens when you leave an employer plan. To qualify, your employer completes a form that says you will no longer be working and your insurance will be ending. At this time, you will qualify to join Medicare with all the first-time joiner rights.
However, when COBRA coverage ends, there isn’t anyone to complete this paperwork stating that you are leaving an employer plan because you are technically leaving a COBRA plan. Therefore, you cannot qualify for an SEP.
Now, if you enroll in Medicare first then you would also be eligible afterwards to purchase COBRA coverage. Even if you only enroll in Part A.
Not understanding how Medicare eligibility works, regardless if you are enrolled or not, can impact how your other benefits work can be costly if you don’t get the correct advice.
