Are you approaching 65, or maybe you’re even over 65, and your employer is offering your COBRA coverage, but you’re not sure how that works with Medicare?
We have been hearing many stories lately about employers giving bad advice when it comes to COBRA, and this advice is leading to costly mistakes. In this blog, let’s get clear on COBRA and how it works with Medicare.
What is COBRA?
How does COBRA work with Medicare?
How do I cancel my COBRA coverage?
What is COBRA?
COBRA stands for Consolidated Omnibus Budget Reconciliation Act of 1985. This a federal law that requires companies with 20 or more employees to let them continue their group health insurance coverage for up to 18 months after they or their spouse leaves their job. With COBRA, the coverage stays the same, but your premiums see a large increase as you pay 100% of the coverage.
How does COBRA work with Medicare?
The short answer is if you choose to remain on COBRA after you turn 65, COBRA will become secondary to Medicare. COBRA is not considered “creditable coverage” by Medicare.
To help you understand what this means, let me tell you a story.
I was working with Sally a few years ago, she had reached out to me because one of her friends recommended she contact us for help.
Sally received a $45,000 bill in the mail from her doctor’s office and was panicking. She had no idea what this bill was for, why she received it, or what had happened. Sally was about to have hip replacement surgery, so she needed to get answers fast.
We started talking and she told me that she was let go from her previous company, and they offered her COBRA coverage. They told her it was going to be $1,000 a month and that it was good coverage. She was led to believe that she didn’t need Medicare when she had COBRA, and unfortunately, that is not true. Since COBRA is to become secondary to Medicare, the $45,000 bill she received is what Medicare Part A and Medicare Part B should have covered for her.
What did that mean for Sally? It meant she was stuck with this bill and had to wait until a new enrollment period to even get Medicare coverage. She had to put her hip replacement surgery on hold and find a way to pay off $45,000.
With this said, if you’re turning 65 and have COBRA coverage, you will need to join Medicare. Most of the time, it doesn’t make sense that you continue paying COBRA coverage as well as having Medicare.
How do I cancel my COBRA coverage?
To cancel COBRA coverage when you’re ready to join Medicare, you will need to contact your previous employer to get the instructions and any necessary paperwork to cancel this coverage.
In conclusion, COBRA is not meant to be your primary health coverage once you turn 65. We are seeing that many employers do not understand Medicare rules and are giving out bad advice.
If you know someone who is on COBRA, be sure to share this blog with them to ensure they do not make the same Medicare mistake as Sally did.
To get help with your Medicare decision, you can register for my next free online Medicare workshop by going here: https://join.themedicarecoach.com/free-workshop
