I have run into this problem so often recently, and was just referred to another Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage casualty.  Although birds and mammals are sometimes eaten, the favorite food of a cobra is actually other snakes.  Pythons are considered their delicacy, so we will refer to this person as Mr. P…. Can you tell I have a 5 year old?

During his Initial Enrollment Period (IEP), Mr. P was enrolled in Medicare Part A (inpatient coverage), but declined Part B (outpatient coverage), believing he would have adequate medical insurance under his COBRA. What Mr. P did not know was that when he turned 65 and became eligible for Medicare, his COBRA coverage became secondary to Medicare. While current employer-sponsored health insurance or COBRA can act as primary or secondary to Medicare, retiree insurance always pays secondary to Medicare, as determined by federal coordination of benefits rules.

The Social Security Administration (SSA) called Mr. P while he was in the process of declining Part B and asked him to confirm that he wanted to decline Part B. According to Mr. P, he told Social Security, “I have medical coverage; I don’t need Part B.”   His wife was under 65, and not eligible for Medicare yet, so to keep her covered he wanted to stay on COBRA for 18 months.  Little did he know he should have been on Part B and COBRA.

When Mr. P became eligible for Medicare, his COBRA stopped paying primary for outpatient services, essentially operating as though Mr. P had no insurance at all. During this time, Mr. P incurred at least $10,000 in medical expenses from two different health incidents. Only after these medical bills for unpaid expenses and denials from his retiree insurance started arriving did Mr. P realize that something was wrong.

But Mr. P was in a bind. Having missed his IEP, he had to wait for the General Enrollment Period (GEP) to enroll in Part B. The GEP lasts from January through March of each year, with coverage beginning July 1st of the year a person enrolls. In the end, Mr. P enrolled in Part B during the 2021 GEP—more than 2 years after he first became eligible for Part B—with his coverage taking effect in July, seven months later.

Leaving COBRA is not the same as leaving group coverage.  His COBRA is ending in February, and Medicare will not start until July 1.  He will not have any coverage until July 1, and will have a penalty that follows him the rest of his life for late enrollment. 

If you are receiving health coverage from your employer when you reach age 65, the age at which most people enroll in Medicare, you may be able to delay enrolling in Medicare Part B without penalty, depending on your coverage.  But not if your employer health coverage is being continued under COBRA.  If this is the case, you must sign up for Medicare Part B when you first become eligible, and perhaps for Part D as well, to avoid penalties.

The COBRA of 1985 provided that workers who have health care from a private employer with 20 or more workers can continue their health care coverage for up to 18 months if their employment is terminated or their hours are reduced.  The Center for Medicare Advocacy reports that advocates are seeing an increase in the number of individuals who have delayed enrolling in Medicare Part B under the mistaken impression that paying for and receiving continued health coverage under COBRA allows them to enroll in Part B after their COBRA coverage ends without penalty.  In fact, only those who delay enrolling in Part B because they are covered under a group health plan and are currently employed can avoid the penalty.

As the Center points out, that penalty can be severe: there is a 10 percent premium penalty for each year that enrollment is delayed. For example, if you turn 65 this year (2021) but wait until 2023 to enroll in Medicare, your monthly Part B premium will be 20 percent higher than the current premium — for your lifetime. Instead of the current premium of $148.50 a month, you would pay almost $178.20 a month.  THIS 20% PENALTY LASTS YOUR LIFETIME!

The interaction between COBRA and Medicare Part D, which covers prescription drugs, is a little different.  Those on COBRA may be able to delay Part D enrollment without penalty if the drug coverage they had under COBRA constitutes “creditable coverage” which means that the coverage is expected to pay on average as much as the standard Medicare prescription drug coverage.

The penalty for delaying enrollment in Part D, as the Center explains it, is “1 percent of the national base beneficiary premium in a given year times the number of full, uncovered months of eligibility without other creditable drug coverage.”

Medicare enrollment begins three months before your 65th birthday and continues for 7 months.  For more on what you need to know about signing up for Medicare visit click here

For more from the Center for Medicare Advocacy on the intersection of COBRA and Medicare coverage, click here.

For more about Medicare, click here.