Does anyone really know the answer? Terminating COBRA due to Medicare Entitlement

Long ago, I memorized a COBRA rule regarding a COBRA participant who becomes entitled to Medicare and have deftly applied it on multiple occasions over many, many years. So, you can imagine my surprise to find my understanding was merely a de facto rule that is not really a rule at all. Apparently whether or not COBRA must be terminated at Medicare entitlement is actually a case-by-case or plan-by-plan situation.  All this came to light this month when a COBRA participant’s plight caused me to dig deep and find I (and many others apparently) was on shifting sand and now I’m trying to readjust my footing on this topic.

Here is what I’ve always believed: If someone is on COBRA and becomes Medicare entitled (turns age 65), it is an automatic termination of COBRA coverage the first day of their birthday month. Here’s what, to my surprise, I learned this month: it “MIGHT” be cause for termination of COBRA eligibility. The “plan document” will have the answer.

This left me befuddled. What kind of answer is that?  It’s not concrete or reliable. So, being the researcher that I am, I set out to get a definitive answer. First, I called the Department of Labor office in Seattle where I was asked “what does the plan document say about it?” Irritating to have my question answered with a question. But more irritating, as a COBRA administrator, I don’t have access to plan documents for each client. And even more irritation, what exactly is a plan document for a fully-insured medical plan anyway?

Having reached a dead end with the DOL, I asked Vimly Benefit Solutions what their policy is for terminating COBRA participants who turn age 65. They administer several Washington State based medical trusts. Their written reply was “If you become entitled to Medicare after you’ve signed up for COBRA, your COBRA benefits will cease.” One point in my camp.

Then, I asked EPK & Associates, general agent for several trusts, for their policy and was told the same thing; benefits will cease when turning age 65. Two points.

Incidentally, in case you were wondering, SBA’s COBRA notice says: “When a person who has elected continuation coverage becomes entitled to Medicare, continuation coverage for that person only will end on the date of Medicare entitlement.”

But then I found an outlier. I asked another general agent for several trusts. She said that it depends on the plan. 

Finally, since this whole rule hinges on the so-called plan document, I called Premera Blue Cross. (The COBRA-participant-in-question’s former employer was on a Premera direct plan with under 50 employees.) In fact, Premera did not automatically cancel his coverage when he turned age 65. We were told by a representative, “We’re waiting for the employer to cancel his coverage.” What does this mean? Does it mean that they do or do not have a policy to terminate benefits at age 65?

I requested a “plan document” for this employer’s medical plan and was emailed a benefit booklet which did not address this topic. I then asked if Premera had a plan document and the representative thought I might be talking about an ERISA document which is not Premera’s responsibility, but that of the employer. Now, while an ERISA document is required for any ERISA eligible plan – including group health plans – smaller employers often simply rely on the combination of the policy provided by the insurance carrier and the required Summary Plan Description thinking this meets the ERISA documentation requirement (it does not, but that’s a topic for another day). So, in the absence of an ERISA plan document that would state the employer’s policy about when to terminate COBRA for Medicare entitled participants, what is a TPA to do?

I continued on my quest and called several other sources to no avail or clear answer. In the end, I am unsatisfied with the “benefits may cease” rule. So, I have decided the only way to apply this equitably to every client is to return to my original rule of always terminating benefits on the first of the 65th birthday month without exception. We do not have the ability to get “plan documents” from each carrier (assuming they can find them) or employer (assuming they have one) to decide what is permitted and then ask the employer what they want us to do.

All this confusion aside, there is one exception to the rule of terminating coverage on the first day of the 65th birthday month – stand-alone dental and vision benefits. We have many COBRA participants who want to keep dental and vision coverage after age 65 because Medicare doesn’t cover those benefits.  We have found that dental and vision carriers do not track the age of a COBRA participant and never terminate benefits. We warn COBRA participants the carrier has the right to cancel coverage but likely won’t. 

If you’ve read any of my Questions of the Month, you know that for many alphabet-soup-related questions, my answer is commonly “it depends.” In this particular instance, however, the rule vs. the generally accepted practice remains at odds. And, so I revert to my long-standing fall back stance of be consistent, be equitable and always ask questions!

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