Show of hands: do you think of Medicare Entitlement as a COBRA qualifying event? If you raised yours, you’re not alone. While technically, you are correct, the reality is Medicare Entitlement rarely ever qualifies as a COBRA qualifying event.
Here’s a common situation:
An employee, age 65+, decides to get off group insurance so that his younger spouse can elect COBRA on a Medicare Entitlement for 36 months due to Medicare Entitlement allowing her to make it to age 65.
Have you recommended this solution to a client? I have too, but you could find yourself hitting a brick wall with their administrator or insurance carrier when you try to enroll the spouse in COBRA under Medicare Entitlement. While you may have gotten lucky because some administrators don’t have a good understanding of the rule, be prepared that others will reject all COBRA enrollment requests with Medicare Entitlement as the reason. And, those folks are the ones with a correct understanding of the law. Your client needs to have a Plan B because the day is coming, my friends, when every carrier will wise up and reject these enrollment applications.
Why isn’t Medicare Entitlement accepted as a COBRA qualifying event even though it is listed as one?
Two things have to happen to be a COBRA qualifying event:
- An involuntary loss of coverage, and
- One of the seven COBRA qualifying events occurred
The problem with Medicare Entitlement is that most group health plans are prohibited from making Medicare Entitlement a qualifying event because it’s not an involuntary loss of coverage. If an employee over the age of 65 decides to drop group benefits because he’s enrolled in Medicare, it’s a voluntary family decision, even if it causes the loss of coverage for the covered younger spouse. It’s no different than an employee voluntarily dropping a dependent from benefits.
What about Medicare Entitlement as a secondary qualifying event?
Let’s say an employee retires before age 65 with employee + spouse coverage, then he turns age 65. Can his spouse get an extra 18 months for a secondary qualifying event of Medicare Entitlement for a total of 36 months? Again, no. She only gets a total of 18 months due to his termination of employment. Medicare Entitlement is not a secondary qualifying event in this case either.
In this scenario, the younger spouse can continue on COBRA (often paying the employee only premium) until the end of her 18 months of COBRA eligibility. Why only 18 months and not an extended 36 months? Again, she did not involuntarily lose coverage so there is no case for a secondary qualifying event. Only death of employee, divorce and legal separation will get the spouse a total of 36 months of COBRA eligibility. Only loss of dependent status will get a covered dependent a total of 36 months of COBRA eligibility.
Is there ever a case where Medicare Entitlement can be used as a qualifying COBRA event?
It’s rare, but can happen. In a scenario where a covered, retired employee (and the spouse and dependent children) experience a loss of coverage when enrolled in a retiree health plan, Medicare Entitlement would constitute a first qualifying event for the affected spouse and dependent children (assuming they are under age 65) permitting them to elect up to 36 months of COBRA. The retiree, however, is out of luck and loses coverage.
How can you help clients with older employees who have younger spouses and/or dependents?
A few “off the record” tips from SBA:
- Turning age 65 during COBRA eligibility will result in the medical carrier booting the person off COBRA the first day of the birthday month. Remember, you need to communicate new rates to the covered spouse and dependent children as they may assume the “employee” rate position.
- Send the person turning age 65 a “Termination from COBRA – End of Eligibility” notice to confirm his termination from coverage (a COBRA requirement).
- Often times, dental and vision carriers do not track the age of COBRA participants. By staying mum on the fact that the COBRA participant has turned 65, it’s possible coverage can continue to the end of the 18 months of COBRA eligibility.
COBRA rules are complicated, and the Medicare Entitlement issue is particularly tricky. If I had my way, it would be removed from the list to avoid all confusion. But, I don’t make those rules (next month’s newsletter will include an article on “Why I think the Conversion Notice needs to be updated or eliminated”).
Remember, anytime an employee comes to you saying retirement, Medicare and COBRA in the same sentence, give them my phone number.