Joanne: Many people are eligible for COBRA once they retire and they make their transition to Medicare. But how do Medicare and COBRA work together? Can you have COBRA without Medicare? Do you even need COBRA? We'll cover all of that and much more in today's episode, giving you what you need to know about Medicare and COBRA during your learning journey.

Cameron: But before we start, my name is Cameron Giardini, and together with my co-host, Joanne Giardini Russell, we operate Giardini Medicare, which is an independent insurance agency based out of southeast Michigan. Although we're based in Michigan, we work virtually over the phone to directly help consumers in about 13 states to find the right Medicare coverage for them.

If we do not work in your state, we will connect you with another trusted independent agent that will be able to help you find the coverage that you want. We also wanted to announce that we now have a free online course that is available for you to register for. This course combines all of the Medicare content we have created in one easy-to-find location, as well as adding official Medicare information and sources that we think will help you in your Medicare transition.

So you can access this course by going to gmedcourse.com, which is G M E D course. com. So with that out of the way, let's give an overview of today's episode. So we'll talk about what is COBRA, what is COBRA eligibility, what that entails, and how COBRA work with or without Medicare, and we'll go over our recommendations for COBRA and Medicare.

And we will also talk about how to avoid possible COBRA and Medicare mistakes, which is probably the most important topic of all of this. And just a quick disclaimer, we do not sell group health insurance plans. We are not COBRA experts. We will break down COBRA to the best of our ability, and we're going to a link.

Two official sources in the show notes for this episode, but the focus of this episode, is going to be how COBRA interacts with Medicare and what that means for you when making your transition to Medicare. So, Joanne, we'll start it off and talk about what is COBRA. 

Joanne: All right. I will say this is probably one of my favorite episodes because we see a lot of issues with COBRA.

So people coming out of the employer situation, by the time they get to a Medicare, you could really have some problems. So we're going to start. And hopefully, avoid those, but let's discuss what COBRA actually is. So according to the Department of Labor, COBRA is an acronym, and it stands for the Consolidated Omnibus Budget Reconciliation Act, which is COBRA.

 Don't worry about remembering that, but that is what that acronym stands for. And essentially, COBRA gives workers, and their families who lose their health insurance benefits the right to continue those group health insurance benefits provided. by the group health plan, and it allows them to continue for limited periods of time and under certain circumstances, such as voluntary or involuntary job loss, reduction in the hours that the employee is working, and transitioning between jobs in the situation of death, divorce, and other life events.

Now, COBRA is typically expensive because now you will be paying the total premiums for your health insurance. COBRA is usually going to cost 102% of the total monthly premiums of that previous coverage. Now this includes 100% of the monthly cost of your coverage, and it's going to combine what you paid and what your employer paid, as well as they are throwing in an additional 2% COBRA administrative fee.

Let me give you an example of that in absolute numbers, though. If the total cost of your employer coverage were 900 a month while you were working at that employer and your employer contributed 50% of that premium, you would have been paying 450 per month for your health insurance while you were employed there.

Now, if you continue the same coverage through COBRA when you leave that employer, you might pay 102% of the 900 per month. amount, and that's going to result in the entire monthly premium that you're going to pay, and that amount will be 918 when you factor in that administrative fee

Cameron: Which is much more than the 450 you were previously paying, which comes as a surprise to a lot of people.

So shifting to COBRA eligibility, according to the Department of Labor, COBRA generally applies to all private sector group health plans maintained by employers that had at least 20 employees on more than 50% of their typical Business days in the previous calendar year. Cobra also applies to state and local government-sponsored plans.

You don't have to remember that guideline, but generally speaking, if you have an employer with more than 20 employees, just know that Cobra should be available to you when you stop working as far as continuing your coverage. Now the Department of labor also says that you must meet three basic requirements for entitlement to Cobra continuation coverage.

And these include your group health plan must be covered by Cobra. You must have a qualifying event that occurs, and you must be a qualified beneficiary for that event. So COBRA coverage is generally available for a set time period, which depends on factors such as the qualifying event causing your COBRA eligibility.

But these time periods, just so you're aware, typically will extend your coverage up to 18. 29 or 36 months. However, 18 or 36 months are likely the most common maximum time limits for Cobra. We're not going to talk about all the different situations that lead to these different coverage timeframes, but just know that an employee's Medicare eligibility, it might allow their spouse or dependents to have Cobra eligibility for up to 36 months.

So make sure to confirm with your employer or your former employer about how long you are eligible for Cobra. 

Joanne: the timing of when you're eligible for Medicare versus COBRA is gonna impact your choice in having either of this coverage or both of these coverages together.

In a couple of situations, if you have Medicare before Cobra begins, that means your Medicare Part A or Part B is effective. On or before the date that you elect to have that COBRA coverage, your plan cannot discontinue your COBRA coverage because of your enrollment into Medicare. The second situation is you have Medicare after your COBRA begins.

So this would mean you start your COBRA first, and then you are entitled to Medicare Part A or Part B after that COBRA began. Remember, Uh, your plan in this situation could terminate your COBRA coverage early. Not all do, but they certainly can. We do find, I would say, Cameron, wouldn't you agree that most do? 

Cameron: yeah, I would say most insurance companies are happy to get rid of your coverage if they can. I guess that's a good point. Okay. 

Joanne: So the most important thing to know is if you're entitled to Medicare due to disability or due to being age 65 plus, COBRA becomes the secondary payer coverage to Medicare. Now this is huge.

This is the stuff we see problems with. And so, let me get into an example. So a little makes a little more sense, but let's say you are turning, but you're still actively working at an employer that has over 20 employees. So your employer coverage while you are working, is the primary insurance for you.

If you have Medicare, maybe you have Part A, which is secondary to that group insurance situation. Now, Because of this, many people only enroll in Part A, and they delay Part B. Now, the same person retires and you become eligible for COBRA. Although this COBRA coverage looks and feels the same as your employer coverage, it now is technically secondary coverage to Medicare.

And this is whether or not you apply and enroll in Medicare Part B, as in "boy". 

Cameron: So Joanne already mentioned how this is super important when it comes to understanding how COBRA is secondary to Medicare. But why does it matter that COBRA becomes secondary? The problem is that COBRA is no longer obligated to pay most of your medical bills.

As primary coverage, Medicare should be paying 80% of coverage for most medical services that you have. But if you don't have part B in place, like you should, your COBRA coverage, they might only pay 20% that they're obligated to pay, or they could just pay nothing because they are typically only obligated to pay after primary insurance paid their share.

So if you don't have Medicare in place, that's where the issue comes into play. This can leave you with large unexpected medical bills. And this is something kind of unique, but we've had people in the past where they don't have Medicare properly in place, and they do have COBRA coverage, and they haven't seen issues for, you know, even several months at a time.

It might not. Even be an issue until you have a bigger claim or something gets audited, and that's where they find out that you do, in fact, not have the correct primary coverage, and that's where Cobra could come back and deny claims or try to get money back. It's not something that happens immediately, but if you have a big claim with just Cobra and without Medicare, that's where you might.

First, run into issues, and that's where we get people that panic and say, what do I do? You know, I got this huge claim out of nowhere. 

Joanne: It happens. I remember someone, Karen, it was like a year and a half later. She was eligible for Medicare on disability. And then she went on to Cobra, and there was a $100,000 plus bill outstanding, and the group people were asking if this was legit, and it certainly was legit because she should have enrolled in Part B, and she did not.

So this does happen, people. Yeah, 

Cameron: just like insurance companies being happy to cancel your coverage if possible, they are equally as happy to not pay for things they don't have to. So I don't really blame them. Exactly. The other thing people wonder about when it comes to Cobra, and Medicare is, is Cobra creditable coverage?

So this comes up when we're talking about Medicare penalties. I'll make it simple. Cobra is never creditable for part B of Medicare, and that's part B like "boy". Now, some will say that Cobra is also never creditable. Part D, which is your drug coverage, but it can certainly be creditable coverage for Part D if you have prescription coverage provided by the plan that meets the standards to make it creditable.

 In order to check with that, just check with your former employer or COBRA to confirm your prescription coverage with COBRA meets the standards for Part D. Creditable coverage. So the reason this matters is that not enrolling in Part B not only can it lead to billing issues, but if you do not have Part B in place in the suitable timeframe, you can potentially have a lifetime penalty for Part B and also for Part D.

If you do find out that your COBRA coverage is not creditable for part D. We do have another episode about Medicare penalties. So if you're worried about that more, just make sure to listen to that. And I 

Joanne: I would bring up there, Cameron, just briefly, the reason why the whole credible coverage is confusing to people is that, again, its employer insurance, you know, and while you were the employee, it was very different than it is while you're on COBRA, but so many people take that same coverage, they continue it, they pay for it now, it's no big deal, it's no different in their brain, so they're thinking they're just able to defer enrolling into Part B because they have worker coverage, and it's just not the case.

Cameron: Yeah, absolutely. COBRA is essentially the same coverage you had. It just works differently with Medicare. So it's going to feel the same as far as your ID card, and you're not really going to notice a difference as the consumer, but you have to understand on the back end, there are a lot of changes that you have to be aware of.

Tons and tons and tons. So we talked about not having Medicare with COBRA, but what if you just want to have Medicare and COBRA together? 

Joanne: Much of the information in this episode won't actually matter for many people listening to it since many people are happy to leave COBRA coverage for Medicare once they compare the coverage and the pricing for a Medicare Advantage plan or a Medicare supplement coverage compared to that actual COBRA cost.

But can you have Medicare and COBRA together? The short answer is yes, you certainly can. Just remember, when we say Medicare, we are referring to having both Part A and Part B of Medicare effective simultaneously. If you are eligible for COBRA coverage and Medicare, you can almost certainly have Medicare as your primary coverage.

And your COBRA as your secondary coverage. We talked about the cost and how typically, this could be more expensive. So why would you want to do that? So we're going to give you a couple of reasons why you might actually want to remain on COBRA as your secondary coverage to Medicare. One great reason is that your former employer is subsidizing, which means they're paying for some or all of that COBRA premium.

And we see this a lot with a severance situation; they might give you six months of free COBRA. So why would you not take that right? This may be for a few months; it could be several months; we've seen up to a year. Just remember, you will still want to have Part B of Medicare in place, and therefore you will be paying your Part B premiums.

And another reason that you might want to have COBRA as secondary insurance is that you might have very expensive medications that are covered really well by that COBRA insurance plan and that they would be really expensive with a Medicare standalone Part D plan. This will become less of a factor over the upcoming years as Medicare is going to be phasing in a cap on Part D prescription costs.

But in the past, we've seen some people if they go to a Part D plan, it could be $8,000 out of their pocket. And if they stay on the COBRA plan, it could be $500. So that is a valid reason to stay with COBRA as well. There may be some other reasons to have both coverage as it becomes, you know, a case-by-case basis, but those are some.

Kind of realistic and common ones that we see. Yeah. 

Cameron: Although most people probably won't continue COBRA with their Medicare, it certainly can happen. So it's not as easy as saying never do one or never do the other, but you just have to, again, take it case by case and figure out if you do have a unique situation where the cost makes sense for you, like anything with Medicare.

Right. So we've already gone over some of the problems when it comes to COBRA and Medicare, but we really want to highlight the two main problems that we encounter with consumers In regard to both of these coverages, so again, the issues between Medicare and Cobra, they arise really not when people have both coverages, but instead, the problems come when somebody defers their Medicare coverage and try to only use Cobra without Medicare, despite being eligible for Medicare.

Again, we'll highlight these two problems that we tend to encounter the most when it comes to COBRA and Medicare. So problem number one is COBRA becomes a secondary payer once you are entitled to Medicare. If you do not enroll in Part A and Part B of Medicare, you can experience significant gaps in coverage and billing issues down the road.

COBRA is not obligated to pay the bulk amount of your medical bills if you do not have original Medicare in place as your primary coverage. Now, sometimes they might make an exception for this; a COBRA administrator or a plan may say they'll still pay as primary. You absolutely have to get that in writing if that is something that they are telling you.

But for the most part, COBRA is going to take a backseat to Medicare once you're eligible for both of them. The second problem we see with COBRA and Medicare is that COBRA does not make you eligible for a Part B special enrollment period. This is the main enrollment period that you are going to use to sign up for Part B.

If you delay your Medicare past age 65, so if you go more than eight months after your active employer coverage ends, you might face large gaps in coverage and lifetime Medicare penalties due to this being the case with Cobra. For example, we've had people in the past who say, well, I've had 18 months of my Cobra, that's my eligibility, and now they're ending.

I need to sign up for part B. All of a sudden, we have to tell them there are barely any solutions for them, and they might have to wait until the general enrollment period to actually enroll in coverage, which that general enrollment period is only from January through March of every year. And in addition to having to wait and having gaps in coverage, they will likely be facing a Part B lifetime penalty.

2023, there is a unique special enrollment period for Part B. If you can truly prove your employer gave you false information about Medicare enrollment, but just know that your employer is not telling you about Medicare properly if they don't say anything, it's really not the same as I'm actively giving you wrong information.

So you have to prove that they actively gave you incorrect information that led to you making an enrollment mistake with Medicare. So those are the two main ones. Problems with Medicare and COBRA, but what are problems without solutions? We got to talk about those. So Joanne can talk about how to avoid these mistakes.

Joanne: Right. So in the vast majority of situations, you should plan on enrolling in Original Medicare, which is, again, Part A and Part B, if you also plan on continuing with that COBRA coverage. You'll want to ask your former employer if you have any unique circumstances like subsidized COBRA. Remember, are they paying for that, and for how long are they paying that?

And make sure you do a brief comparison always of COBRA insurance If you do continue with both Medicare and COBRA, make sure your COBRA is creditable for Part D prescription coverage. And remember, that means you can stay with that COBRA without getting a Part D standalone plan. And you'll always want to understand how keeping Medicare and COBRA can impact your Medicare supplement enrollment options.

And if you'll remember from previous episodes that the Medigap open enrollment period is the best and the easiest opportunity to enroll in Medigap coverage, but it does only last for six months. Once you are 65 or older and enrolled in Medicare Part B for the first time, so, this means the clock starts ticking while you have Medicare and your COBRA coverage in place together.

This doesn't mean that you won't be able to enroll in Medigap coverage in the future, but you may not have your Medigap open enrollment period, and you may instead have to rely on what we call guarantee issue rights or go through underwriting and health questions to qualify for a plan. So again, it is easier with the Open Enrollment Rule, not to say it's impossible the other way. 

Cameron: Overall, many consumers will not choose to have Medicare and COBRA at the same time, but if you do, you just need to ensure that you're not making any mistakes that could have lasting impacts during your time on Medicare. The information in today's episode should have given you the details that you need to do exactly that, but of course, you can always reach out if you have more questions.

But for now, please leave us a review on your podcast app and subscribe so you can listen to future episodes. If you want to find more Medicare content from us, again, the best place to do so is by registering for our online course at gmedcourse. com. G M E D. Course. com. If you want to schedule a one-on-one phone call with us, or if you just want to ask any questions, you can email us at info at G medicare team.

com, or just go to our website at G medicare team. com. Thank you, and have a great day.