COBRA limitations and Medicare

Mary – Fla.: I am a quadriplegic and have been since I had an injury on June 11, 2012. During the time of my injury, I was under my employer’s large health plan and stayed on this plan until March 1 of this year. I had to go on COBRA [COBRA stands for the Consolidated Omnibus Budget Reconciliation Act, which allows workers to continue their group health coverage for 18 or 36 months following a qualifying event], since my employer switched to a different insurance company then. I was given 10 days’ notice to decide if I wanted to elect COBRA coverage and also was never informed about COBRA rules, specifically with Medicare, and the coordination of benefits. At 46, I never thought that I needed to even think about Medicare.

During the time I was on my employer’s health plan, Medicare automatically enrolled me, since I was disabled and collecting Social Security Disability Insurance. When I received my Medicare packet in the mail, I called the company who brokers the health plan to my company and asked them if I had to sign up for Medicare. They told me no, as my company has well over 100 employers. They said that I might as well keep Medicare Plan A since it was free and decline Part B since I had to pay for it. I followed their advice, because at the time, I had a high deductible health plan that paid for everything, including lots of physical therapy and the numerous medical expenses that I incur with my condition.

This entire experience is tragic, and they know it.

When I received the email from the benefits person in February of this year regarding the new insurance plan, I elected a COBRA policy with the new insurer. Just a few weeks ago, many providers started calling me stating that the new insurer was asking for its money back because I was entitled to Medicare and Medicare should be paying first. Well, I did not elect Medicare Part B, so this is leading me into the jam.

The benefits person that I spoke to is working with the new insurer to get this cleared up, but it appears I do have to go on Part B. I was highly misinformed and now will probably have to pay a penalty for late election of Part B. I’m not sure whether I should keep the new COBRA plan, still pay the $509 for it each month and also elect Part B, or if I should sign up for a Medicare Advantage plan. I’m very confused about this and have no idea what the differences are between all of these plans. I want to make sure that whatever plan I go with is the best possible plan that helps pay for all the physical therapy and catheters that I need. The new insurer told me that if I keep them as a secondary that they will cover the difference between what Medicare Part B will not pay.

My previous employer, whom I have very good relationship with, is trying to find a solution for me. This entire experience is tragic, and they know it. I’m hoping that they can do something, because basically, aside from Part A and my COBRA, I’m uninsured until July 2016.

I can’t even buy a private policy, because I’m enrolled in Social Security Disability Insurance and Medicare Part A.

Phil Moeller: Mary, I am so sorry to hear about your injury and your subsequent insurance problems. Medicare should have a red-carpet service for folks like you, instead of forcing you to run such a daunting gauntlet of coverage hassles.

First, your Medicare issues do not really involve the open enrollment period. Open enrollment is for people who already have Medicare to decide if they want to change their coverage. So, you don’t have to worry about the Dec. 7 deadline that just passed. Unfortunately, this is the only piece of good news I have for you.

I don’t understand the details of why you had to go on COBRA, but I assume you’re OK with that shift, or at least you’re not suggesting it was inappropriate. I assume you’re not still actively employed, because if you were, you would not have to go onto COBRA.

Medicare should have a red-carpet service for folks like you, instead of forcing you to run such a daunting gauntlet of coverage hassles.

As I understand your note, you have run into the problem that many people with COBRA encounter. And this is that COBRA coverage is not considered participation in an active employer group health insurance plan under Medicare rules. Accordingly, this policy can no longer be the primary payer of your health insurance claims, and Medicare must now be your primary payer. You don’t mention this, but even at 46, you are entitled to Medicare 25 months after beginning Social Security Disability Insurance payments, and it appears you’ve met this entitlement.

So you will need to get at least Part B Medicare coverage and probably a Part D drug plan as well. But your Medicare enrollment window actually began when you began getting COBRA. Now, more than eight months later, the soonest you can sign up for Medicare may be next January, and the coverage might not be effective until July. This is an awful consequence for people like you who thought they were doing the right thing. I hope your benefits person can do better than this for you, but these are the sign-up rules as I understand them for a person in your situation. While there may be some late enrollment penalties, they will not be large. Your real concern is not having primary insurance at all for an extended period.

If your COBRA insurer is saying it will only be the secondary insurer here, you will have to weigh how much this is worth and compare it to the monthly premium for a Medigap policy. Part B of Medicare generally pays only 80 percent of covered expenses, and you’re on the hook for the other 20 percent. If you got a Medigap plan along with Part B, it might pay this 20 percent for you. You can go online, see who sells these policies where you live and get a general idea of their cost. The monthly premiums ordinarily would be much less than your COBRA premium, but that’s assuming you were signing up for Medigap during your initial enrollment period. Consumers have guaranteed issue rights to Medigap during this period, but you may no longer have such rights, and insurers may be perfectly within their rights to charge you higher premiums.

You also could, as your note suggests, get a Medicare Advantage plan. These plans usually combine Parts A and B of Medicare with a Part D drug plan. They also have annual caps on out-of-pocket spending for covered expenses, which means you wouldn’t need a Medigap policy. I can’t really advise you which way to go. There is a Medicare Advantage online tool that will show you what’s available where you live, but you will need to do homework to figure out the best policy for you.

Your main job, however, as I’ve emphasized, is to get primary coverage as soon as you can. For this reason, I’d sign up for Part B and a drug plan as fast as possible. I’d keep the new insurer plan as a secondary payer and replace it with a Medigap policy if you can find one that is a better deal for you. Then, during next fall’s open enrollment, I’d take the time to research Medicare Advantage plans and figure out if you wanted to switch to one of them in 2017.

I’d recommend that you call the State Health Insurance Assistance Program (SHIP) and ask to speak with a counselor. The service is free, and I hope they can lead you to good and timely decisions here.

All the best. You are a brave soul for navigating these challenges.

Carol – South Carolina: My husband and I will both turn 65 later this year. We are retired and currently on COBRA (Consolidated Omnibus Budget Reconciliation Act) from his employer. His employer says I should delay signing up for Medicare for one month. I am reading about all these penalties if you don’t sign up when you become eligible. Should I just sign up in August and pay the COBRA premium as usual? His employer says they will give me a letter and just wait until September when my husband will sign up. I am concerned about that as employer is in a different state and may not understand the rules fully.

Phil Moeller: You should not have to worry about penalties. There is a seven-month initial eligibility period for Medicare, and the start date of your coverage depends on when during this period you enroll.

I always tell people with COBRA that their main concern should not be penalties but making sure they do not have an unintentional lapse in primary health coverage.

Your COBRA insurer, for example, may not continue to provide primary coverage when you turn 65 and would expect Medicare to become your primary insurer then. I urge you to speak with your COBRA insurer to find out if this will be the case.