Beware of the unknown about COBRA and Medicare

As a recently unemployed older worker, you have options for health insurance, but read the fine print. It will be crucial.

If you were part of a group health insurance plan sponsored by your employer and you lose your job, you may be entitled to the Consolidated Omnibus Budget Reconciliation Act or (COBRA).

This health insurance program gives workers and their families who lose their health benefits the right to choose to continue benefits provided by their group health plan.

COBRA coverage lets you pay to stay on your job-based health insurance for a limited time after your job ends (usually 18 months). You usually pay the full premium yourself, plus a small administrative fee.

Sometimes as part of an exit package, the employer may foot the cost of COBRA for an employee and their family for a short period of time to coincide with a severance package.

There are many rules associated with COBRA continuation coverage. My friend who recently lost his job showed me a 10-page document he received explaining all the details around qualifying for the program.

There are other options besides COBRA for those losing an employer sponsored group health plan, including Affordable Care Act insurance, and Medicare if you are aged 65 or older.

I have limited knowledge of the details surrounding these plans, but a situation was brought to my attention recently that I think every older worker who has lost their job and qualifies for COBRA ought to be aware of.

My friend elected COBRA for he and his wife when he lost his job. He is 62, his wife is 65. Since the company was paying for COBRA for several months as part of the husband’s severance package, they decided to wait for her to apply for Medicare Part B after her paid COBRA coverage ended.

During this time, his wife incurred a medical expense of $3,500. The provider submitted the bill to COBRA insurance. Since their deductible had been reached and the provider covered this type of bill in the past, the couple expected the insurance company to pay.

An explanation of benefits from the COBRA insurance company arrived a few weeks later noting the entire medical bill would not be paid.

After hours on the phone with the insurance provider, they were told “If you sign up for COBRA and are eligible for Medicare at the same time, your COBRA benefits are intended to be paid after Medicare pays, even if you haven't actually signed up for Medicare. Furthermore, if Medicare denies the claim because you are not signed up yet, your COBRA benefits will not make any payment because it was denied by Medicare. COBRA benefits will only be paid after Medicare pays.”

The couple were shocked. If this were in fact true, why would anyone of Medicare age opt for COBRA benefits when the insurance would not cover them, whether they were signed up for Medicare or not?

They searched their 10-page Continuation of Coverage document and there it was embedded in the fine print.

Then they realized they had to take action.

After some conversation with the medical provider, they were able to negotiate down a percentage of the bill. They felt fortunate they were able to do that.

And since COBRA payments are made monthly, the husband disenrolled his wife from the COBRA plan and signed her up for a Medicare Part B plan.

This was a harsh lesson for the couple to learn, especially with the husband no longer receiving a paycheck.

Let’s let their situation be a lesson for us all.

To learn more about how COBRA coverage works with Medicare https://www.medicare.gov/basics/get-started-with-medicare/medicare-basics/working-past-65/cobra-coverage

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Tags: COBRA and Medicare

Andrea GallagherAndrea Gallagher

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