Cobra and Medicare = Chaos 😅
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1. If your client retires early and accepts Cobra, then they will need to proactively enroll in Medicare A/B during their turning 65 Initial Medicare enrollment period to avoid part B penalties and gaps in their health insurance coverage. Why?
At 65, whether your client enrolled in Medicare or not, COBRA switches from being the first in line to pay medical bills to becoming secondary coverage, potentially leaving your client with no primary coverage.
2. If your client delays part B at 65 to stay on their large employer’s group health plan but now plans to retire and come off the large employer’s group plan, they have an 8 month window to enroll in part B and avoid late enrollment Part B penalties. A major hiccup here is navigating Medicare primary v. secondary payor rules. Who is the responsible primary vs. secondary payor once your client retires and moves off active group health coverage and on to COBRA.
We generally recommend enrolling in Medicare Part B asap (don’t use the full 8 month window allowance) to avoid gaps in health insurance. Why?
When your client is 65 or older and no longer actively working for the large employer, Medicare pays health care claims first and COBRA pays second.
But if your client doesn’t sign up for Medicare B upon retirement, the secondary COBRA coverage may not pay claims. It’s important for clients sign up for Medicare before — or soon after — the employment ends to avoid unintended coverage gaps. No one wants to pay full price for a monthly infusion!
How to enroll in part B after 65 https://lnkd.in/eP9ZB_Xm
3. A common pitfall we see is when an employer offers the retiring employee a stipend or lump sum payment for the full cost of 18 months of COBRA premiums as an exit perk. This can cause confusion and make some retirees believe they are free to delay Medicare B enrollment. In this scenario, even though the employee is getting free/subsidized COBRA, they need to enroll in Medicare B upon retirement to avoid gaps and penalties.
We advise clients, HR, and advisors in this space and do a thorough analysis of many factors, including but not limited to:
1. COBRA v. Medicare v. Supplement with Part D v. Medicare Adavantage.
2. IRMAA costs and appeals.
3. Current medications and medical needs- copays on prescriptions. The lovely Donut Hole.
4. Younger spouse and or children and their insurance needs.
5. Travel Insurance.
