Caution
Advocates have seen an increase in the number of Medicare beneficiaries who have delayed enrolling in Medicare Part B, thinking, erroneously, that because they are paying for and receiving continued health coverage under COBRA, they do not have to enroll in Medicare Part B.[1] COBRA-qualified beneficiaries who have delayed enrollment in Medicare Part B do not qualify for a special enrollment period (SEP) to enroll in Part B after their COBRA coverage ends.[2] (They may, however, qualify for a SEP to enroll in Part D at that time if the drug coverage they had under COBRA constitutes creditable coverage.)[3] Only individuals who delay enrolling in Part B because they are covered under an employee group health plan (EGHP) by reason of “current” employment may take advantage of the SEP rules.[4] Individuals on COBRA do not meet the definition of having current employment status.[5]
Consequences
Medicare Part B – The consequences of delayed Part B enrollment can be severe. Generally, the beneficiary who does not enroll during his or her initial enrollment period and who is not entitled to a SEP must wait to enroll in the next general enrollment period (January – March), with benefits starting on July 1 of that year.[6] Further, there is a 10% late enrollment penalty added to the standard monthly premium for every 12 months of delayed enrollment in Part B.[7] The penalty has no durational limit.[8]
Under Part D, the penalty is 1% of the national base beneficiary premium in a given year times the number of full, uncovered months of eligibility without other creditable drug coverage.[9] A Part D eligible individual must pay the late penalty if there is a continuous period of 63 days or longer at any time after the end of the individual’s initial enrollment period during which the individual meets all of the following conditions: (1) The individual was eligible to enroll in a Part D plan; (2) The individual was not covered under any creditable prescription drug coverage; and (3) The individual was not enrolled in a Part D plan.[10]
About COBRA
COBRA is the acronym applied to continuation coverage that was made available through the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985.[11] Private employers who offer EGHP coverage and who normally employed 20 or more workers on a typical business day during the preceding calendar year must offer COBRA coverage to employees and their dependents when they lose their EGHP-sponsored health insurance because of certain specified events.[12] Covered employees, or workers, are only eligible for COBRA based on termination of their employment or reduction in their hours.[13]
An individual eligible to purchase COBRA is referred to as a “qualified beneficiary.”[14] Qualified beneficiaries include covered employees, spouses, dependent children, and retirees, their dependents, or their surviving spouses if the retiree’s former employer files a petition for bankruptcy.[15]
The six qualifying events for COBRA coverage are defined in the statute as:
- The death of a covered employee
- The termination (other than for gross misconduct), or reduction in hours, of the covered employee’s employment
- The divorce or legal separation of the covered employee from the employee’s spouse
- The covered employee’s entitlement to Medicare
- A dependent child’s losing dependent status
- The filing for bankruptcy by a retiree’s former employer.[16]
Reminder
It is important that people with Medicare are advised about COBRA rules and about the circumstances under which they can use a SEP to avoid a late enrollment penalty.
[1] See § 9.05 (Coordination of COBRA Rights and Medicare) of the “2015 Medicare Handbook,” Wolters Kluwer Law & Business, written by the staff of the Center for Medicare Advocacy, Inc. The book is available through http://www.wklawbusiness.com/ (site visited September 11, 2015).
[2] CMA. “Medicare & You!” 2015. https://www.medicare.gov/Pubs/pdf/10050.pdf (site visited September 11, 2015).
[3] See 42 C.F.R. §423.38(c) (special enrollment period) as described in §423.38(c)(8)(ii). See also 42 C.F.R. §§423.46; 423.286(c)(3); 423.286(d)(3). The SEP begins with the month the beneficiary is advised of the loss of creditable drug coverage and ends 60 days from the loss of the coverage or from the date of the notice, whichever is later. See also, CMS “Creditable Coverage Disclosure to CMS Instructions & Screenshots.” 2012. https://www.cms.gov/Medicare/Prescription-Drug-Coverage/CreditableCoverage/Downloads/CreditableCoverageDisclosureUserManual05292012.pdf. A Part D eligible individual must pay the late penalty if there is a continuous period of 63 days or longer at any time after the end of the individual’s initial enrollment period during which the individual meets all of the following conditions: (1) The individual was eligible to enroll in a Part D plan; (2) The individual was not covered under any creditable prescription drug coverage; and (3) The individual was not enrolled in a Part D plan. 42 U.S.C. §1395W-113(b)(2), 42 C.F.R. §423.46 (Late enrollment penalty).
[4] 42 C.F.R. §§407.20(b), (c).
[5] 42 C.F.R. §411.104.
[6] 42 C.F.R. §§407.15(a), 407.25.
[7] 42 U.S.C. §1395(r); 42 C.F.R. §408.22. CMS. “Part B Late Enrollment Penalty.” https://www.medicare.gov/your-medicare-costs/part-b-costs/penalty/part-b-late-enrollment-penalty.html (site visited September 11, 2015).
[8] See 42 C.F.R. §§408.24, 408.25. For disabled beneficiaries under age 65, the penalty will end when they turn 65. For persons under age 65 paying the penalty, the penalty goes away at age 65. See §1837(g)(1) of the SSA; POMS HI00805.085(B). Note, for Part A, the 10% penalty extends for twice the number of full 12 months of delay. 42 C.F.R. §406.32(d).
[9] See 42 U.S.C. §1395W-113(b)(3).
[10] 42 U.S.C. §1395W-113(b)(2), 42 C.F.R. §423.46 (Late enrollment penalty).
[11] See Pub. L. No. 99-272 (Apr. 7, 1986), 100 Stat. 222, codified at 26 U.S.C. §4980(b), 29 U.S.C. §1161 et seq, 42 U.S.C. §§300bb-1, et seq.
[12] See 29 U.S.C. §1161(b). State and local governments employing more than 20 employees also must offer continuation coverage. 42 U.S.C. §300bb-1(a). Federal employees have their own health care continuation coverage. 5 U.S.C. §8905a.
[13] See 29 U.S.C. §§1163(2), 1167(2).
[14] 29 U.S.C. §1161(a).
[15] 29 U.S.C. §1167(2), (3).
[16] 29 U.S.C. §1163.