COBRA Question

[Guest zora]

We have an active employee who has been enrolled in Medicare Part A for 18 months. He will soon retire. His wife says that her insurance agent is telling her she gets COBRA from our self-insured plan for 36 months from the date of termination. We think she only gets 18 months. Could her insurance agent be right?

[QDROphile]

Why is she losing coverage?

[Guest zora]

Under our plan, when an employee terminates the employee and his or spouse and dependents lose coverage. So she is losing coverage because the employee is retiring.

[QDROphile]

If you have no qualifying event other than termination, I don't see how one can get to 36 months. Entitlement to Medicare could be a qualifying event with a 36 month period, but only if entitlement would result in loss of coverage,. You did not indicate that Medicare entitlement had anything to do with loss of coverage under any circumstance.

[GBurns]

Under this plan the retiring employee loses coverage by the act of retiring so the beneficiary also loses coverage.

But doesn't the entitlement to Medicare by the retiring employee also now mean loss of coverage to the beneficiary?

[Guest P-Jay]

I don't have the time right now to find the relevant regulation, but it seems that the spouse has a choice of being covered 18 months from the employee's termination date OR 36 months from the date the employee became entitled to Medicare benefits. So she won't get a full 36 months from the retirement date as she claims, but she could have had COBRA coverage for more than 18 months from the retirement date had her husband retired earlier. As it is, given that he went on Medicare 18 months before retiring, the period of coverage remains the same either way she chooses.

Here's one of the sources I found on this issue: http://www.stoudtadvisors.com/newsletters/FocusApr05.pdf

[Guest zora]

GBurns:

I thought we couldn't require employees to terminate their health plan coverage when they go on Medicare if they are still active. Anyway, even if we could, spouses under our plan do not lose coverage when an employee enrolls in Medicare, so long as the employee is still active and still eligible for the plan (and, as I said above, Medicare does not make them ineligible). If the employee is no longer active (i.e., terminates), or is no longer eligible (e.g., goes part time), then the employee's coverage terminates and the spouse's coverage too.

P-Jay:

So if an employee goes on Medicare the day he quits (or after he quits), does the spouse get 36 months of coverage from the date the employee goes on Medicare?

[leevena]

One issue does come to mind. Employers are allowed to offer longer extension periods if they wish, and since you are self-funded it might be true of your group. Often times the life insurance agent will ask his client to bring in all important financial documents, including their health booklets. Could the agent have found it in the employee's documents from your health plan? Just a thought.

[Guest P-Jay]

I found the reg quoted in the source above--it's 26 CFR s. 54.4980B-7 (found in Federal Register Vol. 66, No. 7, at pages 1853-1854), with that excerpt lifted from Answer 4 (d)(1). (Of course, that's assuming that your plan doesn't have a different provision lengthening the period of coverage, as leevena states.)

As for your further questions, I'm not sure.

I certainly do not have the expertise to even guess what would happen if the retirement date is the exact same date as the Medicare entitlement date--is one event deemed to happen before the other? That I don't know.

Question & Answer 6 under the above reg address what typically happens if a second qualifying event occurs after the first qualifying event. But in the case of Medicare entitlement occuring after the date of retirement/termination of employment, then it seems to me that Revenue Ruling 2004-22 (http://www.irs.gov/irb/2004-10_IRB/ar11.html) makes it clear that there is no further extension of COBRA coverage in a plan like yours, where the spouse didn't lose her group health coverage when her husband went on Medicare. (That's assuming they are already on COBRA when the Medicare entitlement occurs--I don't know how it would be viewed if the health plan extends for a certain period beyond retirement and then Medicare entitlement occurred sometime after retirement but before termination of group health coverage.)

Any ideas from the experts?

[GBurns]

I would say that P-Jay got it right. I would also add Q&A 4 to the explanation.

It seems that barring extension by the Plan, the spouse is entitled to 36 months from the date of Medicare entitlement or 18 months after the termination of employment.

Zora

Where did I state or imply anything about "require employees to terminate their health plan coverage when they go on Medicare "?

[QDROphile]

Zora: To answer your question to P-Jay, the special rule for 36 months of coverage for beneficiaries from participant's Medicare eligibility date applies only when Medicare eligibility begins before the qualifying event of termination of employment/reduction of hours. A day one way or another can have a significant effect. If if the participant became entitled the day before retirement, the spouse could get 36 months. As discussed above, the plan terms can be more generous.

[Guest zora]

I wasn't aware that an employee could extend a spouse's COBRA coverage by coordinating enrolling in Medicare with his termination. It doesn't seem fair that an employee who doesn't know the rules might trip up and enroll in Medicare too early or too late. I know a plan could offer more, but we don't and our boss is very strict about following what the plan says.

Thanks for all your help.

[QDROphile]

The next time you encounter a Medicare situation, make sure you apply the key word, "entitled". I mistakenly used "eligible" in at leat one of my posts.

[jmor99]

I'm assuming that the employee's spouse wasn't offered COBRA at the time the employee enrolled in part A.

Correct me if I'm wrong, but doesn't the employee have 36 months from the time they're notified of their rights?