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COBRA and Medicare interaction

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Let's say an executive is currently employed and on his employer's group health plan. The executive is being terminated in connection with an M&A transaction but will become an consultant to the company for six months as an independent contractor. As part of the termination, the employer has offered to pay for COBRA coverage for him and his dependents for six months. The executive is already eligible for Medicare.

Assuming he is not enrolled in Medicare, he's still eligible for the COBRA coverage, correct? He would lose COBRA coverage if, after the COBRA coverage becomes effective, he then enrolls in Medicare. Do I have that right?


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Here's how the early COBRA termination from Medicare enrollment timing rule works:


Issue #4: Early Termination of COBRA Upon Enrollment in Medicare

COBRA can terminate early if the qualified beneficiary enrolls in Medicare after electing COBRA.

There are a few key points with this rule:

  • Mere eligibility for Medicare (e.g., reaching age 65) does not affect COBRA rights.
  • Although the COBRA rules refer to Medicare “entitlement,” guidance confirms that “entitlement” means “enrollment.”
  • The enrollment in Medicare must occur after the qualified beneficiary elected COBRA to cause early termination.

The timing piece means that a qualified beneficiary who enrolled in Medicare prior to electing COBRA will not be subject to early termination of COBRA because of the Medicare enrollment.  In other words, qualified beneficiaries who want to have Medicare and remain on COBRA must be careful to enroll in Medicare prior to electing COBRA.

This timing rule stems from the 1998 U.S. Supreme Court case Geissal v. Moore Med. Corp., which is the only U.S. Supreme Court case to address COBRA rights.  Since the U.S. Supreme Court’s ruling, the IRS has updated the COBRA regulations to confirm that only enrollment in Medicare after electing COBRA can cut short the qualified beneficiary’s COBRA rights (Treas. Reg. §54.4980B-7, Q/A-3).

The recently updated DOL model COBRA initial notice and model COBRA election notice include a provision directly addressing this issue:

If you elect COBRA continuation coverage and then enroll in Medicare Part A or B before the COBRA continuation coverage ends, the Plan may terminate your continuation coverage.  However, if Medicare Part A or B is effective on or before the date of the COBRA election, COBRA coverage may not be discontinued on account of Medicare entitlement, even if you enroll in the other part of Medicare after the date of the election of COBRA coverage.

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However, there are bigger issues to worry about here--including:

Issue #1: Medicare Will Pay Primary (COBRA Coverage Can Assume Primary Medicare Payment Even If Not Enrolled)

Issue #2: The Eight-Month Medicare Special Enrollment Period is Not Extended by COBRA Enrollment

Issue #3: COBRA Does Not Qualify to Avoid Part B Late Enrollment Penalties

Full details:

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