Medicare & COBRA Myth Busting

February 27, 2020

In the world of healthcare benefits, Medicare and COBRA are two types of coverage that are extensive in their regulations and complicated to understand. How do they work together? Here are a few common myths that are debunked or verified to help in benefit plan design.

Myth # 1 – It is not possible to be enrolled in both Medicare and COBRA at the same time.

False. While it is not generally the best and most cost-effective arrangement and therefore not common, it is allowable. COBRA IRS regulations make it clear that qualified beneficiaries who become entitled to Medicare benefits on or before the date of their COBRA election remain entitled to COBRA coverage. In contrast, for qualified beneficiaries who first become entitled to Medicare after electing COBRA, the COBRA statute and regulations generally permit a plan to terminate COBRA coverage before the end of the COBRA maximum coverage period.

Myth #2 - I can drop COBRA after becoming enrolled in Medicare.

True. A participant can drop COBRA benefits at any time whether or not they are enrolled in Medicare.  Benefits can be terminated by simply not paying any additional monthly premiums within the payment grace period.

Myth # 3 – If an eligible participant elects Medicare coverage, it is possible for eligible dependents to be enrolled in COBRA.

True. The covered employee's entitlement to Medicare is one of COBRA's listed qualifying events. It is a qualifying event only for the spouse and dependent children, not for the covered employee. The initial maximum coverage period is generally 18 months, but can be lengthened to 29 months for a disability extension. Coverage can be extended to 36 months in case of entitlement to Medicare.

An extension is available only if certain qualifying events occur (i.e., the covered employee dies or becomes divorced or legally separated, a dependent child ceases to be eligible as a dependent, or Medicare entitlement) after a first qualifying event that is a termination of employment or reduction of hours. The original reason behind the extension was to allow disabled individuals to maintain COBRA coverage until they become entitled to Medicare.

Myth # 4 – I must elect COBRA coverage once entitled to Medicare, due to being dropped from my employer’s health plan.

False. Active employees entitled to Medicare may remain enrolled on the employer’s health plan. An employer would be in violation of the Age Discrimination in Employment Act (ADEA) for dropping someone from their group health plan at or after age 65. While Medicare entitlement is a COBRA-qualifying event, entitlement does not become a qualifying event until disrupted coverage within a group health plan such as termination or reduced hours occurs.