August 21, 2013
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Medicare and COBRA
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Medicare and COBRA
by Len Barend

At issue: Medicare does not consider COBRA to be creditable coverage and under the COBRA law, it is creditable coverage. Second, is the closed open enrollment opportunity due to PPACA.

The recession wiped out savings that older Americans were counting on so they are working longer than ever. It is not uncommon for a person who is 65 and over to choose COBRA instead of Medicare, but if they do, they can be considered in violation of CMS regulations and subject to a fine for the rest of their lives.

Here’s how it works:

Employee retires, taking COBRA and not Medicare Part B. They are now 68 and want to go on Part B. They have to sign up between January 1 and March 31 for an effective date of July 1. They are then subject to a 10% per year fine based on the current Part B premium (For 2013 - $104.90 per month. Could be higher if income is above $85,000 for singles and $170,000 for a married couple.) In the above example, the Medicare recipient would pay a fine of $10.49 times three years or $31.47 per month for the rest of their lives.

To determine if COBRA is credible coverage, CMS looks to who pays. NAHU believes this is a hardship for many seniors and should be clarified by Congress to say that COBRA is in fact creditable coverage.

Prior to the PPACA legislation, Medicare had two enrollment periods. One is the AEP (Annual Election Period), which runs from November 15 to December 31. During this period a Medicare recipient can change plans as many times as they want with the last plan selected becoming the plan they use. Then you had the OEP (Open Enrollment Period) whereby you could make one final change and be locked in for the remainder of the year. The OEP ran from January 1 through March 31. The PPACA legislation eliminated the OEP and created instead an ADP (Automatic Disenrollment Period). The ADP runs from January 1 through February 14. During this period you can get off your MAPD and go back to Original Medicare and a prescription drug plan or choose a Medicare Supplement (as long as you qualified for the plan through underwriting) along with a prescription drug plan.

There is legislation pending in Congress that would correct the COBRA issue and restore the OEP for Medicare recipients.

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