QUESTION: One of our employees is retiring and will lose coverage under our company’s major medical plan at the end of the month. She is 66 years old and already enrolled in age-based Medicare. Do we have to offer her COBRA?
ANSWER: Assuming your plan is subject to COBRA, you will need to offer her COBRA coverage. The IRS COBRA regulations make 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 early (i.e., before the end of the COBRA maximum coverage period). Thus, the date when Medicare entitlement occurs is critical. (Individuals are “entitled” to Medicare when they are enrolled in Medicare—mere eligibility to enroll does not constitute entitlement.)
Because your employee is already entitled to Medicare, she must be offered COBRA under your company’s plan when she experiences a qualifying event (her retirement). And if she elects COBRA, the plan may not terminate her COBRA coverage due to her Medicare entitlement before the end of the maximum coverage period (in this case, 18 months). Note that the Medicare Secondary Payer (MSP) rules often—but not always—permit plans providing COBRA coverage to pay secondary, with Medicare as the primary payer.
You do not mention when your employee became entitled to Medicare or whether any of her family members are covered under your company’s plan. Be aware that if a covered employee’s qualifying event (i.e., termination of employment or reduction of hours) occurs within the 18-month period after the employee becomes entitled to Medicare, the employee’s covered spouse and dependent children (but not the employee) are entitled to COBRA coverage for a maximum period that ends 36 months after the employee’s Medicare entitlement.
For more information, see EBIA’s COBRA manual at Sections IX.G (“Effect of Coverage Under Other Plan or Entitlement to Medicare”), VIII.C.4 (“Early Termination Because of Medicare Entitlement”), VIII.B.4 (“Fourth Extending Rule: Pre-Termination or Pre-Reduction Medicare Entitlement”), and XXX.B (“The Interactions Between COBRA and Medicare”). See also EBIA’s Group Health Plan Mandates manual at Section XXIV (“Medicare Secondary Payer (MSP) Requirements”).
Contributing Editors: EBIA Staff.