A Resignation, a COBRA Window, and a Husband Turning 65
Lena, 58, resigns on March 31 from a marketing firm that has 32 full-time employees and offers a fully insured group medical plan. She and her husband Tomas, 61, have been covered as employee and spouse. The plan's family COBRA premium is $1,150 a month; the employer's share of that cost is $1,120. Lena is considering skipping COBRA because she feels healthy and wants to save money. She plans to buy an individual marketplace plan instead but has not yet applied. Tomas turns 65 and will enroll in Medicare in August, five months from now.
1. Is the employer subject to COBRA, and what exactly are Lena's election deadline, maximum coverage period, and monthly cost?
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COBRA applies. The firm had 32 full-time employees in the prior calendar year, well above the 20-employee threshold.
- Qualifying event: termination of employment. A voluntary resignation is a qualifying event, so Lena and Tomas qualify.
- Maximum duration: 18 months for termination of employment, running to September 30 of the following year.
- Election window: 60 days from the later of the date coverage ends (March 31) or the date the plan administrator provides the election notice. If she elects on day 59, coverage is retroactive to April 1.
- Premium: the plan may charge up to 102% of the group rate, so $1,150 × 1.02 = $1,173 a month. The 2% covers administrative cost; the employer's $1,120 contribution ends.
- Payment deadline: the first premium is due within 45 days after she elects, and coverage is reinstated retroactively once paid.
Judgment on skipping it. Because the election is retroactive, the rational strategy is to elect COBRA within the 60-day window even if she intends to move to a marketplace plan. She can drop it at any month's end, but she cannot come back later. A retroactive election is the only mechanism that closes a gap in coverage, and a serious diagnosis in May would otherwise leave her uninsured for April and May with no way to fix it.
2. Tomas turns 65 in August and enrolls in Medicare. What happens to his COBRA coverage, and if he keeps both, which pays first?
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Medicare entitlement after a COBRA election is a terminating event. If Tomas becomes entitled to Medicare after he has elected COBRA, the plan may terminate his continuation coverage. Entitlement can begin up to several months before his birthday month depending on when he enrolls, so the plan should be notified promptly.
Order of payment if he keeps both. Medicare pays primary and the group plan pays secondary. The Medicare Secondary Payer active-employee exception does not apply, because Tomas is a COBRA beneficiary, not an active employee or the spouse of one. A COBRA participant whose group coverage sits behind Medicare should not expect the plan to pay first.
Lena is unaffected. Her 18 months keep running to term; Tomas's Medicare entitlement does not terminate her continuation coverage.
Practical caution. Tomas should enroll in Medicare Parts A and B during his seven-month initial enrollment period centered on his 65th birthday month. Missing it exposes him to late-enrollment penalties on Part B (and Part D) that last for life. COBRA is not a substitute for Medicare enrollment, and COBRA prescription drug coverage is generally not creditable coverage for Part D purposes, so relying on it can create a Part D penalty as well.
3. Lena lets the COBRA window expire without electing. In October she is diagnosed with a condition requiring expensive treatment. What are her actual options, and what protections does she have?
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She has no retroactive escape hatch, but she is not uninsurable.
- COBRA is gone. The election window cannot be reopened for a change of mind. HIPAA special enrollment rights apply only to group health plans and only on specific triggering events (loss of other coverage, marriage, birth or adoption, a dependent becoming eligible), none of which occurred.
- Marketplace open enrollment runs November 1 to January 15 in most states, with a January 1 or February 1 effective date. A special enrollment period requires a qualifying life event, and losing the group coverage on March 31 would have opened a 60-day window that she let lapse.
- Underwriting protection: the ACA guarantees issue regardless of health status, prohibits preexisting-condition exclusions, and bars rating by health. The diagnosis therefore cannot be used to deny her coverage or raise her premium. Her cost depends on age, geography, tobacco use, and subsidy eligibility based on projected income, which after a resignation may be low enough to produce a substantial premium tax credit.
What this means practically. The penalty for missing the window is a gap in coverage and a delay in the effective date, not a denial of insurance. Her real exposure is the medical bills incurred between April and the new plan's effective date, plus any network disruption. That is exactly the risk the retroactive COBRA election existed to eliminate, which is why the correct advice in month one would have been to elect and later drop.