COBRA, Medicare, and Two Plans Covering the Same Person
Owen, 58, works for a landscaping company with 45 full-time employees and is enrolled in its group medical plan. His wife Elena also covers him as a dependent on her employer's plan. In February Owen drops to part-time hours and loses eligibility for his employer's plan. The HR manager tells him he is out of luck because he was not fired. Owen is in treatment for Type 2 diabetes, sees an endocrinologist quarterly, and his insulin runs about $600 a month. He turns 65 in 20 months. Elena's open enrollment is in November.
1. Is Owen entitled to continuation coverage? Give the duration, the deadlines, and the premium rule.
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Yes. COBRA applies to employers with 20 or more employees in the prior year, and this employer has 45. A reduction in hours that causes loss of coverage is a qualifying event, so the HR manager is wrong: firing is not required.
Owen is a qualified beneficiary with an 18-month maximum coverage period. That period can extend to 29 months if he or a family member is determined disabled by Social Security within the first 60 days of COBRA coverage, a formal determination rather than a self-assessment, and his diabetes may or may not support one. Procedurally, the employer must notify the plan within 30 days of the qualifying event, the plan must notify Owen within 14 days, and he has 60 days from the notice, or from the loss of coverage if later, to elect. He then has 45 days after electing to pay the first premium. The premium may be up to 102% of the group cost. That is expensive, but a group rate for a 58-year-old diabetic is likely well below an individual-market policy.
2. What happens when Owen turns 65 in 20 months, and what should he be told to do?
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Entitlement to Medicare after COBRA is elected ends COBRA coverage for that beneficiary, so the plan can terminate his continuation on the date he becomes entitled to Medicare. COBRA is therefore not a bridge all the way to 65 if he elects it later than his Medicare date; the two timelines have to be laid side by side.
He should enroll during his Initial Enrollment Period, which begins three months before his 65th birthday month. Delaying creates a Part B late-enrollment penalty of 10% for each 12-month period of delay, generally lasting as long as he has Part B. Once entitled, Medicare is primary because he is no longer an active employee. He should also pick up Part D for the insulin, since prescription coverage under COBRA cannot substitute for creditable drug coverage and missing it can trigger a separate late penalty. The practical advice is to work backward from the Medicare effective date to decide when COBRA stops being useful.
3. In June Owen sees his endocrinologist while covered by his COBRA plan and as a dependent on Elena's plan. Which plan pays first, and why does it matter?
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His former employer's plan, now his COBRA coverage, pays first. Under coordination-of-benefits rules, the plan that covers a person as an employee is primary over a plan that covers the same person as a dependent, and a COBRA qualified beneficiary is treated like an employee for this purpose. So the COBRA plan pays its benefits, and Elena's plan considers the remainder as secondary, paying the difference up to what it would have paid as primary, or nothing if the primary plan already satisfied the claim.
It matters for two reasons. Practically, Owen cannot drop COBRA and assume Elena's plan will cover everything, because as secondary it may leave a large gap, especially since the endocrinologist may be in one network and not the other. Procedurally, both carriers should be given the other's information on every claim, because secondary plans routinely deny until they see the primary explanation of benefits.