Should I Elect COBRA?

This is the last of our archived videos which have played since the July 4th holiday. Tune in next week for the latest in our recently taped videos. Hope you had a wonderful summer.

Our featured video today addresses whether to elect COBRA, the temporary extension of group coverage. Please watch the video at healthcarenavigation.com/videos. The decision to elect COBRA is a bit more complicated than it once was because the Affordable Care Act reformed the individual insurance marketplace to prevent pre-existing conditions from consideration when one applies for individual coverage. As long as one’s application is properly completed and submitted timely (within sixty days of loss of minimum essential coverage or during an open enrollment period), individual coverage is guaranteed issue, meaning an application cannot be denied.

Of course, in many situations, those losing group coverage have additional options to consider beyond COBRA and the individual market, like being a dependent on a spouse’s plan or student coverage.

The primary issues to consider in evaluating coverage options are the cost (whether the coverage is subsidized, of course), the product, and the network of providers. Remember that COBRA is temporary so know how long you are eligible for COBRA. Also, always save the documentation associated with creditable group coverage and a COBRA election.

Unfortunately, many organizations routinely offer subsidized COBRA as part of a severance package without regard to the age of the separating employee. This can be problematic for those approaching sixty-five and those already over sixty-five. According to COBRA rules, COBRA is supposed to end at age sixty-five when one becomes eligible for Medicare. If you already enrolled in Medicare Part A and Medicare Part B before you were eligible for COBRA, you can elect COBRA but the COBRA should be secondary to Medicare A and B which rarely makes financial sense unless the COBRA is subsidized. The negative consequences of Human Resources professionals and COBRA administrators not understanding how Medicare should coordinate with COBRA lead to former employees missing their Part B enrollment deadlines and/or believing the COBRA can be primary when according to insurance rules it is secondary for anyone who is eligible for Medicare.

It is understandable that Human Resource professionals are primarily familiar with the group plan and not well-informed about Medicare issues. However, these issues can result in a gap in coverage and/or premium penalties associated with Medicare Part B delayed enrollment. And, honestly, COBRA has been with us for decades so we believe more companies could be more effective in providing good advice or directing older employees to people who understand these issues. We feel quite strongly about this issue as we’ve had so many clients over the years who’ve been given very poor advice.

Finally, plan ahead. If you intend to elect COBRA, know what your coverage options might be when facing the next transition in coverage and plan the transition to avoid a gap in coverage. Many also might choose to terminate COBRA early to take advantage of the open enrollment period for individual coverage. This strategy avoids beginning a benefit period with a COBRA deductible and then having to meet a new deductible when transitioning to individual coverage. Of course, if one’s options in the individual market are felt to be suboptimal to the COBRA coverage, one might prefer to remain on COBRA until it ends. Again, it is important to plan ahead.

Please watch the video and share this information with family and friends. Thank you.