Medicare and COBRA

COBRA Rules for Medicare entitled employees and their dependents

by Lisa Robinette

First, it’s important to know what Medicare Entitlement means. An employee is entitled to Medicare when they are BOTH eligible for and enrolled in Medicare. Upon reaching age 65 doesn’t automatically make someone Medicare entitled. They must be actively enrolled in Medicare Part A and/or Part B in order to qualify completely.

An individual (employee) reaching age 65 is not considered a qualifying life event. Employees enrolling in Medicare is considered a qualifying life event, and allows the employee to drop group health coverage under a Section 125 (or Cafeteria)* plan. When this occurs, the employer is required to extend COBRA offers to the employee, spouse, and dependent children.

Employees have a COBRA duration of 18 months. The COBRA duration for the spouse or dependents will be 18 or 36 months, and will depend on the timing of the employee’s Medicare entitlement. If an employee’s Medicare entitlement begins on the same day as the employee terminates employment or retires, the COBRA duration is 18 months for dependents. If the Medicare entitlement occurred prior to retirement or employment termination, the COBRA duration is 36 months.

Employers with 20 or more employees during the preceding calendar year are required to offer COBRA.

* A Section 125 plan is part of the IRS code that enables and allows employees to take taxable benefits, such as a cash salary, and convert them into nontaxable benefits. These benefits may be deducted from an employee’s paycheck before taxes are paid. Cafeteria plans are particularly good for participants who have regular expenses related to medical issues and child care. – via Investopedia