How does an employee's entitlement to Medicare affect his or her right to continued health coverage under COBRA?

To answer this question, it is important to first review the definition of “eligibility” versus “entitlement” under Medicare. Being “eligible” means an individual has met the criteria and has attained age 65, but has not applied for Social Security benefits and therefore is not on and not entitled to Medicare. Once someone reaches age 65, active enrollment in Medicare must occur by applying for this Social Security benefit. If individuals have not applied for such benefits, Medicare is not automatic. Being eligible to enroll in Medicare does not constitute being “entitled” to Medicare. Individuals become entitled to Medicare on the effective date of enrollment in either Medicare Part A or B, whichever occurs earlier. For most individuals, this is when age 65 is attained.

Once employees are entitled to Medicare, they have the right to cancel their coverage from the group health plans because of other coverage—including Medicare. COBRA, however, requires two things to occur before continuation coverage is available: a qualifying event and a loss of coverage. Although a loss of coverage occurs when employees voluntarily remove themselves from the health plans, the reason (attaining other coverage, including Medicare) is not considered a qualifying event. Therefore, employees are not offered COBRA coverage in this scenario. If an employee’s spouse is on the plan with the employee but is not yet eligible for Medicare, the spouse would have the opportunity to continue coverage through COBRA.

If the employee with Medicare entitlement decides to remain on the group health plan, an employer cannot remove him or her just because he or she is now on Medicare. Active employees who continue to work past age 65 cannot be dropped from their employers’ group health plans without violating the federal Age Discrimination in Employment Act (ADEA). Also, under Medicare Secondary Payer rules, which have a “current employment status” clause attached, if an employee is actively working, is covered on the group health plan and is entitled to Medicare, the group health plan is primary (Medicare is secondary) as long as the employee’s coverage is based on current employment.

If an employee is covered by both Medicare and a group health plan and a qualifying event occurs, then the employee would have the right to elect COBRA continuation coverage with respect to group health coverage for the maximum period of coverage available. However, becoming covered by Medicare at any time after election of COBRA continuation coverage will generally cause COBRA continuation coverage to end. However, if the employee’s COBRA continuation coverage ends because the employee becomes covered by Medicare, then the COBRA continuation coverage of family members may be extended. Exceptions for retirees on COBRA at the time of an employer bankruptcy may apply.

The DOL has issued revised COBRA model notices along with new COBRA Frequently Asked Questions to better inform retirees about how electing COBRA coverage could lead to higher lifetime Medicare premium costs.