Medicare & COBRA in 2020

There appears to be undue concern about how Medicare and COBRA work and this blog will attempt to clear up that concern. Obviously, Medicare is mainly for those over 65 or those that have been declared disabled by the Social Security Administration. (Those disabled wait 24 months before they are eligible for Medicare unless they have ALS).

COBRA is for those individuals who work for corporations with more than 20 employees and who have left their employer but still want the health insurance benefits. Under the law, they must pay the entire monthly premium plus a 2% surcharge to handle the paperwork for the employer. This coverage usually lasts for 18 months but under certain circumstances that coverage can be extended up to 36 months.

Medicare rules state that COBRA is not creditable coverage and you could be subject to lifetime fines by not going on Medicare. Unfortunately, there are many choices to make and they are not easy to understand. COBRA is not considered creditable coverage for Part B (Outpatient services) of Medicare but is for Part D (Drug Coverage). So, if your drug coverage is creditable you can go onto Part B but not take Part D for reasons previously mentioned. Confusing to be kind. Realizing these options and choosing the correct one is difficult but making the wrong choice and staying on COBRA without understanding the additional cost in lifetime fines can be injurious to your financial health. I have a client who was about 5 years older than his wife. He continued to work as a schoolteacher until he was 67 and then took COBRA until his wife was 65 and eligible for Medicare. What he did not realize is that he was subject to a 10% lifetime fines based on the current Part B premium. Not easy for a schoolteacher to handle financially but he had no choice. Thought he was doing the right thing for himself and spouse but never sought advice until it was too late, and the fines had occurred.

You just turned 65 and eligible for Medicare but you are still working, and your employer has more than 20 employees. You are entitled to Medicare Part A but due to the employee size, you can defer Part B until you leave your employer. Once you leave your employer you have an 8-month window to apply for Part B. Usually you take it immediately because going on Medicare allows you more flexibility in coverage options.

The issue that I see as a broker is that to avoid the confusion it is easier to get Part B and decide what other coverage you need to maintain your health. The options, depending upon where you live are many. In NV there are 54 different options to choose from so using a broker to help you navigate the Medicare maze is critical to get the best coverage for you. Since brokers cannot charge you anything for their services (they get paid from the insurance carrier) they usually will steer you in the right direction. My preference is to discuss all the medical issues and future concerns thus enabling me to narrow the options that appear to be the best for your situation. It is my opinion that you as the consumer need to be able to understand how each option operates so you can choose which will work best for you.

Why Medicare makes things so confusing for recipients is beyond my understanding but once the options are explained, choosing one becomes less difficult to do. Hope this explanation answered some questions but am also sure they raised questions about your own coverage and the possible solutions. I am available via phone or email to offer suggestions to clarify your situation, so you do not occur lifetime fines.

The Barend Agency Inc.

Len Barend, broker


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