COBRA is the temporary insurance that allows people to remain insured for 18 months (or sometimes longer) after leaving employment. It is designed to give people time to get another job or find a different health plan. Aside from the expense—terminated employees must now pay the entire premium themselves—it works well for people under age 65 who are not yet eligible for Medicare.
But for people over 65, COBRA can be a minefield. The first minefield has to do with getting medical bills paid, which is the whole purpose of insurance. The second one relates to Medicare enrollment, which can result in penalties and overage gaps if not done right.
COBRA pays secondary to Medicare
COBRA pays secondary to Medicare. So when a medical bill is submitted to the insurer providing the COBRA, the insurer will wait for Medicare to pay its share. Once Medicare pays its share, such as the 80% of Part B services that Medicare covers, the COBRA insurer will pay what remains of the bill up to the policy limits.
But if the over-65 terminated employee is not enrolled in Part B, Medicare will not pay. And the COBRA insurer will not pay either. This leaves the client stuck with the entire bill.
Sadly, many people over 65 are not being told that when they go onto COBRA they must enroll in Medicare in order to get their bills paid. They assume their health insurance will go on as before, the only difference being that the premiums are coming out of their own pocket now (or in some cases the former employer will subsidize). What they don’t know is that COBRA, for a person over 65, is not complete insurance.