COBRA and Medicare… Oil and vinegar or two peas in a pod?


There are lots of things that are consistent when it comes to Medicare. It runs very smoothly, is a pretty well-oiled machine, and policy holders are overall very pleased. But we also see a lot of uncertainty or overwhelm when trying to fully understand it all. It can be intimidating with the regulations and guidelines to follow that could result in financial penalties if not abided by appropriately. But it doesn’t have to be scary or stressful. That’s what we’re here for.

One of the areas that can seem confusing is when people are approaching age 65 (Medicare eligible) and planning to no longer work. There are options to select COBRA coverage, essentially extending the employer’s group coverage, or enroll in Medicare. Here, we’ll break this down as simply as possible to provide a little guidance.

First, let’s be sure we’re on the same page with what exactly COBRA is. COBRA (Consolidated Omnibus Budget Reconciliation Act) gives employees the right to choose a continuation of the previous employer’s group health plan for a limited time. Usually, that time frame is 18 months but may be extended up to 36 months in some situations. There may be some instances where the coverage changes slightly and the premium is usually a little higher than it was for an active employee prior to retirement, up to 102% of the cost of the plan. Employers with 20 or more full time equivalent employees are generally required to offer COBRA. Spouses can also be eligible for COBRA if:

• The covered employee either voluntarily or involuntarily leaves the job
• The covered employee’s number of hours are decreased making them ineligible for benefits
• The covered employee becomes eligible for Medicare
• Divorce or legal separation from the covered employee
• Death of the covered employee

A commonly used term when entering the Medicare world is “creditable coverage”. This is referring to coverage outside of Medicare being qualified to take the place of Medicare so that there are no late enrollment penalties if you don’t enroll on time. “Creditable” also means that the coverage is expected to pay on average as much as the Medicare coverage would. COBRA is NOT considered creditable for Part B of Medicare. Only active employer group coverage for an employee still working would suffice for that. Regarding Part D prescription drug coverage, it is plan specific whether or not it’s creditable.

Real life example: Bill decides to retire right at age 65. He’s been on his employer’s group plan for 25 years. He can elect COBRA to keep that plan but also needs to enroll in Medicare, now that he’s eligible. Medicare would then become his primary. If he didn’t enroll in Medicare and stayed just on COBRA, he could face a substantial gap in coverage. Let’s say he sees a doctor, they bill Medicare A&B for the standard 80% payment but he doesn’t have any Medicare. So then they bill COBRA, who could pay just 20% of the total cost or possible nothing at all, since they’re secondary with him being 65+ now and he technically doesn’t have any primary coverage. Bill could now be stuck with a bill (see what we did there?) for 80-100% being his responsibility to pay out of pocket. So, Bill, lesson learned… what he should have done is upon retirement, enroll in Parts A&B as soon as he stopped working and then compared his COBRA coverage and premium to that of a supplement or advantage plan to decide on the best secondary coverage.

A few things to consider if you’re going to stop working or are 65+ with COBRA:

• What are the options for your spouse or family?
• Is your employer’s COBRA coverage “creditable” for Medicare?
• What is the cost of COBRA vs a Medicare supplement or advantage plan?
• You have 8 months from when you stop working to enroll in Parts A&B without penalty

It may seem like a lot but this is a big transition from working to not, so don’t take it lightly. We can help work through the details and relieve some of the stress. The positive part of it all is that there are options for care and you get to pick the best fit for you.

How do I know if I need a Medicare Advantage Plan or a Supplement?

Medicare can be confusing. We can all agree on that. But it doesn’t have to be. What it really boils down to is that your options are limited, which makes things quite simple. You can go one of two routes. The first is an Advantage Plan and the second is a Supplement, or what some people may refer to as Medigap. Let us break these down to hopefully help you decide which is the best fit for you and your health care needs.
Keep in mind that this is after you’ve already enrolled in “original” Medicare Parts A and B, which provides the basic hospital and physician coverage. See our video here for instructions on enrolling in Parts A and B: How to enroll in Medicare parts A and B. That must be done first, and then you can essentially “buy up” whichever other coverage you’d like.

•    Route 1: Medicare Advantage Plan
Think of this option as a replacement policy for A and B. It essentially takes the place of your original coverage and is used just like an individual under 65 health plan would be. Most times, there are copays or coinsurance for services, a deductible to meet and an out of pocket maximum. This plan will have out of pocket expenses but the monthly premium is typically very low, considering. With this plan, you would use this card at the doctor in place of the original Medicare ID card. Advantage Plans and their provider networks can vary by county so it’s always safe to confirm that your physicians are part of the network.

Example of coverage: The current Florida Blue Medicare Advantage Plan for 2020 has a monthly premium of $47.90. Pretty inexpensive, right? There is coverage such as a $10 copay for an in-network family physician, $45 copay for a specialist, $50 copay for urgent care, $90 copay for ER visit, $295/day for inpatient hospital care, and a $6,500 out of pocket maximum. This plan also has prescription drug coverage built in at different tiers depending on the medication.

Ideal client for this plan: Someone that may not visit the doctor often, has no major health concerns or current struggles, has the financial ability to pay the out of pocket maximum in the event something big happens unexpectedly.

•    Route 2: Medicare Supplement (“Medigap”)
A supplement is in addition to original parts A and B. It fills in the blanks of what A and B don’t cover. Now because of that, it will only cover things that Medicare does because it basically follows suit with Medicare and then supplements the gaps afterwards. This plan does not have copays or coinsurance or out of pocket expenses. It has a higher monthly premium so that it covers almost everything at the time of service. At a Doctor visit, you would use your original Medicare ID card first along with this one.

Example of coverage: There are several different levels of supplements but the most popular one that is available now is the plan G. There is an annual deductible for the part B coverage that the supplement will have, which is $198. Once that is met, essentially everything is covered at 100%. The current plan G monthly premium in Gainesville, FL is $180.60. It’s important to note that the supplement does not cover prescription drugs and those must be purchased in a separate Part D plan. I know this sounds like alphabet soup but stay with us!

Ideal client for this plan: Someone that frequents the doctor, has some health issues or is prone to illness, can afford the higher monthly premium for peace of mind, or someone that just doesn’t want to have to worry about health care costs.

That’s it! Congrats! You made it through the treacherous trenches of Medicare. There are only two routes and you get to pick! We always like to get a better feel for clients’ individual situations and health care needs to better advise the best fit but it’s pretty simple. And as we mentioned, there’s a separate Part D drug plan for prescription coverage with the supplement route… you can get more information on that here: Part D drug coverage. If we can ever be of assistance and help simplify this process or guide you to a decision you’re comfortable with, please contact us at 352-371-7977 or info@mcgriffwilliams.com.

No more Medicare Plan F supplement in 2020?

Believe it or not, Open Enrollment season is upon us! There’s been a lot of talk lately about the Medicare Plan F supplement going away in 2020. Here are some helpful facts to clarify what our new reality looks like.

For decades now, the Medigap Plan F has been by far the most popular supplement purchased for Medicare eligible individuals. The fact that it covers all deductibles, coinsurance and copays easily justify that. For many, this has been the first time they’ve ever had no out of pocket expense when receiving medical care such as a doctor visit, lab work, or even a surgery or hospital stay. This is what some may refer to as “first dollar coverage” since whichever company you got the supplement from pays immediately. Sound too good to be true? Well, if you weren’t eligible for it by the end of 2019, it is no longer available.

Along with Plan F, the Plan C supplement is, although less popular, also no longer available starting January 1, 2020. The common denominator between the two is that they both cover the Medicare Part B deductible. Based on the Medicare Access and CHIP Reauthorization Act, Congress has decided that they no longer wish to have plans available that pay the first dollar, without any deductible to meet, because patients may access care more often or unnecessarily.

For those already on Plan F (or even eligible but not yet enrolled), the good news is that you can keep it! You are “grandfathered” in on that supplement, at least for the time being. Rates may increase over the years but that’s always a possibility. For others moving forward, the Plan G will be the next best option for a Medigap supplement. G covers everything that F does except for that Part B deductible… but often times, the difference in premium comes out to be almost the same in the end.

Medicare can seem like a very overwhelming, stressful transition in health insurance, especially when there are heavily regulated guidelines and changes like this. We are happy to discuss how this affects you or your loved ones and help guide you to the best protection for your needs.

Please email info@mcgriffwilliams.com or call (352) 371-7977.

When do I need to sign up for Medicare if I’m still working?

TRUE OR FALSE: “I don’t need to think about Medicare until I’m 65 or retired since that’s when I become eligible.”

FALSE. Please tell us you answered FALSE.

Medicare is a federal health care program that is regulated by CMS (Centers for Medicare & Medicaid Services) and with that, comes a lot of important guidelines to follow. And breaking these rules can result in much more than a slap on the wrist. We’re talking financial penalties that can stick with you indefinitely. Forever. Or worse, make you ineligible for coverage.

Medicare is typically available to people at age 65 or retired, but is also offered to those under 65 if disabled or suffering from End-Stage Renal Disease/permanent kidney failure.

Here are a few scenarios that could get you a not-so-nice penalty:

  • Your group employer does not provide sufficiently credible coverage OR you enroll in Medicare but don’t think you need Part D because you aren’t currently taking any medications.
    • Result: Part D penalty that gets tacked on to your premium when you do obtain the correct coverage & will stay on forever. As of now, this is 1% of the base beneficiary premium for every month after age 65 that you didn’t have it.
    • How to avoid: Enroll in even a low premium Part D plan, regardless if you need it at the moment or not.
  • Your employer has fewer than 20 employees & you didn’t sign up for Part B since you’re still working.
    • Result: You could have major coverage gaps you aren’t even aware of.
    • How to avoid: Enroll in Parts A&B at age 65 if still working with 20 or fewer colleagues.
  • You’re still working & contributing to your HSA account.
    • Result: You are at risk for being assessed a tax penalty.
    • How to avoid: Stop contributing to your HSA 6 months prior to Medicare eligibility. You can still use the funds in that account for deductibles, copays or coinsurance but you cannot add any more money to it.
  • You elected COBRA coverage at the time of retirement but didn’t enroll in Part B.
    • Result: COBRA is now secondary to Part B so you must enroll in Part B in order to not have a coverage gap.
    • How to avoid: If you already have Medicare, you can get COBRA…. But if you become Medicare eligible while on COBRA, you cannot keep it.  Most importantly, losing COBRA does NOT qualify as a Special Enrollment to get Part B.

So much of this is situational and really depends on your personal circumstance. We are happy to discuss this individually and help determine exactly what you need to do and when.

What if I’m eligible for Medicare but still working?

How does Medicare work if I’m eligible but still working? What if I’m also drawing social security? How does my spouse fit into all of this?

Medicare can seem like an overwhelming and intimidating time but it doesn’t have to be. A big part of the confusion and nervousness is regarding when you’re eligible but still working and how social security and your spouse can be affected. Here are a few of the most common questions surrounding this:

  • What if I’m turning 65 but still working? If you’re still working full time for a company with twenty or more employees, you are not required to enroll in Medicare Part B upon turning 65. You can wait until you retire. However, if the company you work for has less than twenty employees, you may be required to go ahead and enroll in Part B. Keep in mind, Part A is automatic and has no premium, but Part B almost always does have a premium associated with the coverage, depending on your income. You can still remain on the employer-provided group plan if you prefer.
  • What do I need to do if I’m still working and also drawing social security? If you turn 65, are working, and already drawing from your social security, you will be automatically enrolled in both Parts A and B, and the premium for Part B will be deducted from your social security. If you decide to come off of your employer’s group plan to go on a Medicare supplement, you can elect whether or not you’d like the Part D prescription coverage to be deducted from your social security as well.
  • What if I’m retiring but my spouse isn’t 65 yet? Your employer may offer a group retirement plan that your spouse can remain on but most times, they will need to get an individual health plan in place for themselves when you go on Medicare.

A lot of this is very situational and handled case by case. We are always happy to discuss those specific circumstances with you or you’re welcome to join one of our quarterly Medicare seminars as well. Please contact us at info@mcgriffwilliams.com or (352)371-7977 if we can be of assistance.