If you are turning 65 and you and your spouse are covered under your employer’s group health plan, it is important to understand the implication of enrolling in Part A and/or Part B early while you are still working. If you have a younger spouse who will not be 65 when you retire, then your timing on Medicare enrollment can affect their COBRA coverage period once you leave your group health plan. Failing to plan ahead could kick them off coverage earlier than expected.
Continue reading to learn more on:
- What is COBRA?
- How Medicare Enrollment Impacts COBRA Coverage for a Spouse?
- Key points to remember about Medicare and COBRA
What is COBRA Coverage?
COBRA (Consolidated Omnibus Budget Reconciliation Act) allows employees and their dependents to continue their employer-sponsored health insurance for a limited time after a qualifying life event—like reduced work hours or retirement. COBRA requires that continuation of coverage extend from the date of the qualifying event. If your qualifying life event is due to end of employment or reduction in hours, then qualified beneficiaries are entitled to at least 18 months of coverage. COBRA coverage can be increase up to 36 months when enrolling in Medicare is the qualifying event.
Why would someone enroll in Medicare if they have creditable group coverage?
Medicare Part A is premium free for most people with enough work credits. This means they have worked and paid into Medicare for at least 10 years. Since Part A is premium free and covers hospital stays, it can serve as a backup to an employer group plan. This is a good move to reduce costs in the event of an emergency. However, enrolling in Part A can have implications for some people who retire before their younger spouse.
Did you know, you can’t contribute to an HSA if you are enrolled in Medicare? Read more about How Medicare Affects Health Savings Accounts.
How does Medicare Enrollment Impact COBRA Coverage Duration?
Enrolling in Medicare Part A (and/or Part B) can affect the length of time your younger spouse can stay on COBRA after your retirement. The duration can be up to an additional 18 months of coverage, maxing out at 36 months. However, the amount of extra time is solely dependent on when you enroll in Medicare. Enrolling too far in advance, or even waiting to enroll after retirement, can reduce COBRA coverage duration. Learn how each scenario affects the COBRA duration below:
Enrolling in Medicare TOO EARLY Before Retirement
First, remember that your retirement entitles you and your beneficiaries to at least 18 months of COBRA coverage. If you have a younger spouse, your Medicare enrollment can extend the length of this coverage. If you enrolled in Medicare less than 18 months before your end of employment, then Medicare becomes a second qualifying event for additional months of COBRA. In this situation, a younger spouse can get up to 36 months of COBRA coverage after the date you became eligible for Medicare. However, the timing of your Medicare enrollment is important! We want to emphasize the words “up to” when talking about this additional 18 months. The extra 18 months of coverage depends on when you enroll in Medicare. The number of months you were enrolled in Medicare prior to leaving your employer coverage is subtracted from the additional 18 months of COBRA available to your spouse.
Example of Retiring after enrolling in Medicare: John is employed with XYZ Company and he and his spouse are covered by his employer’s group health plan. John turned 65 in February of this year and enrolled in Part A when he was first eligible, but he did not enroll in Part B. He will be retiring in December of this same year, and plans to enroll in Medicare Part B when he retires. His spouse is will only be 62 when he retires, so she plans to enroll in COBRA. Since John was enrolled in Part A for 10 months before he retired, his spouse will only get 26 months of COBRA coverage (36 months minus the 10 months he was enrolled in Medicare prior to retirement). She may not have enough months of COBRA available to cover her until she turns 65. In this case, ACA coverage would be an option.
Enrolling in Medicare AFTER Retirement (when retiring after 65)
If you don’t enroll in Medicare until AFTER you retire, then you will not get Medicare as a second qualifying event for your younger spouse. This is true even if you are over 65 years old when you retire. If you are over 65 when you retire but you didn’t enroll in Medicare before you stopped working, then your younger spouse will only receive the standard 18 months of COBRA coverage.
Example of enrolling in Medicare after you retire: Lisa is planning to retire from her employer at the end of February when she turns 66. She and her spouse are both covered under her employer group plan. Lisa did not enroll in any part of Medicare when she was first eligible at 65. She plans to enroll in Medicare starting 3/1 after she retires. She heard she has an 8-month Special Enrollment Period to enroll in Medicare after losing creditable coverage. Her spouse, Bob, is only 62 and will enroll in COBRA. Since Lisa was not enrolled in Medicare prior to her retirement, her qualifying life event does not include the Medicare extra COBRA continuation of coverage. Therefore, Bob’s COBRA is limited to 18 months of coverage. He will run out of COBRA before he turns 65.
When should you enroll in Medicare if you have a younger spouse?
Many factors can affect if or when you should enroll in Medicare prior to your retirement. Having a younger spouse that is dependent on your group coverage can affect your timing. If you are over 65 when you retire and have a younger spouse on your plan, then you will want to consider joining Part A BEFORE your retirement if they need more than 18 months of COBRA coverage. Remember, Part A is premium free for most people. This is why many join it right away even when they are still working. But if you join too early, then you could be reducing the months your younger spouse has available for COBRA.
As with most Medicare topics, it gets complicated and there is more to consider than just age. We highly recommend that you speak with a licensed agent for your specific circumstance. If you contribute to an HSA, then you have more things to consider before you decide on your Part A enrollment timing.
Key Points to Remember
- Enrolling in Medicare Part A before you retire can increase COBRA coverage duration for a younger spouse.
- If you enroll in Medicare after you retire, then your spouse only qualifies for 18 months of COBRA.
- The maximum COBRA continuation period for a dependent spouse is up to 36 months, depending on when Medicare enrollment occurred.
- There are other factors to consider before enrolling in Part A – HSA implications.
Need help understanding your options?
Meet our friendly licensed agents who specialize in Medicare today to get answers tailored to your specific situation.
