Medicare Part D & Cobra

Medicare, which offers health insurance to the elderly and disabled, can be a complicated program for many enrollees. When you add something like COBRA on top of it, it can get unruly. Understanding how COBRA policies work with parts of Medicare will prevent repercussions such as premium penalties.

Definition

• The Consolidated Omnibus Reconciliation Act (COBRA) is a law that allows those who have lost employer insurance for any qualifying reason such as job loss or divorce to purchase a health insurance policy.

COBRA and Medicare

• Beneficiaries only have the right to take COBRA if they become COBRA-eligible after they are enrolled in Medicare. If they enroll in Medicare after they have COBRA, the COBRA plan may drop them.

Creditable Coverage

• In order to delay enrollment in into Part D, the beneficiary must be enrolled in coverage that is considered as good as or better than Part D. This is called “creditable coverage.” COBRA plans offer Part D coverage and the beneficiary must find out if it is creditable.

Premium Penalty

• If the drug plan is not creditable, but the beneficiary does not take Part D, he will have to pay a premium penalty if he does decide to take Part D in the future. The penalty is an additional one percent for every month he delays enrollment.

Considerations

• Many COBRA plans do not allow beneficiaries to pick and choose benefits. According to the California Health Advocates, even if the drug plan is not creditable, you may not be able to drop the drug coverage and keep the rest of the COBRA plan.