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The Medicare Enrollment COBRA Extension

Question: How can an employee’s Medicare enrollment extend the subsequent COBRA maximum coverage period for the employee’s spouse and dependents?

Short Answer: An employee’s Medicare enrollment shortly before losing coverage as a result of termination of employment or reduction in hours will extend the COBRA maximum coverage period for the covered spouse and dependents to 36 months from the date of the employee’s Medicare enrollment.

General Rule: COBRA Maximum Coverage Period

All COBRA qualifying events must be a loss of coverage triggered by one of the prescribed COBRA triggering events.  The COBRA maximum coverage period is generally determined by the type of triggering event that caused the loss of coverage:

18 Months:

  • Termination of employment
  • Reduction of hours

29 Months:

  • Disability extension

36 Months:

  • Death of employee
  • Divorce or legal separation from employee
  • Child reaches age 26

For more details, see our 2021 ABD COBRA for Employers Guide.

Note that the 18-month events can be extended by another 18 months under a fully insured policy sitused in California (for a total of 36 months) through Cal-COBRA, but only for medical coverage (not dental or vision).

Special Rule: Pre-Qualifying Event Medicare Enrollment COBRA Extension for Spouse and Dependents

Where an employee enrolls in Medicare shortly before a COBRA qualifying event that is triggered by termination of employment or reduction in hours, there is a special rule that provides an extended COBRA maximum coverage period for the covered spouse and dependents.

There are four requirements that apply to this special COBRA maximum coverage period extension where the employee enrolls in Medicare shortly before experiencing the qualifying event:

  • The COBRA Maximum Coverage Period Extension Applies Only to Two Qualifying Events

This pre-qualifying event Medicare enrollment COBRA maximum coverage period extension applies only where the COBRA qualifying event is the loss of coverage caused by a) termination of employment, or b) reduction in hours.

A COBRA qualifying event that is comprised of any other triggering event for the loss of coverage does not qualify for this extension.

  • The COBRA Maximum Coverage Period Extension Applies Only to Spouse and Dependents

Only the covered spouse or dependent qualified beneficiaries are eligible for the extended COBRA maximum coverage period.

Covered employees are not eligible for an extended COBRA maximum coverage period based on prior Medicare enrollment.

  • Medicare Enrollment Must Occur Prior to the Qualifying Event

The covered employee must have enrolled in Medicare before experiencing the qualifying event (i.e., the loss of coverage caused by termination of employment or reduction in hours) for the extended COBRA maximum coverage period to apply.

Medicare enrollment after the qualifying event does not extend the COBRA maximum coverage period.  Although there are some situations where the spouse and dependents can have an extended COBRA maximum coverage period upon experiencing a second qualifying event, Medicare enrollment can only be a second qualifying event in the rare situation that the employer is not subject to the Medicare Secondary Payer Rules.

For more details:

The COBRA maximum coverage period extension under this special pre-qualifying event Medicare enrollment rule is the later of:

  1. 36 months from the date the employee enrolled in Medicare; or
  2. 18 months from the date of the termination or reduction in hours that caused the loss of coverage (the qualifying event).

Therefore, this special rule will apply to extend the standard 18-month COBRA maximum coverage period for a termination of employment or reduction of hours only where the employee enrolls in Medicare within 18 months of the termination or reduction in hours that caused the loss of coverage (the qualifying event).

Example:

  • Evan enrolls in Medicare July 1, 2021 while still employed and enrolled in family coverage under his employer’s group health plan.
  • Evan retires December 31, 2021 causing the loss of coverage effective the same date—a COBRA qualifying event.
  • Even elects COBRA for himself, his spouse, and his children effective January 1, 2022

Result:

  • Evan’s COBRA maximum coverage period is 18 months (until June 30, 2023).
  • Evan’s spouse and children have a COBRA maximum coverage period of 30 months (until June 30, 2024).
  • The extended COBRA maximum coverage period for the spouse and children is based on 36 months from Evan’s pre-qualifying event Medicare enrollment on July 1, 2021.
  • Evan is not eligible for the special COBRA maximum coverage period extension because he is the covered employee.

Additional Considerations: Medicare and COBRA

There are four primary issues for Medicare-eligible employees to consider upon deciding if and when to elect COBRA upon terminating employment:

  • Medicare will pay primary (and COBRA coverage can assume primary Medicare payment even if not enrolled);
  • The eight-month Medicare special enrollment period is not extended by COBRA enrollment;
  • COBRA does not qualify to avoid Part B late enrollment penalties; and
  • Early termination of COBRA upon enrollment in Medicare after electing COBRA.

For full details, see our prior post: How COBRA and Medicare Interact for Retirees.

Additional Materials

Regulations

Treas. Reg. §54.4980B-7, Q&A-4(d)(1):

(d)(1) If a covered employee becomes entitled to Medicare benefits under Title XVIII of the Social Security Act (42 U.S.C. 1395-1395ggg) before experiencing a qualifying event that is a termination of employment or reduction of hours of employment, the maximum coverage period for qualified beneficiaries other than the covered employee ends on the later of—

(i) 36 months after the date the covered employee became entitled to Medicare benefits; or

(ii) 18 months (or 29 months, if there is a disability extension) after the date of the covered employee’s termination of employment or reduction of hours of employment.

IRS Revenue Ruling 2004-22:

https://www.irs.gov/pub/irs-irbs/irb04-10.pdf

The expanded maximum coverage period of Q&A–6 of § 54.4980B–7 applies only when the 36-month qualifying event follows the qualifying event that is a termination (or reduction of hours) of employment. (However, Q&A–4(d) of § 54.4980B–7 provides a special rule for the measurement of the maximum coverage period in a case where the covered employee’s becoming entitled to Medicare benefits precedes the termination (or reduction of hours) of employment; this special rule applies regardless of whether the Medicare entitlement is a qualifying event.) Because a covered employee is not a qualified beneficiary with respect to any 36-month qualifying event, the expanded period that applies in connection with a second qualifying event will not apply to a covered employee but only to the spouse or a dependent child of a covered employee.

IRS Information Letter 2017-0022:

https://www.irs.gov/pub/irs-wd/17-0022.pdf

As explained below, the spouse of a covered employee can receive COBRA continuation coverage for 36 months if that employee became entitled to Medicare benefits before termination of employment. The 36-month period begins after the date the covered employee became entitled to Medicare coverage. This rule applies regardless of whether the entitlement is a qualifying event under the COBRA rules.

Generally, 18 months is the maximum COBRA continuation period for a qualified beneficiary (which includes an employee’s spouse). However, if a “covered employee” becomes entitled to Medicare benefits before losing coverage because of termination of employment (which is a qualifying event for COBRA coverage), then the maximum COBRA coverage period for a qualified beneficiary ends on the later of:

  • 36 months after the date the covered employee became entitled to Medicare benefits; or
  • 18 months (or 29 months, if there is a disability extension) after the date of the covered employee’s termination of employment or reduction of hours of employment.

For purposes of this rule, a covered employee becomes “entitled to Medicare benefits upon the effective date of enrollment in either part A or B, whichever occurs earlier.”


About the author

Brian Gilmore

Brian Gilmore is the Lead Benefits Counsel at Newfront. He assists clients on a wide variety of employee benefits compliance issues. The primary areas of his practice include ERISA, ACA, COBRA, HIPAA, Section 125 Cafeteria Plans, and 401(k) plans. Brian also presents regularly at trade events and in webinars on current hot topics in employee benefits law.


The information provided is of a general nature and an educational resource. It is not intended to provide advice or address the situation of any particular individual or entity. Any recipient shall be responsible for the use to which it puts this document. Newfront shall have no liability for the information provided. While care has been taken to produce this document, Newfront does not warrant, represent or guarantee the completeness, accuracy, adequacy, or fitness with respect to the information contained in this document. The information provided does not reflect new circumstances, or additional regulatory and legal changes. The issues addressed may have legal, financial, and health implications, and we recommend you speak to your legal, financial, and health advisors before acting on any of the information provided.

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