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A Service of OnQue Technologies, Inc. |
| COBRA & Medicare |
December 1, 2005
By Scott Haines, President
OnQue Technologies, Inc.
Santa Rosa, CA |
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The
following is an excerpt from Questions and Answers from the COBRA Help Desk–Part
I.
Client: A former employee
and his spouse elected COBRA after losing coverage because of his non-FMLA
leave of absence. Their COBRA coverage started on 8/01/2004. On 10/1/2005 the
former employee became entitled to Medicare A & B. I have terminated his
COBRA coverage because of the Medicare entitlement. It is my understanding that
his spouse is now entitled to continue her coverage for a total of 36 months
from the start of COBRA. Is that correct? (COBRA OnQue® did not
automatically create the extension.)
OnQue: It appears that the spouse is not
eligible to receive the extension to 36 months, because a second qualifying
event has not occurred. You are correct in your understanding that the COBRA
statute identifies Medicare entitlement of a former employee as a second
qualifying event for the covered spouse and dependent children. However, on
February 13, 2004, the Internal Revenue Service issued Revenue Ruling 2004-22,
which effectively eliminated the possibility of a COBRA beneficiary being
qualified for that extension. (To review the details of that ruling, please
refer to "IRS Rules COBRA Not Extended After Medicare
Entitlement".)
In a nutshell, the ruling states that if the
eligibility rules do not require the plan to drop an active employee from
coverage when he/she becomes entitled to Medicare, then COBRA covered
dependents are likewise ineligible to receive an extension of coverage as a
result of the former employee's Medicare entitlement. And, because the law
prohibits plans from using Medicare entitlement as a reason to drop an
employee's coverage in the first place, the revenue ruling effectively
eliminates Medicare entitlement as a second qualifying
event.
There are, however, two cases in which an
employee's Medicare entitlement may be a first (initial) qualifying event,
which means that such entitlement would also be a second qualifying event under
COBRA.
Multiemployer Plans: Medicare's Secondary
Payer rules provide an exception that can be elected by multiemployer plans.
That exception applies to employer members having fewer than 20 employees; it
permits multiemployer plans to provide that employees and their dependents will
be ineligible for coverage when the employee becomes entitled to Medicare due
to age. Provided the multiemployer plan is subject to COBRA, that loss of
coverage would be considered a first qualifying event for the covered spouse
and dependent children.
Small Employer Exemption: The second case
occurs when an employer is exempt from the Medicare Secondary Payer rules
because it has fewer than 20 employees in the current year, but is still
subject to COBRA because it had 20 or more employees in the previous year. In
such cases, an active employee's Medicare entitlement will be a COBRA
qualifying event, provided it results in a loss of coverage under the terms of
the group health plan.
According to the IRS ruling, because an active
employee's Medicare entitlement results in a first qualifying event under these
scenarios, a former employee's Medicare entitlement qualifies as a second
qualifying event for the COBRA-covered spouse and dependent
children.
Unless your company is exempt from the Medicare
Secondary Payer rules because it falls into one of the two categories described
above, a second qualifying event did not occur when the former employee became
entitled to Medicare. Thus, the spouse is not entitled to an extension of COBRA
continuation coverage. |
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| Related COBRA Tips |
| IRS Rules
COBRA Not Extended After Medicare Entitlement |
| Medicare's Effect on COBRA |
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This information is provided by
OnQue Technologies, Inc. for educational purposes only and does not constitute
legal advice. If legal advice or other professional assistance is required, the
services of a competent professional should be sought.
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