Issue 24

Health insurance is an important topic that needs to be taken into consideration when an employee decides to retire. Medicare eligibility normally begins at age 65.

Did you know that in some cases, employers may still be required to offer COBRA coverage to a Medicare-eligible qualified beneficiary (QB)?

If an employee is entitled to Medicare prior to his or her COBRA Qualifying Event, the employer must still offer COBRA when the employee becomes a QB. The QB would be eligible for 18 months of COBRA from the date coverage was lost (provided the Event Reason is Termination of Employment/Retirement or Reduction in Hours).

It is important to note that if the individual who is enrolled in Medicare also elects COBRA, Medicare pays primary, and the COBRA coverage becomes secondary.

On the reverse side, if Medicare entitlement occurs after a QB has already been offered and enrolled with COBRA, then the QB’s COBRA can be terminated early. The COBRA benefits should be terminated as of their Medicare effective date.

In this case, the individual’s Medicare entitlement may also be considered a second qualifying event for the member’s dependents, entitling them to an 18-month extension of their COBRA, for a total eligibility period of 36 months (counted from the original COBRA Begin Date). However, this can be a second qualifying event only if it would have caused the individual(s) to lose coverage under the plan in the absence of the first qualifying event.

What happens if an employee decides on early retirement before they are eligible for Medicare?

In these instances, the early retiree does have a few options to bridge this gap.

1. COBRA is still offered for a term of 18 months, regardless of retirement date. This allows the early retiree to keep the same coverages they had before retirement without the worry about any coverage changes or network changes. The biggest downside to COBRA is losing the employer subsidy and being responsible for the full cost of coverage. That may not be affordable for some.
2. After COBRA coverage has ended or if COBRA coverage is not offered, private insurance can be an option. A life event such as loss of group coverage, allows for a special enrollment period and the availability to elect plans on a state’s Marketplace (exchange). By visiting healthcare.gov, individuals can locate plans that are in-network for their area. Here the early retiree can also confirm eligibility for premium subsidies that can help lower the monthly premiums of these plans.
3. Another option would be to apply for Medicaid. There is no Special Enrollment Period, and the plan is usually free or low cost for individuals who qualify financially.

Although not required, some employers may offer individuals who retire early a benefit package extending their subsidized employer coverage or offering credits to help offset the cost of outside health insurance. These options can vary greatly as they depend on the employer’s retirement program or agreement with the employee at the time of retirement.

Did you know that UPMC Benefit Management Services also handles retiree billing services for all retirees’ medical plans? Retiree billing provides coordination of enrollment, billing, premium remittance, and reconciliation services for retiree health and welfare plans. These services may be adapted to each client’s specific needs and requirements. Contact UPMC Benefit Management Services to learn more by emailing out team at benefitmanagementserivces@upmc.edu.