Question:
We have an employee who will be turning 65 this year and is trying to decide whether to enroll in Medicare when he does. He also hasn’t decided whether and when to retire. One of his main concerns is that his wife, who is also on our coverage, is only 60 years old. He wants to make sure she has coverage until she is able to enroll in Medicare in a few years. If the spouse loses coverage, we might be interested in helping them pay the cost of her coverage.
What are the employee’s (and our) options at this point?
Answer:
Coverage options for the employee and his wife will vary widely depending on whether and when he retires.
First, when an employee continues working after age 65:
- He must be given the option of keeping his coverage even if he enrolls in Medicare.
- Employers are prohibited from providing any sort of incentive for the employee to drop their coverage. That includes offering to pay employees’ Medicare premiums or individual/COBRA coverage premiums for the spouse.
- If an employee chooses to enroll in Medicare and drop coverage, the spouse will lose coverage and would not be eligible for COBRA. The spouse may want to consider individual coverage through the Exchange.
- There might be a way for an employer to pay the spouse’s premiums at this point, but they would have to make sure it doesn’t appear they are incentivizing the employee to drop employer coverage. I strongly recommend discussing this with an attorney before attempting it.
Second, if an employee retires before enrolling in Medicare:
- Both the employee and the covered spouse must be offered COBRA and can keep it for up to 18 months after the employee’s date of retirement.
- There would be no restriction on the employer’s payment of the employee’s or spouse’s premiums (through COBRA or otherwise) at this point.
- The employee’s COBRA coverage can be terminated if he subsequently enrolls in Medicare.
Finally, if the employee enrolls in Medicare now and retires later:
- The wife would be entitled to COBRA starting with the date of the employee’s retirement and ending 36 months after he enrolls in Medicare. For example, if the employee enrolls in Medicare as of September 1, 2023, and both stay on the plan until he retires on December 31, 2023, the wife would be entitled to COBRA coverage from January 1, 2024 through August 1, 2026.
- The employee would also be entitled to COBRA for up to 18 months after the date of retirement.
As you can see, the interaction between Medicare and COBRA is very complicated. Feel free to contact me or a member of your account team when these situations arise. Your COBRA administrator should also be a good resource for information.
