We are in a unique environment with the impact of COVID-19, The economic impact has left countless people without jobs and in financially tenuous circumstances. While some have found this is the ideal time to take early retirement, others may find taking that step is like falling off a cliff. This article will explore options to prepare you to make health insurance decisions when retiring early at age 65 . We will explore the options of going on COBRA alone, COBRA and Medicare or just Medicare.
COBRA stands for Consolidated Omnibus Budget Reconciliation Act. It was passed in 1983 to provide for continuing employer-provided group health insurance for some employees and their dependents after a job loss or another life-qualifying event. Deciding whether to take COBRA is a decision that has to be made on a timeline and rushing to make a decision usually doesn't allow for reflective thought on the best and sometimes most cost-effective option available.
Let’s look at an example: if you can retire early at age 65 and your employer will pick up the COBRA costs for a few months, do you just take the COBRA and sign up for Medicare later? NO! COBRA looks just like your employer plan but if you are no longer an employee covered under an employer plan, you are under COBRA. If you need medical care and you have not enrolled in Medicare when you were eligible your COBRA will only cover what Medicare didn’t (20%) had you been enrolled. You are stuck with the 80% balance. So best to sign up for Medicare parts A and B and when COBRA runs out then pick up part D. It all comes down to which plan is supposed to pick up the bill. If you are age 65 Medicare is always the Default primary insurance coverage even if you have not enrolled.
If you have very expensive medications, it may make more sense to stay on the COBRA for 18 or up to 36 months and also be on Medicare parts A and B at the same time. This can prevent you from falling into a donut hole where your medications will become very costly as a result of coverage running out under Medicare. Perhaps the cost to pay for the COBRA premium plus the co-pays for medication is still less than the total out of pocket for the medications in the donut hole. Later when the COBRA runs out go back and pick up the Medicare product.
Be careful about coming off of COBRA and then trying to pick up Medicare - it can be tricky because of pre-existing conditions - though it can be done through “guarantee issue” allowing you to get a Medicare plan. Remember, if you don’t sign up for Medicare within eight months of having COBRA and you will be 65 years old, you will have a late enrollment fee that will follow-you forever.
If you are over 65 facing layoff or retirement and COBRA is an option or you are on Social Security Disability Insurance for 24 months, seek the help of a Medicare enrollment Specialist.
As a Myeloma Coach, I am a Free resource availabe to myeloma patients. If you have specific financial questions or needs you can find/connect with me at: www.myelomacoach.org.
Diahanna Vallentine, BCPA
about the author
Diahanna is the Financial Program Manager for the HealthTree Foundation, specializing in financial help for multiple myeloma and AML patients. As a professional financial consultant and former caregiver of her husband who was diagnosed with multiple myeloma, Diahanna perfectly understands the financial issues facing myeloma patients.