Just recently someone asked me why she was being permanently surcharged on her Medicare Part B premiums. She had worked beyond age 65 When she stopped working, she then elected to pay for insurance continuation under COBRA. She started to receive her Social Security, and automatically began receiving Medicare Part A, but opted out of Medicare Part B until after her COBRA benefits ran out. When she applied for Part B, she learned the unhappy news that she has to pay a permanently higher Part B premium, because COBRA isn’t considered “creditable coverage” that enables a person to hold off on enrolling in Medicare without penalty.
Medicare is available as primary insurance for individuals over age 65 who have paid into the system for at least 40 calendar quarters. An eligible person will automatically be eligible to receive Medicare at age 65 if they are also eligible to receive Social Security. There is no premium for Medicare Part A, which is the benefit that pays for hospital care and post-hospital subacute, rehabilitation and home care. But there is a premium for Medicare Part B, which is the insurance that pays for out-patient services, doctors visits, etc.. It’s deducted from the Social Security check of those who are also collecting Social Security. What happens with Medicare Part B is that a person can elect not to receive it. If a person over 65 is still employed and has insurance through an employer, they may decide to save a few dollars and hold off on enrolling in Medicare Part B until they “need it.” That would typically be the point at which the individual has lost their employer-based insurance plan due to a separation from employment or retirement.
So what happened to our friend with the COBRA problem? Once she was no longer covered under the employer plan, she had to enroll in Medicare Part B during the special enrollment period which lasted 8 months from the date of her separation from employment. The fact that she was enrolled in an insurance plan under COBRA did not exempt her from this obligation. And since she didn’t enroll on time, she now has a permanent surcharge on her Part B premium.
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