Remove the COBRA Creditable Coverage Penalty in Medicare and Help Seniors


COBRA coverage is not currently considered creditable coverage, so some seniors face Part B penalties. That needs to change.

Andrew F. Biernat

Andrew F. Biernat

As strategic adviser to the managed care industry I work with both state and federal legislatures and regulators on impactful solutions to improve quality healthcare for all Americans. It can be very challenging at times, but sometimes easy wins are right under our nose. One such opportunity that would provide significant relief for consumers is contained within Medicare. Numerous changes to Medicare have been implemented since its passage in 1965. But one key aspect of Medicare has remained the same: COBRA is not creditable coverage.

In 1965, if you were lucky enough to reach age 65, you got your gold watch and rode off into the sunset. Now the intersection between employer coverage and Medicare is more complicated. Today, people live longer and work longer, and women comprise a larger share of the workforce. People choose COBRA for a variety of reasons, some have met their deductible, others are in treatment and do not want to change doctors, and many have younger spouses they are pulling along until they reach Medicare eligibility.

A number of years ago, CMS began collecting the penalty for late enrollment of Part B. People coming from employer coverage believed that since their coverage was the same that they had creditable coverage. But here is the catch: Because the employer is no longer contributing to the premium, and former employees pay the entire premium, plus a small administrative fee, the coverage is no longer deemed creditable. People who mistakenly believe that COBRA coverage meets the creditable coverage find themselves subject to a 10% penalty for life (for each year you could have signed up). It accrues for every year the person is not enrolled in Part B.

Agents who work with Medicare beneficiaries began hearing from their clients about the penalty. Former Congressman Kurt Schrader, a Democrat from Oregon, introduced legislation that would reclassify COBRA coverage as creditable coverage, thus eliminating the penalty. The legislation has bipartisan support. Numerous stakeholders back it. But it has been 10 years since it was introduced and, for one reason or another, it has never made it across the finish line and become law.

This year, a strong mix from both parties led by Pennsylvania Republican Rep. Lloyd Smucker, cosponsored of legislation, H.R. 8217 that would provide for a special enrollment period for people enrolled in COBRA coverage.

Lyndon Johnson signing Medicare into law with Harry S. Truman looking on | Image credit: LBJ Presidential Library

President Lyndon B. Johnson signs Medicare into law on July 30, 1965, with former President Harry S. Truman looking on.

Photo courtesy of LBJ Presidential Library.

Imagine that you have saved and prepared for the day when you could enroll in Medicare, and you discover must pay a penalty for life because COBRA was not deemed creditable coverage!

That is not the welcome to Medicare that people should get. It is probably not what the creators of Medicare intended when former President Harry S. Truman was at the signing ceremony and became the first Medicare recipient, proudly watching President Lyndon Johnson sign the Medicare legislation into law.

The Medicare program needs to keep pace with the way in which Americans age and who were just trying to do the right thing.

Andrew F. Biernat is a strategic adviser to the Managed Care Resource Alliance and vice president-strategic business adviser to Gilroy Kernan & Gilroy.

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