Keep COBRA From Biting Medicare-Eligible Consumers: House Reps

Three top House Democrats and three top House Republicans have found something they can agree on: Someone should keep Medicare enrollment rules from biting COBRA coverage users on the neck.

The lawmakers — the Democratic chairs of three House committees, and the top-ranking Republicans at those committees — have asked two cabinet secretaries in the administration of President Donald Trump for help with eliminating the Medicare-to-COBRA transition trap.

Resources

A link to the House committee leaders' letter is available here.
A California Health Advocates discussion of the Medicare-to-COBRA transition trap is available here.
A National Association of Health Underwriters' discussion of the issue is available here.
The Congress.gov page for H.R. 2564, a bill that would create a special Medicare enrollment period for individuals moving out of COBRA continuation coverage, is available here.
The Congress.gov page for H.R. 1657, another bill that would create a special Medicare enrollment period for individuals moving out of COBRA continuation coverage, is available here.

The lawmakers have asked the U.S. Department of Health and Human Services (HHS) and the U.S. Department of Labor (DOL) for:

Any data that might be related to the Medicare-to-COBRA transition trap.
Information about any tools HHS and DOL already have that could help eliminate the trap.
Information about any statutory provisions or other barriers that keep HHS and DOL officials from eliminating the trap.

The lawmakers who signed the letter are Rep. Richard Neal, D-Mass., the chairman of the House Ways and Means Committee; Rep. Kevin Brady, R-Texas, highest-ranking Republican on the Ways and Means Committee; Rep. Frank Pallone Jr., R-N.J., the chairman of House Energy and Commerce Committee; Rep. Greg Walden, R-Ore., the highest-ranking Republican on the House Energy and Commerce Committee; Rep. Robert Scott, D-Va., chairman of the House Education and Labor Committee; and Rep. Virginia Foxx, R-N.C., the highest-ranking Republican on the House Energy and Labor Committee.

The lawmakers who signed the letter addressed it to HHS Secretary Alex Azar II and DOL Secretary Eugene Scalia.

The Trap

The COBRA coverage continuation program is the result of an early effort by Congress to regulate commercial health insurance for people under the age of 65.

The Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, includes a provision that lets many people who have group health coverage pay the full cost of the benefits, along with a 2% administrative charge, to keep their group health coverage in place for a period of at least 18 months.

Today, older workers who leave a group health plan can sign up for individual health coverage, on a guaranteed-issue basis, either through an Affordable Care Act (ACA) public exchange or outside of the ACA public exchange system. Low-income older workers may qualify for ACA premium tax credit subsidies.

But some older workers, and some younger workers with disabilities severe enough that they qualify for Medicare due to the disabilities, still pay for COBRA coverage. Sometimes, they may pay for COBRA coverage because it's cheaper than individual coverage. In many cases, they pay for COBRA coverage because they prefer their existing group health benefits and provider networks.

In some cases, people who have COBRA coverage turn 65 without realizing that they should take steps to sign up for Medicare coverage. COBRA users who fail to sign up for Medicare Part B physician and outpatient services coverage within eight months of turning 65 may have to pay COBRA late-enrollment penalties, according to a COBRA-to-Medicare issue summary posted by the National Association of Health Underwriters.

The House leaders note in their letter to Azar and Scalia that another, even bigger problem could affect COBRA coverage users who turn 65 and fail to understand Medicare eligibility rules: They could face the possibility that huge bills will fall between the coverage cracks.

Once the group health plans that provide the COBRA coverage realize that enrollees were actually eligible for Medicare, but failed to enroll in Medicare, the "group health plans can reevaluate any paid claims," the lawmakers write. "As a result, many retirees are unexpectedly exposed to out-of-pocket liability for any costs paid under COBRA benefits on or after [the] date of Medicare eligibility."

The Lawmakers' Proposed Solution

The lawmakers write in their letter that one way to solve the problem would be to make the workers who use COBRA more aware of what might happen if and when they become eligible for Medicare.

Group health plans already have to send departing enrollees notices about the enrollees' eligibility for COBRA continuation coverage.

Some the risk related to COBRA-to-Medicare transition problems "would be eliminated if COBRA notices addressed the interaction with Medicare, and vice versa," the lawmakers write. "Unfortunately, such information is not required under either Medicare or COBRA, and thus, transparency and clear information about the interaction between the two is lacking."

HHS and DOL should "coordinate and develop informative and clear communications for affected Americans," the lawmakers write.

One thing HHS and DOL could do is to put more and better information about the issue on their websites, the lawmakers write.

Bonnie Burns' NAIC Presentation

Bonnie Burns, a health policy specialist with California Health Advocates, who has an official post representing consumers in proceedings at the National Association of Insurance Commissioners (NAIC), has been working for years to draw NAIC members' attention to the COBRA-to-Medicare transition trap.

She talked about the issue Dec. 7 in Austin, Texas, at a Senior Issues Task Force session at the NAIC's fall national meeting.

She gave the example of a woman who ended up owing her COBRA coverage provider $150,000 in repayments for health care expenses that the carrier had paid after she stopped working, according to draft meeting minutes.

The carrier told the woman that Medicare should have been her primary coverage provider after she stopped working, according to the draft minutes.

State insurance regulators at the session suggested that improving coverage notices could help reduce the impact of the transition problem, and that federal policymakers would have to be the ones to update the notice rules.

H.R. 2564 and H.R. 1657

Rep. Kurt Schrader, D-Ore., and Rep. Gus Bilirakis, R-Fla., have tried to solve the COBRA-to-Medicare transition trap problem by introducing the "Medicare Enrollment Protection Act" bill, or H.R. 2564.

H.R. 2564 could reduce the number of people affected by the transition trap by creating a special Medicare enrollment period for individuals who have, or are moving out of, COBRA continuation coverage.

The bill would also exempt the people making that transition from the usual Medicare Part B late-enrollment penalties.

Schrader and Bilirakis have lined up two other Democratic cosponsors and two other Republican cosponsors.

Rep. Lloyd Smucker, R-Pa., has introduced a similar bill, H.R. 1657, the "Seniors' Health Care Choice Act of 2016″ bill. His bill, which has no cosponsors, would create a special Medicare enrollment period for COBRA users without eliminating the Medicare Part B late-enrollment penalty.

Correction: An earlier version of this article described the Medicare signup trap incorrectly. The trap occurs when people who have COBRA coverage fail to sign up for Medicare coverage at the designated time.

— Read Close the Social Security Claiming Delay Medicare Trap: Hearing Witness to Congress, on ThinkAdvisor.

— Connect with ThinkAdvisor Life/Health on LinkedIn and Twitter.