Alan Cregg turned 65 three years ago and signed up for Medicare Part A, which covers hospitalizations and costs nothing.
But he didn’t sign up for Part B, which covers doctors appointments and outpatient care, because he was still under the insurance plan his wife had at work and saw no need to have separate coverage for himself.
Medicare Part B currently costs $164.90 a month, with those with higher incomes paying more.
But then his wife, Bethann, was fired from her job at an out-of-state tech company. At that point, Alan Cregg should have signed up for Medicare Part B, but he didn’t and that would cost him almost $20,000 for knee surgery.
Here’s what you need to know to avoid his fate:
Q. How did Bethann’s job loss affect the couple?
A. A law known as COBRA kicked in. It requires most employers to continue to offer group insurance to terminated employees for at least 18 months. Under COBRA, terminated employees get the exact same coverage from the same insurer as active employees. The Creggs’ insurer was Cigna, one of the largest in the country. (There are other “events” that trigger COBRA; for example, dependents are allowed to continue their coverage after the death of the covered person.)
Q. Are there any differences when you go on COBRA?
A. Yes, your monthly premium is likely to skyrocket. When she was an active employee, Bethann’s employer paid 100 percent of the premium. After Bethann’s termination, her former employer continued to pay the entire premium, but only for a few months, in accordance with a negotiated severance package. That meant the Creggs soon had to pick up the whole premium, about $2,000 a month.
Q. Why didn’t Alan and Bethann go on Medicare Part B instead of COBRA when she lost her job?
A. Bethann, in her late 50s, was too young to qualify for Medicare. The alternative was to buy insurance as an individual (with Alan as a dependent). But buying insurance on your own is almost always much more expensive than group insurance offered through an employer.
Q. But Alan was old enough for Medicare Part B — why didn’t he go on it?
A. In retrospect, he dearly wishes he had. Basically, he was lulled into a false sense of security. Cigna continued to pay his claims after he turned 65 without interruption. What the Creggs didn’t realize was that Cigna would continue paying his claims only so long as Bethann was a current employee.
Q. What were the Creggs told about COBRA upon Bethann’s termination?
A. This is the crux of the problem. Alan thinks someone should have explicitly told him not to go on COBRA but to sign up for Medicare Part B. Instead, he said he was led to believe there was no change in his status under COBRA.
Alan sent me a dozen documents, most of them letters from a company called Paylocity, which was hired by Cigna to administer its COBRA plans. Paylocity sent a seven-page, single-spaced letter to the Creggs shortly after Bethann lost her job informing them of their COBRA rights. It is quite dense, packed with legalistic and bureaucratic language. I had to read it repeatedly to begin to understand it.
It starts out saying Bethann’s insurance would end as of the date of her termination. But then it says COBRA “entitles” the couple to “elect to continue coverage” as “active members” of the Cigna plan.
“COBRA coverage is the same coverage that the plan gives to other participants or beneficiaries who aren’t on COBRA,” the letter says.
The letter says terminated employees and their dependents on COBRA “will have the same rights under the [Cigna] plan as other participants” in the plan.
It says nothing about those over 65 needing to sign up for Medicare Part B.
Q. How was the letter understood by the Creggs?
A. They thought their Cigna coverage would continue for the couple without interruption or modification, albeit at a higher cost to them, once they opted for COBRA, but their coverage had, in fact, changed.
A. Medicare makes a distinction between those 65 and older who have employer-sponsored insurance and are still working, and those who have employer-sponsored insurance but aren’t working, such as those covered by COBRA.
Q. What is the distinction?
A. I’ll quote AARP: “You can delay signing up for Medicare [Part B] only if you or your spouse is still working and you have health insurance from a current employer.” AARP put “current” in italics for emphasis.
AARP goes on: “Even though COBRA is the same coverage you had when working, it acts differently under Medicare rules because you or your spouse are no longer actively working in that job.”
Q. How did it play out for the Creggs?
A. The Creggs were oblivious to the “currently employed” requirement. They continued on their COBRA plan, and a couple of months later Alan scheduled outpatient arthroscopic surgery on his knee. He got a letter from Cigna approving it “after reviewing your medical information and health plan.”
Alan had the surgery, but Cigna later refused to pay for it because he should have been on Medicare Part B. The Creggs eventually paid out of pocket, almost $20,000.
Anyone who needs help navigating the Medicare system can get it free from the Shine program through their local senior center.