The Internal Revenue Service issued Revenue Ruling 2004-22 (2004), which addresses the COBRA extension of coverage for spouses and dependents receiving COBRA benefits when the former employee qualifies for Medicare. Up until 2004, it was standard for the COBRA administrator to offer spouses and dependents 36 months of COBRA coverage due to the Medicare qualification being considered a 2nd triggering event. The 2004 IRS ruling eliminates the extension and reduces the time frame for spouses and dependents receiving COBRA to 18 months total.
IRS eliminates COBRA extension for dependents and spouses (2004-22)
Employee and spouse are covered under a group health plan subject to COBRA. Employee terminates employment and both employee and spouse lose coverage under the plan as result of the termination. Both are offered COBRA for up to 18 months. Spouse elects COBRA and during the 18-month coverage period, the former employee becomes entitled to Medicare. The plan is notified of the Medicare entitlement within 60 days.
COBRA regulations do not require an employee to elect COBRA for second qualifying events to result in a 36-month extension for a spouse or dependent.
The IRS has ruled that an employee's spouse is not be entitled to an extension of the maximum coverage period because of the former employee's Medicare entitlement. Plans are not required to make COBRA coverage available to the spouse or dependents beyond the end of the initial 18-month period.
If a former employee becoming entitled to Medicare after COBRA election, that is not a COBRA triggering event for the COBRA extension. IRS regulations govern COBRA describe the circumstances under which a second qualifying event can expand the maximum coverage period due to an initial qualifying event, such as termination or reduction in hours. The expanded period applies only to those qualified beneficiaries who became qualified at the time of the initial event and continue on COBRA coverage at the time of the 2nd qualifying event. Since a covered employee is not a qualified beneficiary with respect to any 36-month qualifying event, only the spouse or dependent children of a covered employee may receive up to a maximum of 36 months of COBRA continuation coverage.
A spouse and dependent child of a covered employee may be entitled to an extension of coverage up to a maximum of 36 months, if the 18 month event results in a loss of coverage for the qualified beneficiary under the plan within the maximum coverage period.
The test if a second event triggers an additional 18 months:
Apply the terms of the plan to the qualified beneficiary as if the covered employee had not experienced the termination of employment; and
decide if the occurrence of the 36-month event would result in a loss of coverage for the qualified beneficiary under the plan within 36 months after the covered employee's termination of employment.
Thus, whether the employee's spouse is entitled to a total period of 36 months of COBRA coverage, measured from the date of the employee's termination of employment, depends on if the Medicare entitlement is considered to be a separate qualifying event. If the Medicare entitlement of a covered former employee occurs after COBRA is elected, since the Medicare entitlement cannot create a loss of coverage for the qualified beneficiaries (spouses and dependents), it is not a qualifying event. Would the Medicare entitlement have resulted in the loss of coverage for a qualified beneficiary? If so, that is a second qualifying event.
Why isn't Medicare entitlement a second qualifying event?
A qualifying event occurs when there is a loss of coverage. Medicare entitlement does not cause a loss of coverage, and so it is no qualifying event. The Medicare Secondary Payer provisions of the Social Security Act prevent plans from treating current employees, their spouses and dependents differently from other group plan participants solely because one of them has attained age 65, or is entitled to Medicare benefits by reason of the attainment of age 65. You cannot In short, it is unlawful for a plan to use as a reason to terminate a participant's coverage under the plan Medicare entitlement.
From IRS Revenue Ruling 2004-22 we learned the employee became entitled to Medicare benefits which cannot result in a loss of coverage for any plan participant. So the spouse is not entitled to an extension of the COBRA maximum coverage for 36 months because the employee's entitlement to Medicare is not be a qualifying event to dependents.
Craig Casey is an Writer, Coach, Blogger, Husband, and Former Health Insurance Agent helping people on the web since 1999 with their health insurance problems.
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