COBRA Bites Back

After the bombshell landed, Bregar repeatedly called Social Security. Among some 15 conversations with officials, he says, “two of them told me exactly the same wrong information as I was given in the first place.”

But one suggested he apply for “equitable relief.” This little-known option allows Social Security to investigate cases and reverse decisions if it finds an official has given faulty information. Bregar wrote a letter applying for relief and took it down to the office. “The lady there said: ‘Well, I’m happy to forward this on, but I can tell you I’ve been here for 26 years and I’ve only seen one case resolved in favor of the applicant,’ ” he recalls.

At that point, Bregar called the office of his congressman, Schrader. His staff, who’d never heard of the rule either, became interested. Their calls resulted in a “congressional inquiry” label attached to the Bregars’ Social Security file. Meanwhile the couple, frantically trying to find insurance, discovered that only one policy—costing around $1,700 a month—was available to them. On the day they were due to sign up, Bregar received a call from Social Security. He says the official said simply: “When do you want your Medicare insurance to begin?” He said: “Next week?” “Done,” she replied. The power of a congressional inquiry had paid off.

Unlucky victims caught in the trap

Many others in the same situation are not so lucky. Harvey Fine, of Woodstock, Ga., had planned to retire from his job as a packaging company executive upon reaching age 70 in October. But last summer he was laid off and now he and his wife, Lucille, are covered under COBRA until December. He, too, was stunned to discover last month that they’d fallen into the unforeseen trap and would have to wait until next July for Medicare. Everyone had told him that COBRA was simply an extension of his employer’s group coverage—“same policy, same card, same everything,” he says. “The hidden point to me was this eight-month window. You lose out unless you know these things.”

Fine, too, complained to Social Security that he’d been given wrong information, but at a review he was denied because he couldn’t remember the name of the official he’d visited a year ago. There was a record of his visit, but “they said the person didn’t enter anything into my file,” he recalls. The agency confirms that an investigation cannot be opened unless the applicant can provide the name of the official and the date and place of the conversation. And an applicant making a formal appeal is unlikely to succeed, because ignorance of the law is not a defense.

Fine wonders why he is being penalized when, by taking COBRA for 18 months, he has actually saved Medicare money. “There seems no logic in this rule,” he says. The confusion is compounded by the fact that Medicare Part D, the prescription drug benefit, has a different rule: People whose COBRA benefits expire are allowed a two-month special enrollment to sign up with a drug plan without penalty.

No Medicare for months

Many older Americans who fall into the Part B-COBRA trap aren’t so concerned about the late penalty, but say the prospect of no insurance for months is frightening.

Like most others, Fine’s insurance options after COBRA ends are limited. With a history of diabetes, high blood pressure and high cholesterol—which his current medications keep in check—he is unlikely to find individual coverage. He isn’t eligible for insurance under the new health care law’s high-risk pools that accept people with preexisting medical conditions, because to qualify people must have been uninsured for at least six months.

He may be able to get coverage under another law that allows people who have had continuous coverage from an employer plan and COBRA for at least 18 months to buy insurance regardless of preexisting conditions, but this is usually very expensive. Fine is exploring all possibilities, but the process “is like Russian roulette,” he says. “My worst case scenario is to bite the bullet and dig into whatever savings I have.”

A proposed change in the law

It was Bregar who suggested to Schrader that the law should be changed.

Schrader agreed.

His bill, entitled the Medicare Enrollment Protection Act of 2010, proposes to allow people a special enrollment period of eight months after COBRA benefits run out to sign up for Medicare immediately and without penalty.

The bill would also create continuous enrollment for people who miss their Part B deadlines for other reasons. They, too, would get coverage the month after they applied, but would pay an appropriate late penalty. That’s to prevent people gaming the system and deliberately failing to sign up and pay premiums until they have serious medical issues, Schrader says. “Seniors have earned these benefits and need to be covered,” he adds.

AARP, the Medicare Rights Center and other consumer organizations support the bill.

Patricia Barry is a senior editor with the AARP Bulletin who writes about Medicare.