COBRA & Medicare

COBRA coverage and Medicare are two perplexing topics on their own. And they can become even more confusing when you are eligible for both COBRA & Medicare at the same time.

COBRA (The Consolidated Omnibus Budget Reconciliation Act) is a federal law that allows certain employees and their spouse and/or covered dependents to continue group health care coverage for a period of time after their employment ends or in the case of certain “qualifying events”. “Qualifying events” are events that cause an individual to lose group health coverage such as loss of employment, divorce or legal separation, loss of “dependent child” status under the plan rules, covered employee becoming eligible for Medicare, and a few others. Those entitled to COBRA coverage will have at least 60 days to elect to enroll and are generally required to pay the full cost of the plan premiums. COBRA rules require coverage be allowed to continue for a limited period of either up to 18 or 36 months, however, the length of time depends on the qualifying event that gave rise to the COBRA rights.

When Medicare eligibility coincides with a COBRA election opportunity there are special rules to pay attention to.

So how do you know if COBRA is available and whether it is the right option for you? The answer is…it depends and proceed with caution!

  • If your Medicare Part A or Part B is effective on or before you elect COBRA, you must be allowed to enroll in COBRA. However, it is important to note that Medicare is the primary payer, and your Cobra plan is secondary. This means Medicare will pay claims first, and your Cobra plan pays second. Because of this nuance, it is important to confirm with your plan as to whether they require Parts A & B to be active to avoid getting stuck with any unnecessary or surprise bills!
  • If you become Medicare eligible after you begin COBRA, COBRA typically can’t continue. It will likely end on the date your Medicare coverage begins. 

It’s important to note that Medicare does not view COBRA the same way that it does an employer health plan. When you leave your employer plan, you have a special enrollment period that allows you to enroll into Medicare without any late enrollment penalties. This period lasts for 8 months following the termination of your employer health plan. Even though COBRA is a continuation of the employer plan you had while working, Medicare no longer views this plan as an employer-sponsored plan once it becomes COBRA continuation. Therefore, COBRA does not qualify for a special enrollment period with Medicare.

The bottom line is, if you leave your employer health plan and elect COBRA, make sure you don’t postpone Medicare enrollment for more than 8 months, or you will face a late enrollment penalty, AND, confirm with your COBRA plan whether or not they require you to be enrolled in Medicare to avoid getting stuck with any surprise bills.

What is the Medicare Part B late enrollment penalty? For each 12-month period, you delay enrollment in Medicare Part B, you will have to pay a 10% Part B premium penalty. In most cases, you will have to pay that penalty every month for as long as you have Medicare!