Some individuals who moved from employer-sponsored health insurance and are eligible for Medicare may wonder how COBRA works with Medicare. Understanding the rules and coordination between these two programs is essential to avoid gaps in coverage and potential penalties.
What is COBRA
COBRA (Consolidated Omnibus Budget Reconciliation Act) allows eligible employees and their dependents to continue their employer-sponsored health coverage for a limited time when they experience a qualifying event, such as job loss, reduction in work hours, or retirement. In most cases, COBRA coverage is available for up to 18 months. In some circumstances, beneficiaries may be eligible to extend this coverage.
How COBRA Works with Medicare
The way COBRA and Medicare work together depends on which coverage individuals have first and their specific situation.
1. If you have COBRA and become eligible for Medicare
If the beneficiary is enrolled in COBRA and then becomes eligible for Medicare (usually at age 65), COBRA coverage may end. Employers are not required to continue COBRA once an individual enrolls in Medicare. However, dependents covered under COBRA may still maintain their coverage. It is important to enroll in Medicare on time to avoid late enrollment penalties.
Click here to learn more about how Medicare works with other insurance
2. If you have Medicare and then become eligible for COBRA
Beneficiaries already enrolled in Medicare and then become eligible for COBRA due to job loss or another qualifying event can enroll in COBRA. However, COBRA acts as secondary insurance to Medicare, meaning Medicare will pay first for covered services, and COBRA will cover remaining costs according to the plan.
3. Can you delay Medicare and keep COBRA
Relying solely on COBRA instead of enrolling in Medicare when first eligible can lead to serious consequences. Medicare considers COBRA secondary to Medicare-eligible individuals, so delaying Medicare enrollment may result in penalties and a coverage gap when COBRA ends.
It is important to note; Medicare does not consider COBRA creditable coverage even if it provides the same coveage the employer provided. In othe rwords, beneficiaries could end up with a coverage gap leading to lifetime penalties for Part B. This depends on the amount of time beneficiaries go without creditable coverage.
Things to consider
- Medicare Enrollment Deadlines: Individuals who are eligible for Medicare should enroll during their IEP (Initial Enrollment Period) to avoid penalties. COBRA does not count as creditable coverage to delay Medicare Part B enrollment. However, it is usually considered creditable Part D coverage.
- COBRA Costs: In most cases, COBRA coverage is expensive because beneficiaries must pay the full premium, including the employer’s share.
- Medigap and Medicare Advantage Options: Once COBRA ends, beneficiaries may want to enroll in a Medicare Supplement (Medigap) and PDP plan or a Medicare Advantage plan to fill the coverage gaps left by Original Medicare.
Learn about Medicare OEP, SEPs and Late Enrollment Penalties watch a quick YouTube video
COBRA and Medicare can work together, but understanding how they coordinate is crucial for making informed healthcare decisions. For individuals on COBRA who are approaching Medicare eligibility, it’s advisable to consult with a licensed Medicare agent to ensure you avoid LEPs and coverage gaps.