If you are approaching age 65 and currently have COBRA insurance , you may be wondering how it affects your Medicare enrollment . Understanding how COBRA and Medicare work together is crucial to avoid costly mistakes, gaps in coverage, and potential penalties. This guide will walk you through everything you need to know about COBRA insurance and
Medicare, ensuring a smooth transition to the right healthcare coverage.
What is COBRA Insurance?
COBRA (Consolidated Omnibus Budget Reconciliation Act) allows individuals to continue
employer-sponsored health insurance for a limited time after leaving a job, reducing work hours, or experiencing another qualifying event. COBRA coverage is often used as a temporary
solution for those between jobs, retiring early, or waiting to enroll in another health plan.
Key Features of COBRA:
- You can keep your employer’s health plan for up to 18 or 36 months, depending on the qualifying event.
- You must pay the full cost of the premium (including the portion your employer previously covered), plus a 2% administrative fee.
- COBRA coverage is identical to your previous employer-sponsored plan, covering doctor visits, hospital stays, and prescriptions.
While COBRA provides important continuity of care, it is not designed to be a long-term
solution—especially for those approaching Medicare eligibility at age 65 .
COBRA and Medicare: How They Work Together
If you are already enrolled in Medicare before you lose your job and qualify for COBRA,
Medicare becomes your primary insurance , and COBRA acts as secondary coverage. However, if you become eligible for Medicare while on COBRA , there are important rules to understand.
If You Have COBRA and Become Eligible for Medicare
- Once you become eligible for Medicare at 65 , COBRA coverage typically ends .
- If your employer had 20 or more employees , COBRA may continue, but it will no longer cover services Medicare would cover.
- You must enroll in Medicare Part A and Part B during your Initial Enrollment Period (IEP) to avoid late penalties.
- COBRA is not considered creditable coverage for Medicare Part B or Part D, meaning delaying Medicare enrollment while on COBRA can result in lifelong penalties.
If You Have Medicare First and Then Become Eligible for COBRA
- Medicare remains your primary insurance .
- COBRA may cover costs that Medicare does not, like prescription drugs and dental care , but it cannot replace Medicare.
- If COBRA includes prescription drug coverage , you must ensure it is considered creditable coverage to avoid Medicare Part D penalties later.
Common COBRA and Medicare Mistakes to Avoid
1. Thinking COBRA Coverage Replaces Medicare
Many people mistakenly believe they can keep COBRA instead of enrolling in Medicare when
they turn 65. This is a costly mistake because COBRA is not a substitute for Medicare, and
once you are eligible for Medicare, COBRA may no longer cover you.
✔ Solution: Enroll in Medicare Part A and Part B during your Initial Enrollment Period to avoid losing coverage and facing late penalties.
2. Missing the Medicare Enrollment Deadline While on COBRA
If you delay Medicare enrollment because you have COBRA, you could face a lifetime late enrollment penalty for Medicare Part B and Part D.
✔ Solution: Sign up for Medicare during your Initial Enrollment Period (IEP) (three months before and after your 65th birthday). If you missed it, enroll during the General Enrollment Period (January 1 – March 31) to avoid coverage gaps but you will still incur a penalty..
3. Assuming COBRA Prescription Coverage is Creditable for Medicare Part D
COBRA may include prescription drug coverage , but that does not always mean it meets
Medicare’s creditable coverage requirements. If COBRA drug coverage is not creditable and
you delay Part D enrollment , you could pay penalties for life.
✔ Solution: Verify with your COBRA provider whether your prescription plan is considered creditable coverage for Medicare Part D. If not, enroll in a Medicare Part D plan before your
COBRA coverage ends.
4. Overpaying for COBRA When Medicare Provides Better Coverage
COBRA premiums are expensive because you pay the full cost of the plan plus administrative
fees. Medicare often provides more affordable and comprehensive coverage compared to COBRA.
✔ Solution: Compare Medicare costs versus COBRA premiums before deciding to keep COBRA after turning 65. If additional coverage is needed, consider a Medicare Supplement
(Medigap) policy or a Medicare Advantage (Part C) plan .
What to Do When Transitioning from COBRA to Medicare
If You Are Approaching 65 and Have COBRA:
- Enroll in Medicare Part A and Part B during your Initial Enrollment Period.
- Check if your COBRA prescription drug coverage is considered creditable for Medicare Part D.
- Compare Medicare Advantage or Medigap plans if you need additional coverage.
- Contact your COBRA administrator to confirm how your COBRA plan interacts with Medicare.
If You Have Medicare and Are Offered COBRA:
- Understand that Medicare remains your primary insurance .
- Review whether COBRA offers extra benefits (such as dental, vision, or drug coverage) that Medicare does not.
- If COBRA includes prescription drug coverage , confirm whether it is creditable for Medicare Part D .
COBRA vs. Medicare: Which One Should You Choose?
| Feature | COBRA | Medicare |
|---|---|---|
| Cost | High premiums (full employer plan cost + 2%) | Generally lower, based on income |
| Coverage Duration | Limited (18-36 months) | Lifetime coverage |
| Doctor & Hospital Choice | Depends on employer’s network | Nationwide acceptance (Original Medicare) |
| Prescription Drug Coverage | Varies; may not be creditable for Part D | Part D or Medicare Advantage plans available |
| Penalties for Late Enrollment | No direct penalty | Possible lifetime penalties for late Part B or Part D enrollment |
✔ In most cases, transitioning to Medicare as soon as you become eligible is the best
financial and healthcare decision.
Final Thoughts: Making the Right Medicare Decision After COBRA
Understanding how COBRA and Medicare work together is essential for avoiding unnecessary expenses and lapses in coverage. The key takeaways are:
- COBRA is temporary and does not replace Medicare.
- Enroll in Medicare on time to avoid late penalties.
- Compare costs —COBRA premiums are often higher than Medicare options.
- Consider additional Medicare coverage if you need extra benefits COBRA provided.
Transitioning from COBRA to Medicare can feel complicated, but by planning ahead and
enrolling on time, you can ensure seamless healthcare coverage without stress. If you have
questions, reach out to Medicare.gov, your employer’s benefits administrator, or a licensed Medicare advisor to guide you through the process.
When I leave my employer will I be automatically enrolled in Cobra Insurance.
No, you have to contact your Benefits Administrator to apply.
Is my Cobra coverage the same as my employer Health Plan?
No, depending upon the Cobra contract cobra may cover a smaller amount of a Medical claim.
If I become Medicare eligible can I keep my Cobra coverage instead of signing up for Medicare?
No, Cobra coverage is not considered “Creditable Coverage” to Medicare and you will receive a penalty for late enrollment if you delay signing up.
Mike Miligi- Owner- Michael M Insurance Services
For over 10 years, Mike
has been assisting Seniors and other Medicare-eligible individuals in understanding the ins and outs of Medicare and Medicare Health Insurance options, including Medicare Advantage Plans(Part C), Medicare Supplement Plans(Medigap), Prescription Drug Plans(PartD), and Dental
and Vision programs. Mike is Licensed in seven States and Certified with 11 Insurance Carriers. He has helped thousands of individuals decide on the best course of action for their particular Health Insurance needs.
Because Mike is an Independent Medicare Health Insurance Broker, he
works for the client, not the Insurance Carriers, and is able to provide his clients with accurate and unbiased Health Insurance options. Mike
recertifies with CMS (The Centers for Medicare and Medicaid Services) annually, regularly completes Continuing Education Courses required by
individual State Insurance Departments, and keeps abreast of industry trends and standards to offer his clients the most up-to-date information.
