COBRA and Medicare – What You Should Know

If you receive health insurance benefits through work, you may have heard about COBRA coverage. COBRA helps people avoid losing their health insurance abruptly during a qualifying event, such as divorce, death, retirement, or leaving a job. With COBRA, you pay for employer provided health benefits to continue for you, your spouse and your dependents for a period of time until other arrangements can be made.

As a senior about to retire or become eligible for Medicare, COBRA raises new questions: If you will soon be eligible for both Medicare and COBRA, which benefits should you take? If you are a spouse not eligible for Medicare, and about to lose employer coverage, can you still take COBRA? Understanding your options is important for ensuring you have the coverage you need when you need it most. Here’s some background on COBRA, along with some facts that can help you make an informed decision regarding Medicare. 

What Is COBRA Exactly?

Short for the Consolidated Omnibus Budget Reconciliation Act, COBRA was passed by Congress in 1985 to protect qualified beneficiaries—and their dependents—from losing health coverage abruptly should group health insurance stop. Benefits are typically available when a qualifying event occurs, such as a divorce or legal separation, death of a covered employee, retirement, or, in some cases, eligibility for Medicare. 

If you have COBRA when you first become eligible for Medicare:

If you’re already receiving COBRA benefits, and become eligible for Medicare during that time, what should you do? While seniors often delay signing up for Medicare Part B if they have comparable health insurance, COBRA is not considered comparable coverage. If you wait to enroll in Part B until your COBRA coverage ends, you will pay a late enrollment penalty. To be safe, if you have COBRA at the time you become eligible for Medicare, sign up for Part B to avoid the late penalty—you can have both Medicare and COBRA.

Remember, enrollment in Part B triggers open enrollment rights for Medicare Supplement. If you plan on using Medigap to help pay out-of-pocket costs, you will have six months from the date you enroll in Part B to choose a plan without regard to your current health condition. 

If you have COBRA before enrolling in Medicare, your COBRA benefits may end on the date you sign up for Medicare. However, your spouse and dependents may be able to keep coverage for up to 36 months. You may be able to keep COBRA benefits for services not provided by Medicare. For example, if dental or vision coverage is provided through COBRA, you may be able to continue paying for benefits for as long as you are entitled to COBRA.

If you have Medicare when you become eligible for COBRA 

You may have already signed up for Medicare when COBRA benefits are made available to you. You can sign up for coverage even if you are already enrolled in Medicare. Basically, Medicare becomes your primary payer, while COBRA acts as your secondary payer. However, you will be responsible for both the Part B premium and your COBRA premium.

When would it make sense to take COBRA coverage with Medicare? Maybe your COBRA benefits include prescription drug coverage or eye care. With Medicare, these services are not included, but extra. You do have the option to turn down COBRA benefits. But, if you have dependents who rely on you for health coverage, be sure to consider your options carefully.

In general, COBRA only applies to companies with 20 or more employees. If you are planning on retiring, or leaving employment where COBRA is offered, you should receive a letter notifying you of your rights and offering you the option to elect continuation coverage. Typically, COBRA benefits extend for 18, and in some cases, 36 months.