The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that lets you keep employer group insurance when it ceases due to a lost job or other circumstances. But if you’re turning 65, you still must sign up for Medicare or risk permanent consequences.
But who does this affect? Under what circumstances would you need to sign up for Medicare, and what are the repercussions if you don’t in the time allotted?
Who May Be Affected by COBRA Coverage
According to Medicare.gov, if you leave your job for whatever reason, you can keep your employer group health plan coverage for a limited time. Typically, COBRA only applies to employers with 20 or more employees. But some states have mini-COBRA laws that also allow employees to keep coverage despite the employer having fewer than 20 employees.
COBRA coverage is generally offered for 18 months, but according to Medicare, it may be offered for 36 months in some cases.
There are other reasons COBRA coverage may be available. For example, if you recently divorced or are legally separated with a court-ordered separation decree, you typically would be eligible for COBRA coverage.
If you are a dependent child or dependent adult child who’s no longer a dependent, you may also be eligible.
It’s important to notify the plan administrator that you have the right to choose COBRA coverage.
Can You Delay Medicare While Working?
According to Medicare Resources, if you’re still employed, you can delay Medicare enrollment if you are working and covered under your employer’s health plan when you turn 65.
This refers to Medicare Part B and will let you avoid the Medicare premium while your employer’s health care plan covers you. It will also let you avoid a penalty for failing to enroll in a timely manner.
When you leave your job, or your employer stops offering coverage, you’ll receive an eight-month special enrollment period to sign up for Medicare. This special enrollment period starts the month after you leave your employer, or the month coverage ends while you are still employed.
The eight-month special enrollment period also applies if you’re delaying Part B enrollment because you’re covered under your spouse’s employer-sponsored plan.
But the rules change if you leave your job and COBRA enters the picture.
Trap That Catches COBRA Recipients at 65
What trips up many 65-year-olds or older who leave their jobs is COBRA coverage.
According to Mauldin Insurance Group, the moment you stop working, you are no longer protected from incurring a penalty if you don’t sign up for Medicare. This is true regardless of whether you have COBRA coverage.
COBRA does not count as creditable coverage for Part B. It doesn’t matter if it is the exact plan you had while employed. The day you stop working, the eight-month countdown begins for applying for Medicare coverage.
So, if you are 65 and take 18 months of COBRA, you will pass the eight-month window that Medicare gives you. There is no warning, and by the time COBRA ends, you will have missed the special enrollment period.
If the special enrollment period runs out, you will incur a lifelong penalty.
Penalty for Missing Special Enrollment Period
If you use COBRA instead of signing up for Medicare within the eight-month window, you will pay an extra ten percent for each full year you could have signed up for Part B according to Medicare.gov.
If you went two full years without signing up for Part B, you would have to pay 20 percent on top of the Medicare Part B monthly premium. The 2026 Part B monthly premium is $202.90 according to Medicare.gov.
That would bring your 2026 premium to $243.48. Keep in mind this 20 percent penalty would last your entire life. The regular monthly premium typically increases yearly. That means you would pay the premium increase plus the penalty.
Another potential penalty, according to California Health Advocates, is that the COBRA carrier may be able to bill you for any benefits paid by mistake when Medicare should have paid first.
COBRA and Medicare at the Same Time
In some situations, according to the National Council on Aging (NCOA), you can have both Medicare and COBRA. But they don’t share the costs equally.
If you have both, Medicare generally provides the primary coverage.
COBRA for Medicare Part D
Prescription drug coverage works differently with COBRA. If your COBRA or retiree plan includes creditable drug coverage, you may be able to delay enrolling in Part D without penalty.
To be creditable, according to the Centers for Medicare & Medicaid Services (CMS), COBRA (or your group health plan coverage) must be designed to pay at least 72 percent of your prescription drug expenses.
Beware of the Medicare and COBRA Timeline
If you’re 65, once you stop working and receiving health insurance from your employer, the clock starts ticking for Medicare. COBRA is not considered creditable coverage. You will need to sign up for Medicare Part B through a special enrollment period.
Failure to do so could incur a lifelong financial penalty.
