How Medicare and COBRA interact

Depending on your employment situation, you may be wondering about how Medicare and COBRA interact. COBRA, which stands for the Consolidated Omnibus Budget Reconciliation Act, helps provide health insurance to employees in certain situations where they may otherwise lose their health coverage for 18 to 36 months. COBRA usually is offered to those who experience a reduction in work hours or lose employment.

In this blog we’ll cover all these questions you might have about COBRA and Medicare.

Yes! You can have both Medicare and COBRA. Medicare will be your primary insurer and COBRA will be your secondary.

If you become eligible and enroll in Medicare before COBRA, the good news is that you can have both. Taking COBRA is optional, and depending on your situation, you may or may not want to. If you do decide to take COBRA, do not drop your Medicare plan. Medicare is your primary insurer, and that won’t change when you take COBRA. Medicare will cover some or all health care costs first. COBRA may pay some costs not paid for by Medicare.

Some people are only enrolled in Medicare Part A when they become eligible for COBRA. Usually this is because your employer health insurance was considered creditable by Medicare and qualified you to delay Medicare Part B and Part D.

In this situation, you will need to enroll in Part B within 8 months of your employment ending to avoid paying the Part B late enrollment penalty. This 8-month period is called a Special Enrollment Period.

Additionally, you may need to get Medicare Part D – whether you take COBRA or not. If you do not take COBRA, you will have about the first two months of your Special Enrollment Period to get Part D without penalty (or 63 days exactly after losing your employer coverage). This is also the case if you do take COBRA but it doesn’t provide creditable drug coverage.

If you take COBRA and it does provide creditable coverage, then yes, you may be able to delay Part D without penalty. In this case, you will have 63 days after losing COBRA coverage to enroll in Part D without penalty.

If you get COBRA first and then become eligible for Medicare, when you turn 65, COBRA will cease providing primary insurance coverage to you. Medicare will become primary, and if you can keep COBRA, it will become your secondary insurer. In this case, make sure to ask when your COBRA coverage will end, for if you become Medicare-eligible before the typical 18 months of coverage are up, it’s still possible for the COBRA coverage to end early.

This is very important because some people will wrongly assume that COBRA will continue, and they don’t need Medicare at age 65. This isn’t true. Once you become entitled to Medicare, COBRA primary coverage benefits will cease. In this situation if you fail to get Medicare when you become eligible, you could end up facing late enrollment penalties because you decide to later enroll in Medicare later on, if you have a costly medical incident and COBRA informs you they’re no longer providing primary coverage, you could end up shouldering the high medical bill yourself.

In short, if you have COBRA and then become eligible for Medicare, enrolling in Medicare on a timely basis is paramount.

Here are some key things about enrollment to keep in mind:

• You need to enroll in Medicare Part B once you’re eligible
• You may be able to delay enrolling in Medicare Part D prescription drug coverage without penalty if you can keep COBRA coverage and it includes creditable prescription drug coverage
• You will have 63 days to enroll in Medicare Part D without penalty once you lose COBRA drug coverage

No matter if you become eligible for COBRA or Medicare first, make sure you clearly understand how the two work together and your options with each. If you need help, a good resource is your employer’s benefits department or your local State Health Insurance Assistance Program office.