Can You Have COBRA and Medicare at the Same Time?

Navigating health coverage changes can be complex, particularly when nearing Medicare eligibility while also having COBRA access. While it is generally possible to have both COBRA and Medicare, their interaction involves specific rules and considerations. Making the correct choices can help prevent gaps in coverage or potential financial penalties.

Understanding How COBRA and Medicare Interact

COBRA allows individuals to continue employer-sponsored health coverage for a limited time after qualifying events like job loss or reduced hours. This coverage typically lasts 18 months, but can extend to 36 months. Medicare is the federal health insurance program for people aged 65 or older and certain younger individuals with disabilities. The way COBRA and Medicare work together depends on which coverage you obtained first.

Understanding how these coverages interact involves the “primary payer” and “secondary payer” distinction. The primary payer is the insurance plan that pays first for healthcare services, while the secondary payer covers remaining costs after the primary insurer has paid its share. If an individual is already enrolled in Medicare (Parts A and B) when eligible for COBRA, Medicare typically serves as the primary payer. COBRA then acts as the secondary payer, potentially covering costs not paid by Medicare, such as deductibles or coinsurance.

Conversely, if an individual has COBRA coverage and then becomes eligible for Medicare, Medicare generally becomes the primary payer. COBRA coverage often shifts to a secondary role, supplementing Medicare by paying for services Medicare does not cover or assisting with out-of-pocket costs. If you are on COBRA and then become eligible for Medicare, your COBRA coverage may terminate for the Medicare-eligible individual. However, spouses and dependents may be able to continue their COBRA coverage for a longer period, sometimes up to 36 months.

COBRA might also offer benefits that Medicare does not, such as coverage for routine dental care, vision care, or eyeglasses. Even with COBRA, individuals with only Medicare Part A should enroll in Part B to avoid late enrollment penalties.

Key Considerations for Medicare Enrollment While on COBRA

Timely enrollment in Medicare is important to avoid late enrollment penalties, particularly for Medicare Part B and Part D. The Initial Enrollment Period (IEP) for Medicare spans seven months, beginning three months before and ending three months after an individual’s 65th birthday month. Enrollment during this period avoids penalties and coverage gaps.

COBRA does not qualify individuals for a Medicare Special Enrollment Period (SEP) based on ongoing employment if it’s their only group health plan. COBRA is a continuation of prior employment coverage, not active employment. Relying on COBRA past the IEP can lead to penalties and coverage delays.

Individuals who delay enrolling in Medicare Part B while only on COBRA, beyond their Initial Enrollment Period, will likely face late enrollment penalties. This penalty is an additional 10% for each 12-month period of delayed enrollment. Missing the IEP for Part B often means waiting for the General Enrollment Period (GEP) from January 1 to March 31, with coverage effective July 1.

For Medicare Part D (prescription drug coverage), a late enrollment penalty may also apply if an individual goes 63 or more days in a row without Part D or other creditable prescription drug coverage after their Initial Enrollment Period. This penalty is 1% of the national base beneficiary premium for each uncovered month. However, if COBRA coverage includes prescription drug benefits that Medicare considers “creditable,” individuals may be able to delay Part D enrollment without penalty.

If an individual or their spouse is still actively working and covered by an employer group health plan (not COBRA), active employment coverage can qualify them for a Special Enrollment Period when it ends, allowing delayed Medicare enrollment without penalty. However, COBRA does not offer this same protection against late enrollment penalties for Medicare Part B.

Financial Implications of Combining COBRA and Medicare

The cost of COBRA coverage is typically high, as individuals are responsible for paying the full premium, including the portion their former employer previously covered. This usually amounts to 102% of the total cost of the plan.

Medicare also involves various costs, though they are structured differently. Medicare Part A (hospital inpatient care) is often premium-free for those with sufficient work history. Medicare Part B, covering doctor visits and outpatient services, has a standard monthly premium, but can be higher for individuals with higher incomes due to Income-Related Monthly Adjustment Amounts (IRMAA). Medicare Part D, which covers prescription drugs, requires a separate monthly premium that varies based on the chosen plan and income. Supplemental coverage like Medigap policies or Medicare Advantage plans also have premiums.

Having COBRA only can be very costly due to its high premiums. Medicare-only coverage, including Parts A, B, and D, along with potential supplemental coverage, often presents a more cost-effective solution for long-term health insurance needs. Medigap policies help cover Original Medicare out-of-pocket costs like deductibles and coinsurance. Medicare Advantage plans, offered by private companies, can include additional benefits.

While it is possible to maintain both COBRA and Medicare, COBRA can fill coverage gaps or reduce out-of-pocket expenses when combined with Medicare. However, due to its significant cost, COBRA is generally not considered a financially sustainable long-term solution once Medicare eligibility is attained. For most individuals, Medicare becomes the more economical primary health coverage option, making extended COBRA reliance unnecessary.