COBRA extends benefits beyond employment but isn’t a long-term replacement for former private employer insurance or Medicare.
COBRA health coverage can be creditable for Part D for qualified beneficiaries but is not creditable for Part B.
Enroll in Medicare Part B within 8 months losing employer benefits to avoid penalties.
With COBRA’s creditable drug coverage, you can delay enrollment in Part D without penalties.
If you’re on COBRA when eligible for Medicare, COBRA often ends with Medicare enrollment.
COBRA election can supplement Medicare depending on circumstances.
What’s creditable coverage?
Creditable coverage in the context of Medicare refers to a health plan that offers benefits that are equal to or more comprehensive than those provided by the specific Medicare plan you’re considering postponing enrollment in.
When you have such creditable coverage, you can choose to defer signing up for Medicare without facing the consequences of late enrollment penalties. This generally applies to both Medicare Part B and Medicare Part D. Part A is not typically an issue because for most people it is paid for early in life through Medicare payroll taxes.
Some of the common forms of creditable coverage include:
Group health plan provided by large employers (group health plan coverage for 20 or more employees)
Health plans sponsored by labor unions
What’s COBRA Continuation Coverage?
COBRA is a federal law that may let you keep your employer group health plan, with the same insurance company, when your employment ends. The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) serves to extend benefits beyond employment for employees.
According to the Consolidated Omnibus Budget Reconciliation Act, qualifying events for COBRA continuation coverage include situations like employment termination or reduced working hours.
Is COBRA Creditable Coverage for Medicare?
Unfortunately, COBRA is NOT a creditable replacement for employer group insurance in the eyes of Medicare, even if COBRA provides the same coverage as your former group health insurance plan.
COBRA can serve as creditable coverage for Medicare Part D for qualified beneficiaries, yet it is not considered creditable in relation to Medicare Part B.
If you lose group coverage and are granted COBRA benefits, you will be provided with an 8-month Special Enrollment Period during which you can enroll in Original Medicare without incurring penalties. We strongly advise people take advantage of this Special Enrollment Period.
If your COBRA coverage qualifies as creditable prescription drug coverage, you will be granted a different Special Enrollment Period during which you can enroll in a Part D plan without incurring any penalties.
If you miss your Special Enrollment, you will need to wait until General Enrollment (January 01 through March 31) as your next time window to enroll in Medicare.
COBRA is seldom the optimal choice for an individual eligible for Medicare. Typically, you can get superior coverage at a lower cost compared to what COBRA offers.
You have the option to combine Medicare Part A and Part B with COBRA coverage. However, COBRA was not designed to complement Medicare and doing so may put in jeopardy your ability to get a Medicare supplement plan when your COBRA runs out.
Should I Elect COBRA Continuation Coverage?
Opting for COBRA depends heavily on your specific circumstances. The advantages and disadvantages vary depending on factors like your age, Medicare eligibility timing, COBRA premiums, and other details of the COBRA plan.
To research and compare your Employer Plan or COBRA to Medicare coverage, use this link or call us at 800-847-9680 to speak with a licensed Medicare specialist.
Can I have Both Employer Insurance and Medicare Coverage?
You can have both Medicare and employer health insurance coverage (or COBRA) at the same time, but it is seldom a good idea. The reason for this is that you cannot have a Medicare supplement and employer group health coverage at the same time. But when you enroll in Medicare Part B, you have just 180-days to get a Medicare supplement without being required to qualify medically. You can lose your ability to get a Medicare supplement if you use employer coverage instead of a supplement plan.
Medicare and COBRA Coordination
Medicare coordination of coverage with COBRA depends on the sequence in which you acquire each type of insurance. While obtaining COBRA after having Medicare is possible, if you become Medicare eligible while on COBRA, the covered employee will lose their COBRA coverage. In essence, the possibility of having both COBRA and Medicare hinges on the order in which you initially acquire each form of insurance. Not to mention that COBRA is expensive relative to a supplement plan.
1) If You are on COBRA Before Medicare
If you have COBRA and then become Medicare eligible, your COBRA usually ends when you start Medicare. You will want to enroll in Part B right away because there’s no Special Enrollment Period (SEP) once COBRA ends. Your spouse and dependents can continue COBRA for 36 months, regardless of your Medicare enrollment.
COBRA might cover services not included in Medicare. For instance, if you have COBRA dental coverage. Talk to your Medicare broker about replacing dental coverage with a permanent policy.
2) If you Have Medicare First, then COBRA
If you have Medicare prior to qualifying for COBRA, then you should have the option to enroll in COBRA. Your primary insurance becomes Medicare, while COBRA takes a secondary role. That means Medicare pays first, with COBRA secondary.
Maintaining Medicare is crucial as it covers most of your healthcare expenses. Medicare and COBRA is seldom a winning combination. COBRA is often costly. Replacing COBRA with a Medicare supplement (Medigap Plan) can improve your coverage and lower your cost.
3) If You Only Have Part A then Become Eligible for COBRA
If you have just Medicare Part A and then get COBRA you may be able to defer enrolling in Medicare Part B and Part D for a brief period of time.
In this scenario, it’s necessary to sign up for Part B within 8 months of your employment ending to prevent incurring the Part B late enrollment penalty. This 8-month interval is referred to as a Special Enrollment Period.
Caution: when your employer coverage ends you only have 63-days to enroll in Medicare Part D. Not the 8-months you have with Part B.
Do I Enroll in Part B if I Already Have COBRA?
If you continue working beyond the age of 65 and subsequently retire later, you must enroll in Medicare Part B within the initial 8 months losing employer coverage, regardless of whether your COBRA coverage extends beyond this 8-month period. Failure to enroll within this timeframe can result in a late enrollment penalty for Part B.
If you are under the age of 65 and are covered by COBRA, you are required to enroll in both Part A and Part B during your Initial Enrollment Period. Your Initial Enrollment Period commences three-months before your 65th birthday month and ends three-months after. If you do not enroll during this 7-month window, you may be subject to penalties.
Part D of Medicare and COBRA
If you decide not to opt for COBRA, you’ll generally have 63 days after your employer coverage ends, to enroll in Part D.
Who Pays First, Medicare or COBRA Continuation Coverage?
Medicare pays first, and then COBRA. But if you are dealing with End-Stage Renal Disease, COBRA pays first for your health care costs during the 30-month coordination period.
Keep in mind, if you have COBRA when you become eligible for Medicare, your COBRA coverage will end when your Medicare starts.
How Long Can Family Member Stay on COBRA When I Start Medicare?
An employee’s enrollment in Medicare qualifies as a COBRA-qualifying event. This implies that if you enroll in Medicare, your spouse and a dependent child can still have COBRA coverage.
In the majority of scenarios, the covered employee’s spouse and dependents can maintain coverage for a duration of up to 18 months, even if your own COBRA coverage concludes.
However, a few exceptions apply. If there was a second qualifying event, one may be eligible for an 18-month COBRA extension.
One of these arises if you fulfill both of the following criteria:
You became eligible for COBRA due to job termination or reduced working hours.
Your eligibility for Medicare started less than 18 months before you qualified for COBRA.
In this case, your spouse and dependents would have the opportunity to access COBRA continuation coverage for a period of 36 months, starting from your Medicare eligibility date.
Alternatively, your family members can explore health insurance options via your state’s Health Insurance Marketplace, which might offer more cost-effective alternatives compared to a COBRA plan.
When COBRA insurance is exhausted, thanks to the Health Insurance Portability and Accountability Act, you may also qualify for special enrollment in the Marketplace, 60 days prior to or following losing your insurance.
Can I get a Medigap Plan?
Well, you can purchase any Medigap policy available in your region, regardless of your health status, within 6 months of enrolling in Medicare Part B (your Medicare Supplement Initial enrollment Period).
When you have a Medicare supplement, Medicare is your primary insurer and the medigap plan is secondary. You can only have one primary insurer and one secondary insurer.
Original Medicare plus a supplement is considered the best medical insurance you can get in the U.S. Your medical coverage is is complete. Between what Medicare pays and your supplement, your out of pocket limit for medical bills reduced to just a few hundred dollars per year.
Avoid Making a Permanent Mistake
COBRA and Medicare is one of the most complex and confusing topics in Medicare. Medicare coverage alone can be complicated. If you are soon to be eligible for Medicare or are a covered employee in need of advice, contact Medigap Seminars so our team can help you with Medicare and COBRA.
Our dedicated team is just a click or call away. We remember all the Medicare rules so you don’t have to!