COBRA and Medicare: Why COBRA Doesn't Let You Delay Part B

Here's the short answer. COBRA is not coverage from a current job, so it does not let you delay Medicare Part B without a penalty. Your 8-month window to sign up for Part B starts when you stop working or lose your job-based coverage, whether or not you take COBRA. Stay on COBRA past that window and you'll wait until the next General Enrollment Period, likely have a gap in coverage, and pay a lifetime Part B penalty. Worse, once you're eligible for Medicare, COBRA may pay only a small part of your bills. The one exception is drug coverage: if your COBRA plan's drug benefit is "creditable," it does protect you from the Part D penalty.

What COBRA Is

COBRA is a federal law that lets you keep your employer's group health plan for a limited time after your job ends, or after you lose coverage as a spouse or dependent. It generally applies to employers with 20 or more employees, though some states have "mini-COBRA" laws for smaller ones. COBRA usually lasts 18 months, and up to 36 months in some cases. You pay the full premium yourself, which is why it often costs far more than you paid while working.

The Mistake: Treating COBRA Like Employer Coverage

While you're working past 65, coverage from your (or your spouse's) current employer lets you delay Part B. When that job ends, you get a Special Enrollment Period. Many people assume COBRA simply continues that protection. It doesn't.

Medicare's rule is about coverage based on current employment. COBRA and retiree plans are not based on current employment. So:

• Your 8-month Special Enrollment Period starts the month your employment or job-based coverage ends, even if you choose COBRA.
• COBRA does not extend that window.
• When COBRA ends, you generally do not get a new Special Enrollment Period.

People often say "COBRA isn't creditable coverage." Strictly speaking, "creditable coverage" is a Part D drug-coverage term. For Part B, the test is whether coverage comes from current employment, and COBRA fails that test. The result is the same: it won't save you from the penalty.

What the Penalty and the Gap Cost You

Miss the 8-month window and two things happen.

• A waiting period. You can only sign up during the General Enrollment Period, January 1 through March 31, and coverage starts the month after you sign up. Depending on when COBRA ended, that can mean months with no coverage at all.
• A lifetime penalty. Your Part B premium goes up 10% for each full 12-month period you could have had Part B but didn't. You pay that extra amount for as long as you have Part B.

Why COBRA Pays Poorly Once You're Medicare-Eligible

If you're 65 or older, Medicare pays first and COBRA pays second. That's true even if you never enrolled in Medicare. Medicare's own warning: if you have COBRA and are eligible for Medicare but not enrolled, "COBRA may only pay for a small portion of the health care services you get, and you may have to pay most of the costs yourself." Contact your COBRA plan and ask what percent it pays.

The one exception is people with Medicare because of kidney failure (ESRD). For them, COBRA pays first during a coordination period of up to 30 months. See Medicare for kidney failure.

What Happens to COBRA When You Enroll in Medicare

If you have COBRA before you sign up for Medicare, your COBRA will probably end once you enroll. If you already had Medicare when you became eligible for COBRA, you can keep both, and COBRA pays after Medicare. Some people use COBRA that way for a short time, for example to keep dental coverage or to cover a spouse or child who isn't on Medicare.

COBRA and Part D Drug Coverage

Drug coverage follows a different rule. If your COBRA plan includes creditable prescription drug coverage, meaning coverage at least as good as Medicare's, you can delay Part D without a penalty. When COBRA ends, you get a Special Enrollment Period to join a Medicare drug plan. Don't go more than 63 days without creditable drug coverage, or the Part D penalty applies. Your plan must tell you each year whether its drug coverage is creditable. Keep that notice.

The Safe Way to Use COBRA Around 65

1. Enroll in Part A and Part B when your job ends, even if you also take COBRA. Do it about a month before your employer coverage stops so there's no gap.
2. Ask your COBRA plan two questions: "What percent do you pay once I'm eligible for Medicare?" and "Is your drug coverage creditable?"
3. Compare the cost. Medicare plus a Medigap policy or a Medicare Advantage plan may cost less than a full COBRA premium. Our Choosing Coverage guide walks through the options.
4. Watch the Medigap window. Your one-time Medigap open enrollment period starts when your Part B begins. Delaying Part B on COBRA can cost you that guaranteed right. See Medigap Plans.
5. Think about family members. A spouse or child who isn't Medicare-eligible can stay on COBRA, or may find a Marketplace plan cheaper. See Medicare for Couples.

Common Questions

Related Guides

• Retiring or Losing Job-Based Coverage
• Working Past 65: Medicare & Employer Coverage
• Enrollment & Deadlines
• Common Medicare Mistakes
• HSA Contributions and Medicare
• Official: Medicare.gov: COBRA coverage
• Official: Medicare.gov: Avoid late enrollment penalties