Broker Check

How COBRA coverage can affect your Medicare

June 28, 2021

In 1985, COBRA was enacted to protect workers after leaving a job to be covered under their employer’s plan for up to 18 months. The intent of this law was to protect the American worker until they found gainful employment and be covered again under their new employer.

In fact, this may be true, unless you are of Medicare age. If you or your spouse leave a job and one of you is of Medicare age (65+), you must enroll in Medicare Part B (and Part A if you have not done so) within 8 months of the employment termination date without incurring a late enrollment penalty (see ). You must also enroll in Medicare Part D, prescription drug coverage within 63 days of employment termination date to avoid its late enrollment penalty (see ). The order of enrollment is crucial as you must be enrolled in Medicare parts A & B before you can enroll in Part D.

You should enroll in Medicare Part A (Hospital insurance) in most cases upon your 65th birthday as it works with the employer insurance as a secondary insurance. Medicare Part B is optional at 65, meaning if you have employer insurance, in most cases it isn’t required and it has a monthly premium. The employer insurance is considered “credible coverage” by Medicare.

But if you are of Medicare age and retire, Medicare does not generally recognize COBRA as such “credible coverage.” Therefore, action needs to be taken. If your spouse is younger than you and you were covered under their employer, they can remain on COBRA for the full 18 months.

SFM has Medicare experts on staff that can educate you on your Medicare choices. We recommend that our clients consult us about their existing benefits before they leave an employer so we can help you avoid such pitfalls.