COBRA is a federal law in the United States that allows you to continue receiving health insurance benefits from your employer for a limited time after your employment ends. It stands for Consolidated Omnibus Budget Reconciliation Act. 

There are specific instances where COBRA coverage and Medicare benefits may come in handy. In this blog, we’ll explain what you need to know about COBRA and Medicare if your employer coverage recently ended.

Key takeaways:

  • COBRA is a federal law that allows you to continue to pay for and receive coverage from your employer-sponsored healthcare plan for a limited time after your employment ends.

  • You can have COBRA and Medicare. Your eligibility status for Medicare determines who pays first. 

  • If you have COBRA and you’re eligible for Medicare, make sure you enroll in Medicare as soon as you can to avoid late fees. 

What is COBRA?

COBRA allows you to keep your employer insurance for a limited time after your or your spouse’s employment ends. You may also be eligible if you experience certain life events like a divorce. COBRA is usually only applicable if you worked for an employer with 20 or more employees—but some states have COBRA laws that apply to smaller companies.

It’s important to note that COBRA coverage can be expensive. While you’ll continue with your employer’s group health insurance coverage, you have to pay the full price of the premium and any administrative fees. 

Your COBRA coverage typically lasts for 18 months after you elect coverage. To receive benefits, employers must get in touch with the plan administrator to explain your qualifications. Then, the plan administrator would notify you of your right to enroll in COBRA coverage. 

COBRA eligibility requirements

  • You have a qualifying event: You’ve experienced a termination or lay off, reduced work hours, divorce or legal separation from a covered employee, or death of a covered employee.

  • Group health plan coverage from employer: Your employer must have had a group health plan with at least 20 employees (in most states) for more than 50% of its typical business days in the previous calendar year. Some states have a mini-COBRA law that expands COBRA to employers with fewer than 20 employees. 

  • Timely application: To receive COBRA health coverage, you must enroll within the timeframe that your plan administrator provides. In most cases, you’ll have 60 days after your qualifying event to sign up for COBRA coverage. 

Remember that your COBRA coverage won’t be covered by your previous employer. You are responsible for paying the full cost of COBRA coverage, which includes premiums that range from $400 to $700. 

Can you have COBRA and Medicare?

Some people who have lost employer coverage and elected COBRA coverage may have some overlap between COBRA and Medicare. However, once you’re eligible for Medicare, you should sign up as soon as you can to avoid late penalties or gaps in coverage. There are deadlines to keep in mind if you’re eligible for Medicare and you haven’t enrolled yet, like your Initial Enrollment Period and Special Enrollment Period.

COBRA and the Medicare Part B penalty

COBRA will likely pay for only a small amount of your healthcare expenses if you’re eligible for Medicare but not yet enrolled. There’s a chance that you may have to pay for most of the costs of healthcare services yourself in this circumstance. That’s why it’s important to sign up for Medicare when you can.

If you lose employer coverage and you’re eligible for Medicare, you’re qualified to enroll during a Special Enrollment Period. Whether or not you elect COBRA coverage, you have 8 months to sign up for Medicare after you stop working and/or you lose your employer coverage. Missing your chance to enroll during your Special Enrollment Period could delay your coverage and result in a financial penalty that adds to your Medicare Part B premium. 

You can also enroll in Medicare during your Initial Enrollment Period while you’re still working and you have employer coverage. There are some benefits to keeping your employer coverage and Medicare if the situation applies to you.

Keep in mind that your COBRA coverage will likely end once you sign up for Medicare.

Is COBRA creditable coverage for Medicare?

Understanding creditable coverage is important for avoiding a Part D enrollment penalty. If you don’t have creditable drug coverage for 63 days or more, you may have to pay a penalty when you get Medicare Part D coverage. 

Because COBRA coverage is a continuation of your employer coverage, credibility can vary from plan to plan. Creditable coverage can be confusing, but your plan must tell you if your drug coverage is considered creditable coverage each year. We can also help you determine if and when you should enroll in a Medicare plan with prescription coverage. Give us a call at 855-900-2427 to get your Medicare questions answered.

How COBRA and Medicare work together

For a short period of time, you may elect COBRA coverage and receive Medicare benefits. If you lose your employer coverage and you have Medicare, Medicare’s “coordination of benefits” rules determine which insurance pays first and which insurance pays second.  

Primary and secondary payers

In many cases, Medicare can work with another insurance to provide more comprehensive coverage. The eligibility status of a Medicare beneficiary determines whether or not Medicare or COBRA is the primary or secondary payer.

  • If you have Medicare because you’re 65 and up or you have a disability that isn’t End-Stage Renal Disease (ESRD), Medicare pays first.

  • If you have Medicare because you have ESRD, COBRA pays first and Medicare pays second. This relationship lasts for a period of 30 months after you’re first eligible for Medicare. After that, Medicare becomes the primary payer.

Understanding how Medicare works with other insurance

Medicare can work with a number of different health insurance benefits, like the VA health care, TRICARE, Medicaid, FEHB, employer sponsored coverage, and COBRA coverage. You may have questions about how different types of insurance can work together and if it’s worth it to keep two or more coverage options. We can help you understand these questions and guide you towards the most comprehensive healthcare coverage. Call a Chapter Medicare Advisor at 855-900-2427 or pick a time to chat to get free, personalized advice.

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