COBRA vs Medicare: The Ultimate Safety Net Guide

Getting a COBRA plan may feel simple on the surface after you leave a job, since you get to see the same doctors and keep employer health benefits. However, holding COBRA — short for Consolidated Omnibus Budget Reconciliation Act — in your 60s after retirement can cause you to miss a major Medicare deadline.

That means you could end up with Part B late enrollment fees in the future if you switch to Medicare. Here’s what to know.

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Why COBRA doesn’t work like active employer coverage

If you work past 65 and have qualifying health coverage through your job, you generally can delay Part B without a penalty. (But you must pay attention to Medicare’s Special Enrollment Period. You should make sure you understand when you need to sign up for Medicare to avoid gaps in coverage and a monthly Part B late enrollment penalty.) However, COBRA typically doesn’t allow you to delay Medicare without penalty since it’s not via an active employer.

You have up to eight months after you stop working — or lose your job-based health insurance, if that happens first — to sign up for Part B without a penalty, whether or not you choose COBRA. While COBRA can last for more than eight months, it does not freeze Medicare’s countdown.

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Plus, if you’re eligible for Medicare but haven’t enrolled, COBRA may pay for only a small portion of your services, meaning you may need to pay for many of the costs yourself.

In short, you should enroll in Medicare Part B in most cases if you’re eligible and have left your job, even if you elect to use COBRA, according to the National Council on Aging.

What happens if you wait until COBRA ends

Using COBRA after leaving your job doesn’t slow down the clock. If you’re late, you can face a 10% Part B premium penalty for each full 12-month period you could have had Part B but didn’t. You’ll generally have to pay the higher premium for as long as you have Part B.

There are some exceptions to who has to pay late fees, depending on your circumstances.

Part D has a different clock and other COBRA complications

Although COBRA will not extend your Part B deadline, it may qualify as creditable drug coverage that lets you delay Part D without penalty. However, each COBRA plan is different, so you will have to confirm if it counts as a creditable option for delaying Part D.

Part D late-enrollment penalties may start 63 days after creditable drug coverage expires. You must register for Medicare Part A or Part B before you can enroll in Part D. Your COBRA plan will typically end once you are on Medicare, but it’s best to check with your former employer or COBRA administrator to verify. It also gets more complicated if you already had Medicare before opting for COBRA.