How Does COBRA Work with Medicare?

Americans are working later in life. It’s possible you’ll still be working when you become eligible for Medicare, increasing the chance that you may see overlap between Medicare and COBRA coverage.

There’s some intricate interplay between the two forms of insurance that can influence your decision to enroll in one or both if you’re eligible. Let’s explore your options.

What is COBRA?

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal program that creates an opportunity for workers and their families to maintain their employer-offered health coverage even if they leave or lose that job. While this window is limited to 18 months (or 36 months in some cases), COBRA creates an essential safety net of continued coverage while you search for more permanent coverage.

To enroll in COBRA, you must experience a qualifying circumstance, which can include loss of employment, reduction in hours, and certain life events. While you can receive the same coverage you previously had in your plan, you may be required to pay the entire premium of the plan or up to 102 percent of the cost. This can create a real incentive to find an alternative, more permanent solution depending on the costs of your plan. Luckily, you don’t have to maintain your COBRA plan for the full 36 months if you find something else.

How Medicare Affects COBRA

The way that Medicare and COBRA interact depends on the order that you enroll in them. Let’s say you have COBRA when you become eligible for Medicare. In many cases, once you enroll in Medicare, you’re COBRA coverage will end. It’s rarer that you may have both Medicare and COBRA, though some plans do allow it. Whether you’ve enrolled in Medicare or not, once you become eligible for Medicare, COBRA transitions from being the primary coverage to the secondary coverage, regardless of whether you’re enrolled in Medicare. This can leave you with some costs left uncovered if you don’t enroll in Medicare when you first become eligible or some other form of primary health insurance.

Things work a little differently the other way around. If you have Medicare and become eligible for COBRA, you must be given the opportunity to enroll in COBRA. If you choose to enroll in COBRA, you may have both Medicare and COBRA. When this happens, Medicare will act as your primary coverage with COBRA covering costs above and beyond what Medicare offers. If you qualify for Medicare because you have End-Stage Renal Disease (ESRD), Medicare will initially act as the secondary coverage during a 30-month coordination period before taking over as your primary coverage.

What are Your Options?

If you qualify for both Medicare and COBRA, what are your options? Well, this will depend on the specifics of your situation. We encourage you to meet with a licensed insurance agent to get advice based on your needs. That said, there are some details that are worth knowing.

First, if you qualify for both types of coverage, we recommend, at the very least, enrolling in Medicare or another health plan. COBRA doesn’t qualify as creditable coverage, so if you’re eligible for Medicare, you won’t be able to have just COBRA coverage without later incurring a Medicare penalty when you enroll.

As mentioned earlier, COBRA can pair with your Medicare coverage, and it’ll cover services and equipment Medicare normally doesn’t. That said, COBRA plans can be expensive for the coverage they offer. The costs may outweigh the benefits, especially if you don’t need the additional coverage often. This is where you have to look at the pros and cons of both or seek professional help.

If you receive dental, vision, or hearing benefits through your COBRA health plan, you may be able to speak with the plan to see if you can pay the premiums for those services while dropping the rest of the coverage. Even then, COBRA is only available for a maximum of 36 months, so if you choose to have COBRA as secondary coverage, you should plan on how you want to phase it out and deal with the eventual lost coverage. Another consideration is that, while Medicare will cover your health needs, COBRA can cover those of the rest of your family. Luckily, even if your COBRA coverage ends once you enroll in Medicare, your family and dependent may be eligible for COBRA coverage for up to 36 months. This makes COBRA a good option if you’ve retired and your spouse or other family members aren’t eligible for Medicare or don’t have another form of coverage. While it isn’t a permanent option, it gives your family time to figure out coverage until they become eligible for Medicare, Medicaid, or can find another insurance plan that covers their needs.

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COBRA is one of those health insurance programs that you only interact with when you really need it. While being eligible for Medicare can lessen that need to a degree, there are times when both may be preferable or even necessary. We suggest that, before making a decision on COBRA and Medicare, you speak with a licensed insurance agent so you can understand each aspect of the finances and coverages that can go into the decision. Since it’s fairly uncommon that COBRA and Medicare are held at the same time, it can help to have a professional opinion or at least to cover all your bases.