FAQ: How does COBRA coverage affect Medicare entitlement?

November 10, 2020

COBRA coverage can have a big impact on a person’s entitlement to Medicare coverage. If a Medicare-enrollee is unaware of how COBRA affects Medicare entitlement, they may find themselves paying higher premiums for as long as they are covered by Medicare and could experience gaps in coverage when COBRA coverage expires.

Remember that a person is “entitled to” Medicare Parts A and B when they become eligible (generally, when the person turns 65) and actually enroll in the coverage. An eligible person becomes enrolled automatically if they sign up for Social Security benefits; otherwise, there is a window of time within which they must enroll in Medicare Parts A and B to avoid a penalty. If they enroll in Medicare within a seven-month window that begins three months before the month they turn 65, covers their birthday month, and ends three months following their birthday month, then they will not have to pay higher premiums for enrolling later. If they do not enroll during this window, they will have to wait until a subsequent Medicare general enrollment period, which runs from January 1 through March 31 of every year.

However, there is a special enrollment period for people who didn’t enroll when first eligible because they were covered by a group health plan based upon their current employment status. This special enrollment period ends eight months after the earlier of the date someone loses group health plan coverage or the date the current employment ends. Importantly, COBRA coverage is not considered a group health plan based upon current employment. So a Medicare-eligible person that has COBRA coverage and delays Medicare would not experience a special enrollment period when the COBRA ends and would be subject to premium increases if they fail to enroll when first entitled to Medicare.

So if the person does not enroll in Medicare Parts A and B in a timely manner because they chose COBRA coverage, then not only are they subject to higher premiums for enrolling late, but they would also have to wait until Medicare general enrollment rolls around to enroll.

As you can see, the Medicare rules can be difficult to follow. As such, employers should consult with Medicare-knowledgeable advisors when employees have questions about how their coverage decisions affect Medicare enrollment.