The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that allows Americans to retain group health insurance provided by their employer even after losing it due to reasons like unemployment or other specific circumstances.
However, turning 65 years old does not exempt you from also applying for Medicare even if you are still utilizing COBRA. Failing to apply for Medicare within the designated timeframe can lead to long-term or even permanent consequences.
So, who exactly does this regulation affect? In what situations should you start applying for Medicare while using COBRA? What are the consequences of not applying within the specified deadline?
According to information from Medicare.gov, if you leave your job for any reason, you can usually continue the group health insurance provided by your former employer for a limited period. Typically, COBRA applies to employers with 20 or more employees. However, some states have enacted “Mini-COBRA” laws, allowing employees to continue their health insurance even if the employer has fewer than 20 employees.
Normally, COBRA insurance can be extended for 18 months, but Medicare states that in certain cases, the COBRA coverage period may be extended to 36 months.
Furthermore, there are other situations that may qualify for COBRA. For instance, if you recently divorced or legally separated with a court-issued separation order, you may still qualify for COBRA insurance.
If you are a dependent child of an employee or were previously a dependent child but no longer meet the criteria, you may also qualify for COBRA insurance.
It is crucial to notify your group health insurance plan administrator promptly when you become eligible for COBRA to exercise your right to choose COBRA insurance.
According to Medicare-related information, if you turn 65 and are still working with employer-provided group health insurance, you can generally delay applying for Medicare.
Specifically, this refers to Medicare Part B. Delaying the application for Part B allows you to temporarily avoid paying the monthly premiums while your employer’s insurance provides coverage. It also helps avoid late enrollment penalties for not applying for Medicare on time.
After leaving your job or when your employer stops providing group health insurance, you typically have an 8-month Special Enrollment Period to apply for Medicare.
This Special Enrollment Period usually begins from the month after you leave your job. If you are still employed but the employer’s group health insurance has ended, the clock starts ticking from the month following the termination of insurance.
If you have spousal employer-provided group health insurance and choose to delay applying for Part B of Medicare, the 8-month Special Enrollment Period applies to you as well.
However, once you leave your job and start using COBRA, different rules apply.
One commonly overlooked issue for retirees aged 65 and above who leave their job is COBRA insurance.
As explained by the Mauldin Insurance Group, once you stop working, even if you continue with COBRA, you no longer qualify for delaying Medicare application without penalty.
In other words, whether or not you have COBRA insurance, you must apply for Medicare within the specified timeframe as per Medicare’s regulations.
COBRA is not considered creditable coverage for Medicare Part B. Even if you continue with COBRA, the group health insurance you maintained from your job does not alter this requirement.
Once you stop working, the clock starts ticking for the 8-month Special Enrollment Period to apply for Medicare.
For instance, if you retire at 65 and opt for 18 months of COBRA coverage, by the time your COBRA protection ends, you may have exceeded Medicare’s 8-month application period.
This catch can catch you off guard, with many people unaware they have missed the deadline. Only when COBRA ends and they truly need Medicare do they realize their Special Enrollment Period has already expired.
Missing the Special Enrollment Period may lead to lifetime late enrollment penalties.
If you choose COBRA without applying for Medicare within the 8-month Special Enrollment Period, your Medicare Part B premium may increase, according to Medicare.gov. For each full year missed, an additional 10% may be added to the standard monthly premium for Part B.
For example, if you go two full years without applying for Medicare Part B, your monthly premium could increase by 20%. As of 2026, Medicare’s standard monthly premium for Part B is $202.90.
With a 20% penalty, your monthly premium would increase to $243.48.
It is essential to note that this 20% late enrollment penalty is usually lifelong. Additionally, Medicare’s standard monthly premium for Part B typically adjusts annually. Consequently, even if premiums increase in the future, you would still need to pay this penalty based on the new premium.
Apart from the lifelong penalty for Part B, according to data from California Health Advocates, there may be another potential risk: if Medicare was supposed to be the primary payer, but due to not applying for Medicare on time, COBRA mistakenly pays for medical expenses Medicare ought to cover, the COBRA insurer may demand reimbursement for these incorrectly paid medical costs.
As per the National Council on Aging (NCOA), in certain circumstances, you can possess both Medicare and COBRA simultaneously. However, they do not evenly split medical expenses.
In the situation of having both Medicare and COBRA, generally, Medicare will be the primary coverage.
The rules differ for prescription drug coverage. If your COBRA or retiree health insurance plan contains creditable prescription drug coverage as required, you may delay applying for Medicare Part D without facing late enrollment penalties.
According to the Centers for Medicare & Medicaid Services (CMS) regulations, for prescription drug coverage to be considered creditable, your COBRA or employer group health insurance plan must meet specific criteria, including anticipating paying at least 72% of prescription drug costs.
If you are 65 or older and stop working without employer-provided group health insurance, the countdown to applying for Medicare begins. COBRA is not considered creditable coverage for Medicare Part B. You must apply for Part B of Medicare during the Special Enrollment Period (SEP).
Failure to do so within the deadline may lead to lifelong financial penalties.