The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows individuals and their families to temporarily continue their employer-sponsored health insurance after a qualifying event, such as job loss. However, the dynamics shift significantly once you reach age 65 and become eligible for Medicare.
The crucial interaction between COBRA and Medicare
The primary confusion around COBRA and age 65 comes from how the two types of insurance interact and coordinate. The general rule of thumb is that if you become eligible for Medicare while on COBRA, your COBRA coverage will likely terminate. For your medical and hospital care (Parts A and B), COBRA is not considered 'creditable coverage' that would allow you to delay Medicare enrollment without penalty.
- COBRA before Medicare: If you are on COBRA and then turn 65, your COBRA coverage will end. You must enroll in Medicare Part A and Part B during your Initial Enrollment Period to avoid lifelong premium penalties and coverage gaps.
- Medicare before COBRA: If you are already enrolled in Medicare when you lose or leave your job, you may be offered COBRA. In this scenario, Medicare pays first (as the primary payer), and COBRA acts as the secondary payer. However, since COBRA is expensive, this is rarely a cost-effective option unless it covers specific services, like dental or vision, that Medicare does not.
The risk of delaying Medicare for COBRA
Many people make the costly mistake of assuming they can continue COBRA instead of enrolling in Medicare at age 65. COBRA is a temporary continuation of your employer plan, not a replacement for Medicare. This misconception can lead to severe financial consequences. For example, if you are on COBRA when you turn 65 and fail to enroll in Medicare Part B, you could face two major problems:
- Lifetime Penalties: Your Part B premium could be permanently increased by 10% for every 12-month period you were eligible but not enrolled.
- Coverage Gaps: After your Initial Enrollment Period, you can only sign up for Part B during the General Enrollment Period (January 1–March 31), with coverage not starting until July 1. This could leave you without medical coverage for months.
Cost comparison: COBRA vs. Medicare at age 65
For most retirees, Medicare proves to be the much more affordable choice than COBRA. The following table compares the typical cost structure.
| Feature | COBRA (post-age 65) | Medicare (post-age 65) |
|---|---|---|
| Premium Cost | You pay 100% of the premium, plus up to a 2% administrative fee. Can be very expensive. | Most people have no premium for Part A. Part B has a standard monthly premium. Higher-income earners pay more. |
| Secondary Payer | If you have both, COBRA is secondary and only covers what Medicare doesn't. Its payments may be minimal. | Medicare is the primary payer. A Medigap policy or Medicare Advantage plan can act as a secondary payer. |
| Deductibles | You are responsible for the plan's deductible, which may or may not be met before ending employment. | Medicare Part A and B have their own deductibles. The Part A deductible is per benefit period. |
| Creditable Coverage | Generally not considered creditable coverage for Medicare Part B. Delaying Medicare for COBRA leads to penalties. | Active employment coverage through a large employer (20+ employees) is considered creditable. |
Special considerations: ESRD and prescription drugs
Some specific medical situations change the COBRA and Medicare rules. For example, individuals with End-Stage Renal Disease (ESRD) have different coordination of benefits. For the first 30 months of Medicare eligibility due to ESRD, COBRA remains the primary payer. After that period, Medicare becomes primary.
For prescription drugs, if your COBRA plan offers drug coverage that is considered 'creditable'—meaning it is as good as or better than a standard Medicare Part D plan—you may be able to delay enrolling in a Part D plan without a penalty. Your COBRA plan administrator is required to notify you annually about whether your drug coverage is creditable. When your COBRA coverage ends, you will have a two-month Special Enrollment Period to sign up for a Part D plan.
Conclusion
While technically you can get COBRA after age 65, it is rarely the best or most cost-effective decision. For most people, enrolling in Medicare Part A and Part B during the initial enrollment period at age 65 is the most sensible path forward. The primary reasons to choose Medicare are lower costs, comprehensive primary coverage, and avoiding lifelong premium penalties. Continuing COBRA unnecessarily risks expensive coverage gaps and financial penalties that can impact you for the rest of your life.
For most retirees, the best strategy is to coordinate the end of your employer coverage with the start of your Medicare benefits to ensure a seamless transition. If you are already on COBRA and approach age 65, your priority should be enrolling in Medicare and canceling your expensive COBRA coverage at the appropriate time. For personalized advice, resources like your State Health Insurance Assistance Program (SHIP) can offer invaluable guidance.
Visit Medicare.gov for definitive information and enrollment assistance on Medicare policies.
