How Does COBRA and Medicare Work Together?

If you are eligible for Medicare and lose, leave or retire from your job, you may be able to use COBRA benefits to help pay for your health care for up to 18 months and your dependents’ health care for up to 36 months. COBRA allows you to temporarily pay for health insurance through your employer’s health plan.

Medicare vs. COBRA

COBRA is a form of continuation coverage of employer group health insurance.

It gets its name from the Consolidated Omnibus Budget Reconciliation Act, a federal law that lets you (and your spouse and dependents, if applicable) keep your employer’s health coverage for a limited time after you lose or leave your job.

Typically, COBRA is available if your employer has 20 or more employees, but some states require companies with fewer than 20 employees to offer it. The coverage is usually available for 18 months after you leave your job, but it can be extended for up to 36 months for dependents in some cases.

You should talk with your COBRA administrator to determine the rules for your plan and the costs.

To enroll in a COBRA plan, you will generally have to pay your share of the premiums as well as your employer’s share, plus an additional 2 percent to cover administrative fees.

If you become eligible for Medicare before leaving your job, you may still be eligible for COBRA benefits, but you’ll want to compare the two plans to see which is better for your situation, especially if you have dependents on your employer’s health plan.

Comparing Medicare and COBRA
COBRA vs. Original Medicare
Having Medicare Part A and Part B is usually more affordable than COBRA, and coverage lasts for the rest of your life as opposed to a limited period of time. But Medicare covers only you, while COBRA will cover your spouse and dependents, too, and may also cover more services than Medicare.
COBRA vs. Medicare Advantage
The cost of Medicare Advantage plans vary depending on where you live and the plan you choose. You will need to shop for a plan that works for you before comparing Medicare Advantage plan costs with COBRA coverage.
COBRA vs. Medicare Part D Drug Coverage
COBRA plans generally include prescription drug coverage. If you go with Medicare, you’ll need to buy Medicare Part D or stick with the COBRA drug coverage. But COBRA is only temporary, and you’ll be required to get creditable drug coverage or a Part D plan when COBRA expires. If you don’t, you’ll be stuck with a late enrollment penalty for Part D coverage later on.

Deciding whether to use COBRA, Medicare or both is a decision you should base on your health care needs, your budget and your family circumstances.

Can You Have Both COBRA and Medicare?

You can have both COBRA and Medicare coverage at the same time, but only in certain situations.

COBRA and Medicare
When You Can Have Both
  • Your Original Medicare benefits take effect on or before the day you enroll in COBRA.
  • Your Medicare Part A benefits take effect on or before the day you enroll in COBRA, but you wait to enroll in Medicare Part B.
When You Cannot Have Both
  • Your COBRA benefits will end when you become entitled to Medicare.

If your COBRA plan covers your spouse and dependents but your benefits stop because you’ve become entitled to Medicare, your spouse and dependents may still be covered under COBRA for up to another 36 months.

How Do COBRA and Medicare Work Together?

If you have both Medicare and COBRA coverage, Medicare is always the primary payer — meaning that Medicare pays first for any health care claims, and your COBRA plan pays second. This can save you on out-of-pocket costs.

Because of the potential savings on out-of-pocket expenses, it’s important to enroll in Medicare as soon as you become eligible. Some COBRA plans will still pay for your health care as if they are the secondary payer if you are Medicare eligible, which may leave you on the hook for a large portion of your coverage.

You can continue using COBRA to cover your spouse or dependents for up to 36 months after you are no longer eligible for COBRA due to your Medicare eligibility.

COBRA is not considered employment insurance, so you are not given a grace period to sign up for Medicare while insured through COBRA. You will have to enroll in Medicare in the seven-month enrollment period that ends three months after the month in which you turn 65.

If you wait longer than three months after you turn 65 to enroll in Medicare, you will face late enrollment penalties. If you are using COBRA as your health insurance when you become entitled to Medicare, you will not be allowed a special enrollment period.

It’s important to note that your COBRA coverage stops when you become entitled to Medicare. But you can stop your COBRA coverage at any time since you pay for it on a monthly basis. You would just need to cancel coverage through the insurance company that provides your COBRA plan.

Information on canceling your COBRA coverage should be included in the packet you received within the first 90 days of your enrollment in COBRA.

Last Modified: October 30, 2020

5 Cited Research Articles

  1. Newhouse, A. (2018, December 17). Medicare and COBRA Coordination: What You Need to Know. Retrieved from https://blog.ifebp.org/index.php/medicare-and-cobra-coordination-what-you-need-to-know
  2. AARP. (n.d.). I’m About to Retire. My Employer Has Offered Me 18 Months of COBRA Coverage. Can I Delay Signing Up for Medicare Until COBRA Runs Out? Retrieved from https://www.aarp.org/health/medicare-qa-tool/cobra-and-medicare-at-the-same-time/
  3. U.S. Centers for Medicare & Medicaid Services. (n.d.). COBRA: 7 Important Facts. Retrieved from https://www.medicare.gov/supplements-other-insurance/how-medicare-works-with-other-insurance/cobra-7-important-facts
  4. U.S. Centers for Medicare & Medicaid Services. (n.d.). COBRA Continuation Coverage. Retrieved from https://www.cms.gov/CCIIO/Programs-and-Initiatives/Other-Insurance-Protections/cobra_fact_sheet
  5. U.S. Department of Labor. (n.d.). FAQs on COBRA Continuation Health Coverage for Workers. Retrieved from https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/faqs/cobra-continuation-health-coverage-consumer.pdf