COBRA stands for the Consolidated Omnibus Budget Reconciliation Act, a federal law that may let you keep your employer group coverage for a limited time after your employment ends or after you would otherwise lose coverage.
This is often called continuation coverage according to the Center for Medicare and Medicaid Services (CMS). COBRA insurance rules typically only apply to companies with 20 or more employees.
Important Facts to Know About Medicare and COBRA
COBRA allows you to keep group coverage for limited time
COBRA is a federal law that lets you keep your employer group health plan coverage for a limited time after one of these:
- Your employment is terminated
- You lose coverage as a dependent of the covered employee.
COBRA & employers with less than 20 employees
Some states require insurers covering employers with fewer than 20 employees to let you keep your coverage for a limited time.
You should get a notice from your employer’s benefits administrator or the group health plan if you are getting COBRA rights (other than a divorce). The notice will tell you coverage is ending and will offer the right to elect COBRA continuation coverage.
Group coverage under COBRA Lasts up to 18 months
Group coverage under COBRA usually lasts up to 18 months, although some can be extended to 36 months under special circumstances. Ask the benefits administrator or group health plan about your COBRA rights if:
- You find out your coverage has ended, and you didn’t get a notice.
- You get divorced.
Your employer must tell you if you’re eligible for COBRA
The employer must tell the plan administrator if you are eligible for COBRA because of one of these:
- The covered employee died.
- A covered employee lost their job.
- The covered employee became entitled to Medicare.
Once the plan administrator is notified the plan will let you know you have the right to choose COBRA coverage.
The employee must tell the employer if they’re eligible for COBRA
The covered employee needs to tell the plan administrator if they qualify for COBRA because of one of these:
- You’ve become divorced or legally separated (court-issued separation decree) from the covered employee.
- You were a dependent child or dependent adult child who’s no longer a dependent.
You will need to tell the plan administrator about the change within 60 days of the change.
Is COBRA considered creditable coverage
There are many reasons why you should take Medicare Part B instead of, or in addition to, COBRA.
If your COBRA is considered creditable prescription drug coverage, you will have a special enrollment period to join a Medicare Part D plan without a penalty when COBRA ends. Keep any creditable prescription drug coverage information you get from your plan.
You may need it if you decide to join a Medicare drug plan later. Do not send creditable coverage letters or certificates to Medicare.
COBRA and Medicare
If you are eligible for Medicare, you might be able to have both, depending on which you had first.
- If you already have COBRA when you enroll in Medicare, your COBRA insurance may discontinue. You will not be entitled to a Special Enrollment Period (SEP) When COBRA ends.
- If you already have Medicare and then become eligible for COBRA, you must be allowed to enroll in COBRA. Unless you qualify for Medicare because you have end-stage renal disease (ESRD). In this scenario, Medicare acts as the primary payer and COBRA as the secondary. You will probably want to stay enrolled in Medicare Part A and B.
- If you have ESRD and receive Medicare, there is usually a period when your employer group health plan will pay first, and Medicare will pay second. This is called the 30-month coordination period.
COBRA does not qualify for a Special Enrollment Period
Even if you qualify for COBRA coverage you may want to enroll in Original Medicare. You may even choose a Medicare Supplement to cover the 20% Medicare doesn’t cover.
Your Medicare plan options could provide even better benefits than those provided under your employer’s COBRA plan.
Your Medicare options are probably much more affordable than your COBRA coverage. If you are covered under COBRA when that coverage ends you will not qualify for a Special Enrollment Period through Medicare.
Medicare will allow you to qualify for a Special Enrollment Period if you lose your employer’s current group health coverage and you are eligible for Medicare coverage according to Medicare enrollment guidelines.
Who pays first, COBRA of Medicare
Medicare pays first except when you have End-Stage Renal Disease. If you have ESRD then COBRA pays first, and Medicare pays second to the extent COBRA coverage overlaps the first 30 months of Medicare eligibility or entitlement based on ESRD.
If Medicare is the primary payer, you will want to have that coverage when you are first eligible to avoid late enrollment penalties. COBRA coverage wasn’t designed to complement Medicare.
By getting a Medicare Supplement and prescription Part D plan to go with your Medicare you will have comprehensive creditable coverage.
If you set this up when you are first eligible for Medicare you could qualify for Guaranteed Issue prices on your Medicare Supplement; meaning no medical underwriting along with price based only on age, gender and location.
By setting this up early you also avoid late enrollment penalties. Talk with one of our licensed agents now, or compare rates online here.