Medicare and COBRA
Comparing Medicare and COBRA Insurance: Here are some tips on when you can take advantage of each plan and what to watch out for.
What is COBRA health coverage?
The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives individuals who are no longer employed the right to maintain employer-provided health coverage for 18 – 36 months under certain circumstances, such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events. However, enrolling in COBRA can be rather expensive as those who utilize COBRA as their health care plan may be required to pay up to the employer’s full cost plus an additional two percent.
Can I use COBRA as my health coverage plan if I am 65 or older and am currently unemployed?
For most people, the answer is No. If you are 65 or older and are not covered under an employer health plan linked to current employment, you must enroll in both Medicare Parts A and B to avoid life-long penalties. If you have at least Part A prior to losing your active employer plan, you will have the option to sign up for Part B and COBRA. In this situation, your Medicare will pay primary and your COBRA will pay secondary. Rarely this approach makes financial sense since you will generally pay much more for COBRA than a more comprehensive Medicare plan. If you do not have Medicare Parts A or B when your employer health plan ends, you will need to enroll in both Parts A and B and usually will not be allowed to continue COBRA.
If you enroll in your Medicare A and B and then become eligible for health insurance through an active employer with 20 or more employees, you will have the option to put your Medicare Part B back on hold at that time without any penalty. (For those people who lose coverage but aren’t yet ready to declare themselves to be retired)
What happens if I become eligible for Medicare while on COBRA?
If you become eligible for Medicare after signing up for COBRA, your COBRA primary coverage will USUALLY end, no matter how many months of COBRA coverage you were offered. However, if your spouse and/or dependent children received coverage through your COBRA plan, they may be able to keep their coverage for the remainder of their COBRA terms.
Our advisors are here for you.
Regardless of your retirement status, your safest bet is to enroll in Medicare as soon as your active employer plan ends to avoid costly fees and premiums, and/or potentially losing coverage. If you have questions about COBRA or are ready to begin exploring your Medicare options, give our advisors a call.
If you’re in need of health coverage but not yet eligible for Medicare, an individual health insurance plan may be the right option.