COBRA vs. Medicare at 65: why COBRA can cost you

The mistake almost everyone makes

Here is how it usually goes. You retire or leave a job at 64 or 65. Your employer offers COBRA, which lets you keep your workplace health plan for up to 18 months by paying the full premium yourself. It feels like the path of least resistance. Same doctors, same card, no new paperwork. So you take COBRA and figure you will sort out Medicare later.

The problem is that “later” has a price. Federal rules do not treat COBRA as active employer coverage for Medicare purposes. The special protections that let working people delay Part B past 65 do not apply to COBRA. Every month you are on COBRA past 65 without Part B is a month the late enrollment penalty can grow.

The 8-month rule that trips people up

When your employment ends, you get an 8-month special enrollment period to sign up for Medicare Part B without penalty. That sounds generous. The trap is when the clock starts. It starts when your employment ends, not when your COBRA runs out.

Say you leave your job in January and take 18 months of COBRA. Your 8-month Part B enrollment window closes in September, while you are still on COBRA and feeling covered. When COBRA ends the following July, you discover you missed your window. Now you wait for the next general enrollment period, and the late penalty has been building the whole time. People end up with a permanent 10% penalty per year of delay, plus months of no Part B coverage exactly when they need it.

What COBRA actually costs vs. Medicare

COBRA is expensive by design. You pay the entire premium your employer used to split with you, plus up to a 2% administrative fee. For many people that means several hundred dollars a month for one person. It is the same coverage you had while working, at the full unsubsidized price.

Medicare Part B has a standard monthly premium set by the government each year. Add a Medigap plan or a Medicare Advantage plan, plus Part D for prescriptions, and most people land well below what COBRA costs, with coverage that is at least as good. There are exceptions, especially if you take very expensive brand-name drugs, but the math favors Medicare for the large majority of 65-year-olds.

When COBRA and Medicare overlap

You are allowed to have both. If you already have COBRA when you enroll in Medicare, you can keep COBRA as secondary coverage. Medicare pays first, COBRA pays second. In practice, paying two premiums rarely makes sense, because Medicare plus a supplement usually covers what COBRA would have covered as the secondary payer.

One warning in the other direction: if you are on COBRA and enroll in Medicare Part A, your COBRA coverage for the services Part A covers can end. Check with your COBRA administrator before enrolling, so you understand exactly what continues and what stops. Here is the full turning-65 enrollment checklist.

What to do if you are 65 and on COBRA now

• Check your 8-month window. Count 8 months from when your employment ended, not when COBRA started. If the window is still open, enroll in Part B now.
• Do not wait for COBRA to expire. COBRA ending does not reopen your Part B enrollment window. Enroll while you still can.
• Compare the real costs. Price out Medicare Part B plus a supplement or Advantage plan against your COBRA premium. Include your prescriptions.
• Talk to someone before you decide. The penalty rules have edge cases. A free review now beats a permanent penalty later.