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Do I need to sign up for Medicare if my former employer’s coverage continues under COBRA?

Kimberly Lankford,

Updated January 11, 2024

AARP

En español

Published August 17, 2022

/ Updated January 11, 2024

Yes, you need to sign up for both Medicare Parts A and B if you’re 65 or older, even if you continue your employer’s health insurance through COBRA after you leave your job. Otherwise, you could end up with late enrollment penalties and coverage gaps.

COBRA stands for the Consolidated Omnibus Budget Reconciliation Act of 1985, a federal law that requires companies with 20 or more employees to let them continue their group health insurance coverage for up to 18 months after they or their spouse leaves their job. Sometimes COBRA coverage can continue for up to 36 months for certain family members. Many states have similar laws for employers with fewer than 20 employees.

Your coverage won’t change under COBRA but expect your premiums to jump, because you will now pay both the employer’s and the employee’s share of the costs. Employers generally pay 70 to 80 percent of the premiums for their current employees.

Medicare works differently with COBRA, depending on whether you first signed up for COBRA before or after age 65.

What happens if my COBRA coverage started before 65?

If you become eligible for Medicare after you’ve signed up for COBRA, your COBRA benefits will end when you turn 65, no matter how many months of COBRA coverage you were offered.

You’ll need to sign up for Medicare during your initial enrollment period, which begins three months before the month you turn 65 and ends three months after your birthday month.

How does Medicare work with COBRA after age 65?

If you leave your job after you turn 65, you aren't prohibited from signing up for COBRA, but you could end up with late enrollment penalties and coverage gaps if you don't sign up for Medicare when you do.

You can delay signing up for Medicare without penalty only if you or your spouse is still working and have health insurance from a current employer. Even though COBRA is the same coverage as you had when working, it acts differently under Medicare rules because you or your spouse are no longer actively working in that job.

If you postponed signing up for Medicare past 65 because you or your spouse was still working, you qualify for a special enrollment period any time while working in that job and for up to eight months afterward. You should enroll in Medicare Part A and Part B before the end of that special enrollment period. If you don't, you may have to pay a late enrollment penalty and you may have to wait until the general enrollment period, Jan. 1 to March 31, to sign up for Part B.

You may also have coverage gaps. When you’re 65 or older and you and your spouse are no longer working, Medicare pays your health care claims first, and your other coverage — whether COBRA, a Medigap policy or retiree coverage — pays for expenses and services that Medicare doesn’t cover. The secondary coverage may pay for Medicare’s deductibles, copayments and other out-of-pocket costs.

But if you don’t sign up for Medicare, the secondary coverage may not pay any claims. It’s important to sign up for Medicare before — or soon after — the employment ends so that you don’t end up with coverage gaps.

Keep in mind

Prescription drug coverage. The rules are different for Medicare Part D prescription plans. If you have COBRA or retiree drug coverage that is at least as good as Part D, which Medicare considers “creditable coverage,” you don’t need to enroll in Part D as long as you have that coverage, even if it’s not from a current employer. Ask your plan if the coverage is creditable.

After losing that coverage, you’ll have 62 days to enroll in Part D without a late enrollment penalty.

Medigap plans. You can buy any Medigap policy in your area, regardless of your health, within six months of enrolling in Medicare Part B. Otherwise, Medigap insurers can reject you for coverage or charge more if you have preexisting conditions. Within 63 days of losing health insurance that provides secondary coverage to Medicare, such as COBRA, you have a guaranteed issue right.

However, in most states, this means that you must exhaust COBRA coverage (meaning that you may have to pay for the full 18 months of COBRA) before you’re given this guaranteed issue right, if more than six months have passed since you signed up for Medicare Part B. When first deciding whether to supplement Medicare with COBRA or Medigap, compare the cost of both options and keep this time frame in mind.

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Kimberly Lankford is a contributing writer who covers Medicare and personal finance. She wrote about insurance, Medicare, retirement and taxes for more than 20 years at Kiplinger’s Personal Finance and has written for The Washington Post and Boston Globe. She received the personal finance Best in Business award from the Society of American Business Editors and Writers and the New York State Society of CPAs’ excellence in financial journalism award for her guide to Medicare.