No, generally, COBRA is not considered creditable coverage for Medicare's major medical benefits, particularly Medicare Part B. Relying on COBRA coverage past your Medicare eligibility can lead to significant, lifelong financial penalties.
The Core Issue: COBRA and Medicare Part B Penalties
While COBRA provides a temporary continuation of your previous employer's health coverage, it is typically not recognized by Medicare as "creditable coverage" in the context of avoiding late enrollment penalties for Medicare Part B. This distinction is critical because it means that individuals enrolled in COBRA who do not enroll in Medicare Part B within 8 months of turning 65 (or within their specific Medicare enrollment period) face substantial financial penalties for the rest of their lives. This applies even if they have months or years of COBRA coverage remaining.
What is "Creditable Coverage" for Medicare?
"Creditable coverage" refers to health insurance that meets Medicare's minimum standards. Having creditable coverage allows you to delay enrollment in certain parts of Medicare, like Part B or Part D, without incurring lifelong late enrollment penalties.
For Medicare Part B, the most common form of creditable coverage that allows for delayed enrollment without penalty is an employer-sponsored group health plan based on current active employment (either your own or your spouse's). This is where COBRA differs significantly.
Why COBRA Differs
Although COBRA is a continuation of an employer's group health plan, Medicare does not treat it the same as coverage from an active employer for the purpose of avoiding Part B late enrollment penalties. This means that:
- No Special Enrollment Period: Being on COBRA generally does not grant you a Special Enrollment Period (SEP) for Medicare Part B when your COBRA coverage ends. The SEP for Part B is typically reserved for those who are covered by a group health plan based on current employment when they turn 65 or older.
- Penalty Accumulation: If you delay enrolling in Part B because you are on COBRA, you may begin accumulating late enrollment penalties once your Initial Enrollment Period (IEP) ends.
Important Considerations for Those on COBRA Approaching Medicare Eligibility
If you are on COBRA and approaching age 65 or Medicare eligibility, it is crucial to understand these implications to avoid costly mistakes:
- Enrollment Timeline is Key: Your Initial Enrollment Period (IEP) for Medicare Part B typically begins three months before you turn 65, includes the month you turn 65, and ends three months after you turn 65. If you do not have creditable coverage from active employment during this period, you should enroll in Part B to avoid penalties.
- Don't Rely on COBRA: Do not assume your COBRA coverage will protect you from Part B late enrollment penalties. It generally will not.
- Potential Lifelong Penalties: The Part B late enrollment penalty is a 10% premium increase for each full 12-month period you were eligible for Part B but didn't enroll (and didn't have creditable coverage from active employment). This penalty is added to your monthly Part B premium for as long as you have Medicare.
- Consider Medicare and COBRA: You can have COBRA and Medicare at the same time. In most cases, Medicare will be the primary payer. If you enroll in Medicare Part B, your COBRA plan may adjust its benefits.
- Seek Expert Guidance: Navigating Medicare enrollment while on COBRA can be complex. It is highly recommended to contact Medicare directly or a qualified benefits counselor to discuss your specific situation and ensure you make informed decisions.
