Receiving COBRA? Sign Up for Medicare Part B at 65

If you are receiving health coverage from your employer when you reach age 65, the age at which most people enroll in Medicare, you may be able to delay enrolling in Medicare Part B without penalty, depending on your coverage.  But not if your employer health coverage is being continued under COBRA.  If this is the case, you must sign up for Medicare Part B when you first become eligible, and perhaps for Part D as well, to avoid penalties.

The Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 provided that workers who have health care from a private employer with 20 or more workers can continue their health care coverage for up to 18 months if their employment is terminated or their hours are reduced. The Center for Medicare Advocacy reports that advocates are seeing an increase in the number of individuals who have delayed enrolling in Medicare Part B under the mistaken impression that paying for and receiving continued health coverage under COBRA allows them to enroll in Part B after their COBRA coverage ends without penalty.  In fact, only those who delay enrolling in Part B because they are covered under a group health plan and are currently employed can avoid the penalty.

As the Center points out, that penalty can be severe: there is a 10 percent premium penalty for each year that enrollment is delayed. For example, if you turn 65 this year (2015) but wait until 2017 to enroll in Medicare, your monthly Part B premium will be 20 percent higher than the current premium -- for your lifetime. Instead of the current premium of $104.90.90 a month, you would pay almost $126 a month.

The interaction between COBRA and Medicare Part D, which covers prescription drugs, is a little different.  Those on COBRA may be able to delay Part D enrollment without penalty if the drug coverage they had under COBRA constitutes “creditable coverage,”which means that the coverage is expected to pay on average as much as the standard Medicare prescription drug coverage.

The penalty for delaying enrollment in Part D, as the Center explains it, is “1 percent of the national base beneficiary premium in a given year times the number of full, uncovered months of eligibility without other creditable drug coverage.”

Medicare enrollment begins three months before your 65th birthday and continues for 7 months. Find more information on what you need to know about signing up for Medicare.

For more from the Center for Medicare Advocacy on the intersection of COBRA and Medicare coverage.

For more information on coordinating employer coverage with Medicare, read this article.