“I am 65 and going on COBRA,”- I have heard too many people retiring say… 

Unfortunately, this is a common retirement benefit strategy people choose. I’m writing this article to call attention to this strategy to save others from making the same mistake thousands of retiring employees make each and every year. 

When it comes to retirement or even an employee exit after an employee turns 65, an employer can offer continuing benefits in the form of a retiree group plan or COBRA. The challenge is Medicare doesn’t consider COBRA ‘creditable’ coverage. While it may appear to be exactly like the coverage they had when they were actively employed, when an employee is asked to provide proof of coverage to Medicare, it won’t count. This leads to unintentional penalties, confusion, and ultimately frustration. 

Consider these popular scenarios:

• If leaving an employer group plan and are not yet 65: you can elect COBRA – however, when you are close to age 65, you must enroll in Medicare during the “Medicare Initial Enrollment Period”  to avoid any issues. This enrollment period coincides with your 65th birthday. It includes 3 months before your birthday, your birthday month, and 3 months after. 

• If leaving an employer group plan and are over 65: you should consider enrolling in Medicare as soon as you can to ensure a transition to Medicare without penalty. Leaving your group plan qualifies you to enroll any month after you leave your employer and qualifies enrollment under a ‘Medicare Special Enrollment Period’. Medicare gives you a grace period to enroll. As a reminder, employees can defer Medicare enrollment while employed as long as the group coverage they are on is considered “creditable”. If an employee continues to work and stays covered under employee health insurance (not COBRA) they do not need to take any form of Medicare, not A, B, or D. When they decide to leave that group insurance and begin Medicare, they can do so with no penalties or loss of options. They would just need to bring a form to HR to fill out showing they had creditable coverage, then take that to Social Security and apply for Medicare for parts A & B to start. [Employer verification form Link to CMS]

• If an employee continues to work, past 65, and then retires, and elects to have non-creditable health coverage, like COBRA, then they are forced to wait for the “Medicare General Election Period” when they decide to begin Medicare. this enrollment is between January and March, for  Medicare to begin July 1st. The individual would be responsible for any penalties Medicare tacks on for that lapse in creditable coverage.

• If leaving your group plan and are 65 or older: and elect COBRA because you are carrying dependents on your plan, you must also enroll in Medicare parts A, B, and D BEFORE electing COBRA. COBRA is not considered ‘creditable’ coverage by Medicare.  If you do not enroll in Medicare before leaving your employer and go on COBRA benefits alone, you may incur lifetime premium penalties.

• Financial Problems with COBRA after you turn 65: 
• If you elect COBRA and miss the above opportunities to enroll in Medicare, penalties will be assessed back to the date you were eligible and will be carried permanently on your premiums for both Part B and possibly Part D.
• You can only enroll during the “Medicare General Election Period”, between January and March, and your Medicare is not effective until July. If your COBRA coverage ends before the Medicare General Election Period and effective date begins you may need to obtain coverage from the marketplace to bridge your coverage. This is often very expensive coverage. And you would also bare the penalties in coverage if you were eligible for Medicare and took COBRA alone instead.

Want to avoid all the Medicare hassles?  Consider partnering with a Medicare Transition Team. Maybe one with Certified Medicare Planners to help your employees. Certified Medicare Planners are trained to provide the tools and technology your employees need to confidently transition to Medicare with no penalties or reduction in options.