What is COBRA insurance?

COBRA refers to the Consolidated Omnibus Budget Reconciliation Act, a federal law that may let you keep your employer group health plan coverage for a limited time after your employment ends or after you would otherwise lose coverage. This is called “continuation coverage,” according to the Center for Medicare & Medicaid Services.  Group coverage under COBRA usually lasts up to 18 months, although it may be extended to 36 months under certain circumstances. Typically COBRA insurance rules apply to companies with 20 or more employees. In some states, COBRA insurance rules apply to smaller companies.

How do you qualify for COBRA?

You may qualify for COBRA if you lost your job; you generally have to apply for COBRA within 60 days of the date your employer-based coverage ended, or the day you received notice of your employment ending, whichever is later. If your spouse or ex-spouse was covered by an employer’s group health plan, you might be covered if he or she:

  • Lost his or her job
  • Died
  • Became entitled to Medicare

Any one of the above might qualify you for COBRA coverage. There may also be other situations that qualify you for COBRA coverage. If you are eligible for continuation of coverage under COBRA, you will typically be notified by your employer or your employer’s group plan administrator of your right to choose COBRA coverage, the duration of the COBRA coverage available to you, how to enroll, and the premium cost you will pay should you choose COBRA coverage.

If you qualify for COBRA through an ex-spouse, call the employer’s benefits administrator or group health plan for information about your COBRA rights and coverage details. See “An Employee’s Guide to Health Benefits Under COBRA” from the U.S. Department of Labor for more information about the program.

Can you have COBRA health insurance and Medicare coverage?

If you are eligible for Original Medicare, whether you can have both COBRA and Medicare depends on which you had first. The order in which each type of coverage, or payer, pays for covered services follows “coordination of benefits” rules.

  • If you already have COBRA when you enroll in Medicare, your COBRA insurance may stop. As soon as you’re Medicare-eligible, you may want to enroll in Medicare Part A and Part B immediately to avoid a Medicare late-enrollment penalty, because you’re not entitled to a Special Enrollment Period (SEP) when COBRA ends.
  • If you already have Medicare when you become eligible for COBRA, you must be allowed to enroll in COBRA. Unless you qualify for Medicare because you have end-stage renal disease (ESRD), Medicare acts as the primary payer and COBRA as the secondary payer. Therefore, you will probably want to stay enrolled in Medicare Part A and Part B or in the Medicare Advantage (Medicare Part C) program.
  • If you are eligible for Medicare because you have ESRD, there is usually a period of time when your employer group health plan will pay first and Medicare will pay second. This is called the 30-month coordination period. If you have COBRA during this time, COBRA will be your primary insurance during your 30-month coordination period. If your COBRA coverage ends before the 30 months have passed, Medicare becomes primary. If you still have COBRA when the 30-month coordination period ends, Medicare will pay first and your COBRA coverage may end (check with your state Department of Insurance for details on your state laws regarding COBRA coverage).

Should you enroll in Medicare if you qualify for COBRA?

When you qualify for COBRA coverage and are also eligible for Original Medicare, you may want to enroll in Original Medicare, Part A and Part B. Or, you may choose to get your Original Medicare benefits through the Medicare Advantage (Medicare Part C) program.

Medicare Advantage plans are offered by private insurance companies that are approved by Medicare. They are required to provide at least the same level of coverage as Original Medicare, with the exception of the hospice benefit, which is paid by Medicare Part A. Often a Medicare Advantage plan may cover more than Original Medicare Part A and Part B, with extra services or prescription drug coverage.

Getting Medicare coverage when you are eligible for it may be important for several reasons if you lose your employer’s group health coverage:

  1. You can enroll in Medicare through a Special Enrollment Period if you lose your employer’s current group health coverage (through loss of a job, for instance) and you are eligible for Medicare coverage according to Medicare’s enrollment guidelines. COBRA coverage, however, is not considered current group health coverage. Therefore the loss of COBRA coverage at the end of required coverage time period does not qualify you for the Special Enrollment Period. You may have a coverage gap and could end up having to pay a late enrollment penalty for signing up late for Medicare if you wait until your COBRA coverage expires.
  1. Your Medicare plan options might provide comparable or even more benefits than those provided under your employer’s COBRA plan.
  1. Your Medicare options might have lower premium costs for you than COBRA coverage. Keep in mind that, generally, you bear the entire premium cost of COBRA coverage and your employer is not obligated to pay the premium or a portion of it.

Your state’s State Health Insurance Assistance Program (SHIP) is a resource with information (at no cost to you) about Medicare and COBRA.

If you would like to learn more about your Medicare coverage and options, start by entering your zip code on this page to compare Medicare plans for free!