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COBRA As Creditable Coverage


Seniors who are enrolled in COBRA coverage but are eligible for Medicare face financial penalties for not enrolling within the mandated time-frame. However, seniors who are enrolled in similar employer-sponsored plans are not penalized as their coverage is considered creditable for Medicare. Switching from a COBRA plan to Medicare could be disruptive for the beneficiary's care and may come with financial consequences for terminating their COBRA coverage early to meet the Medicare enrollment windows. Seniors should be able to remain on their COBRA coverage without penalty the same as seniors who remain on similar employer-sponsored coverage.


  • There is no active legislation on this issue.


We urge Congress to support forthcoming legislation that would allow seniors enrolled in COBRA coverage to transition to Medicare Part B without a penalty. This legislation would effectively treat COBRA as creditable coverage, the same as seniors who remain on similar employer-sponsored coverage and then enroll in Medicare. This one time Medicare special enrollment period would only apply for this scenario.


Seniors are continuing to work for longer than ever before and are often choosing to stay on their employer group health plans once they turn 65 rather than enrolling in Medicare coverage. As long as the seniors are actually on a group health plan as an employee or beneficiary that is comparable to Medicare, then there is no financial consequence to their choice because employer-sponsored coverage is considered to be creditable coverage to replace Medicare. However, if the individual is a COBRA beneficiary, either because of reduced hours, retirement or another reason, then the rules change and most Americans have no idea until it is too late.

COBRA is not normally considered to be creditable coverage for Medicare major medical benefits, so people who are enrolled in COBRA and do not enroll in Medicare Part B within 8 months of turning 65 face substantial financial penalties for the rest of their lives, even if they have months or years left on their COBRA eligibility and their benefits are identical to their former employer-sponsored coverage.  

When the employer plan includes prescription drug coverage the rules become even more complicated. If the COBRA coverage is at least as generous as a Medicare Part D plan, then just that prescription coverage may be considered creditable. And if that is the case, then the senior citizen doesn’t have to worry about a lifetime late-enrollment penalty when it comes to just Medicare Part D prescription drug coverage, although for major medical coverage they will. Plus, the senior citizen needs to remember that individuals do not have eight months to enroll in a Part D plan when transitioning off creditable coverage. For Part D coverage, the deadline is just 63 days!

To make it even more complicated, there is a third set of rules for individuals who are eligible for Medicare due to end-stage renal disease. The law allows for an overlap of Medicare and either employer-sponsored or COBRA coverage for 30 months. During this 30-month coordination period, if a beneficiary has either employer-provided coverage or COBRA coverage, then the private coverage is the primary payer and Medicare is the secondary payer. If an individual’s COBRA benefits run out during the 30 month window, then Medicare becomes the primary payer.

Unfortunately, seniors and their employers often don’t understand the rules until it is too late and many seniors are paying a lifetime penalty of 10 percent or more on their Medicare premiums for a single misinformed choice. As more and more seniors stay in the workforce longer, this problem will continue to grow since for some individuals, staying on COBRA makes a lot of sense.

One of the main benefits of COBRA is that it gives the individual the option to keep the exact same coverage they already had in place for an extended period. This makes it an attractive option for a person who has already met the plan’s deductible or out-of-pocket expense limit for the plan year ,or if the individual or the family member needs coverage of a specific prescription or treatment or is the midst of some type of extensive treatment or therapy. Electing COBRA can assure complete continuity of care, whereas switching to a Medicare option could disrupt some medical services. There may also be a financial benefit to continue COBRA coverage when there are other family members on the plan. Seniors should have the freedom to make this choice without a lifetime financial consequence.


  • Congress needs to pass legislation to treat COBRA coverage as creditable coverage for Medicare, the same way that similar employer-sponsored insurance is already treated as creditable.
  • Seniors are remaining in the workforce longer and are continuing to be covered by either employer-sponsored coverage or COBRA.
  • While the Medicare age remains 65, the age of retirement including eligibility for Social Security is not necessarily the same. Because of this, seniors may choose to stay on another private plan including those under COBRA instead of electing to enroll in Medicare.
  • Under current law, seniors who are eligible for Medicare and are on an employer-sponsored plan do not face any financial consequences for doing so. However, individuals who are eligible for Medicare but receive COBRA coverage are subject to these penalties.
  • Penalties for late enrollment will continue for the duration of the beneficiary's lifetime. Many seniors are unaware of these penalties when electing COBRA coverage for themselves or their spouse.
  • There are a number of reasons why an individual would choose to remain on COBRA coverage instead of enrolling in Medicare, including the plan design, provider networks, financial considerations, or other reasons. It may be better for them to remain in their existing private coverage and forcing seniors to terminate this coverage could have negative consequences on their care.