• COBRA allows you to keep your former employer’s health insurance plan for up to 36 months after you leave a job.
  • If you’re eligible for Medicare, you can use it alongside COBRA to help you pay for healthcare.
  • COBRA allows you to keep providing insurance coverage for your spouse and dependents.

COBRA is a health insurance option for people who have recently left their job. Under COBRA, you’re able to stay with your former employer’s health plan, even if you’re no longer employed. You can keep COBRA coverage for 18 or 36 months, depending on your situation.

If you have Medicare, COBRA can be used to supplement your coverage and help pay for more services. In some situations, using COBRA and Medicare together might save you money.

You can have COBRA and Medicare together if you were already enrolled in Medicare when you become eligible for COBRA. For example, if you’re 67 years old and using a combination of Medicare coverage and coverage from your employer but then retire or scale down to part-time hours, you could be eligible for both COBRA and Medicare.

On the other hand, if you become eligible for Medicare while you’re already enrolled in COBRA, your COBRA coverage will end. So, if you leave your job at age 64 and enroll in COBRA, your COBRA coverage will end when you turn 65 years old and enroll in Medicare.

If you have more than one type of insurance coverage, the insurance reimbursement to healthcare providers is divided into two types: primary and secondary. This is based on which insurance pays first and which pays second.

If you have Medicare and COBRA benefits, Medicare is your primary payer. This means that Medicare will pay for services first, and your COBRA plan will help pay for any remaining costs.

For example, when you use Medicare Part B, you generally pay a coinsurance of 20 percent of the Medicare-approved cost for the service. If your COBRA plan has a lower coinsurance or deductible, it can be used to pay for that remaining 20 percent.

CORBA plans may also cover services that Medicare parts A and B don’t, such as dental care, eye care, or medications. These additional expenses may also be covered by separate Medicare Advantage (Part C) or Medicare Part D plans.

Medicare takes the place of traditional insurance plans. Medicare coverage is provided in parts. Parts A and B make up original Medicare. Each Medicare part covers different services. The parts of Medicare are:

  • Medicare Part A (hospital insurance). Part A covers stays in the hospital, skilled nursing facilities, and other inpatient care settings.
  • Medicare Part B (medical insurance). Part B covers doctor’s visits, ambulance rides, medical equipment, therapies, and other medical services.
  • Medicare Part C (Medicare Advantage). Part C plans cover everything that parts A and B do, with additional coverage for dental, hearing, vision, and sometimes medications.
  • Medicare Part D (drug coverage). Part D covers medications. You can add a Part D plan to original Medicare or to a Part C plan.

COBRA vs. original Medicare

A COBRA plan is likely to cover services that original Medicare doesn’t. Depending on your need for those services, COBRA might save you money. But purchasing a supplemental Medigap plan can also help cover some of those costs and may be less expensive than COBRA. It’s important to read your plan details carefully and compare it with Medicare coverage.

Pros of Medicare

  • more affordable for most people
  • coverage lasts the rest of your life
  • ability to choose from a variety of Medicare Advantage plans
  • ability to supplement your coverage with Medigap or Part D

Cons of Medicare

  • only covers you and not your spouse or dependents
  • original Medicare doesn’t cover all services
  • the Medicare Advantage plans in your area might not fit your needs

COBRA vs. Medicare Advantage

The cost of Medicare Advantage plans varies depending on the plan you choose and your location. Not all plans are available in all states. You can generally find Medicare Advantage plans that cover services original Medicare doesn’t. Your costs compared to a COBRA plan will depend on the details of the COBRA plans and Advantage plans available to you.

COBRA vs. Medicare Part D

Your COBRA plan will likely include coverage for medications but you’ll be responsible for paying the entire premium amount. Medicare Part D plans are available at a wide variety of premiums. You can choose a plan that fits your needs and budget.

Pros of COBRA

  • allows you to keep the same coverage of your employer’s plan
  • allows you to cover your spouse and dependents
  • normally covers medications and other services that original Medicare doesn’t
  • might have lower copays or coinsurance than Medicare

Cons of COBRA

  • lasts for only 18 to 36 months
  • premiums can be very expensive
  • might be less flexible than a Medicare Advantage plan

For most people, COBRA will be significantly more expensive than Medicare. In a few circumstances, though, this might not be the case.

Medicare Part A costs

Medicare is divided into parts. Medicare Part A is hospital coverage, and most people do not pay a premium for it. As long as you’re eligible for Social Security or Railroad Retirement Board benefits, you won’t pay Part A premiums.

If you haven’t worked enough to qualify for Social Security benefits, you can pay as much as $471 a month for your Part A premium.

Medicare Part B costs

Medicare Part B is medical coverage, and most people pay the standard premium amount for it. In 2021, this amount is $148.50. So, for most people, Medicare will be less expensive unless their COBRA coverage has a premium that’s lower than $148.50.

Not everyone pays the standard Part B premium. If you have an individual income greater than $88,000, you’ll be charged an adjusted amount. This amount is known as an income-related monthly adjustment amount (IRMAA). The higher above $88,000 your income is, the more your IRMAA will be.

COBRA costs

If the added surcharges for parts A or B apply to you, COBRA might actually be less expensive than Medicare.

For example, if your income as an individual is greater than $500,000 or $750,000 as a married couple, you’ll pay the maximum $504.90 a month for Part B coverage. If you haven’t earned 30 work credits, you’ll pay another $471 for Part A coverage. This means your total costs for parts A and B would be $975.90 a month.

Depending on your previous health plan, COBRA coverage might be cheaper.

Medicare is an individual plan. It covers only you. Unlike a plan from your employer, you can’t add your spouse or dependents to your plan. COBRA will allow your spouse and dependents to stay on your coverage.

So, if your plan was covering a spouse or dependents, COBRA might be a smart choice. For example, if you’re 66 years old and have just left your job, you’ll have the option of using COBRA, Medicare, or both together. If your previous plan was covering your 55-year-old spouse and two college-age children, they will also be eligible for COBRA coverage. They are not eligible to be added to your Medicare plan.

In this situation, you could enroll in Medicare while your spouse and children use COBRA to continue their insurance coverage.

When you’re looking into Medicare and COBRA coverage, the best choice for you will depend on your situation. Your budget, personal medical needs, and the needs of your spouse or dependents will help you determine the best choice for you and your family.

Once you leave your job, you have at least 60 days to decide whether to take COBRA coverage. If you’re not already enrolled in Medicare Part B, you’ll have 8 months after leaving your job to enroll. You can use this window of time to weigh your options.

Factors to consider when choosing COBRA or Medicare

  • the cost of your Medicare premiums
  • the cost of your COBRA premiums
  • the cost of any medications you take
  • the copay and coinsurance amount for your COBRA plan
  • the Medicare Advantage plans available in your area
  • the cost of care for your spouse or any dependents

Knowing this information can help you decide which option makes the most sense for you.

If you become eligible for Medicare while you’re on COBRA, your COBRA coverage will stop. You can enroll in Medicare as normal. You don’t need to take any additional steps. Just make sure you sign up during the initial enrollment window.

The window lasts from 3 months before your 65th birthday to 3 months after. If you enroll after this point, you’ll be charged with a late enrollment penalty.

If you’re using both Medicare and COBRA together and no longer want your COBRA coverage, you can cancel with the providing insurance company. An information packet from your former company’s human resources department should tell you how to do this. COBRA coverage is month to month, so you can cancel at any time.

COBRA is an acronym that comes from the federal law that created it: the Consolidated Omnibus Budget Reconciliation Act of 1985. All employers with more than 20 employees are required to offer COBRA coverage. Even if you work for a company with fewer than 20 employees, you might still be eligible for COBRA coverage, depending on your state.

COBRA ensures that if you have participated in your employer’s healthcare plan, you and your dependents are eligible to purchase that same plan after you leave your job. COBRA coverage can help you and your family maintain health insurance coverage while you look for a new job or other coverage.

Once you leave your job, you’ll be notified by the health plan or by your former employer’s human resources department. The notice will let you know when your plan ends and what steps you should take to keep the coverage. You’ll need to respond to the offer and accept COBRA coverage by the deadline given on your notice. By law, you’ll have at least 60 days to respond.

How do you qualify for COBRA?

The most common way people qualify for COBRA is by leaving a job where they participated in an employer-offered healthcare plan. In this case, the former employee and anyone who was on their plan, including their spouse and children, will be offered COBRA coverage.

There are a few additional instances where you might be able to obtain health coverage through COBRA:

  • If you have health insurance coverage through a spouse or parent but lose that coverage due to death, divorce, or other life change. For example, if you have health coverage through your spouse’s job but then get a divorce, you are no longer covered under that policy. In this case, you’d be able to use COBRA to keep the plan while you look for other coverage.
  • As another example, if you’re 24 years old with coverage through your parent’s employer-provided health plan and that parent dies, you are able to purchase COBRA coverage through that plan. You can also use COBRA coverage if your covered spouse or parent stops using employer-sponsored healthcare because they’ve become eligible for Medicare.
  • In some cases, you can become eligible for COBRA even if you still have your job. This can happen if your job offers health insurance only to full-time employees, and your hours are cut down to part time. In this case, you could use COBRA coverage to keep your plan, even though you are no longer full time.

Are there situations that make you ineligible for COBRA?

Generally, you’ll be eligible for COBRA coverage no matter why you’re no longer working for your former employer. The only exception is in cases of “gross misconduct.” This term typically refers to serious and possible illegal offenses, like showing up to work under the influence of alcohol or other substances, stealing from your employer, or harassing other employees.

If your employment ended for any other reason, you’ll still be eligible for coverage. This is true even if you were laid off or fired for a reason like performance concerns.

Who pays for COBRA?

The person receiving the insurance coverage is typically the one who pays for it. You will be responsible for the entire premium amount. For many people, this makes COBRA an expensive option for coverage. Plus, your former employer can charge you an administrative fee of up to 2 percent. This means you could be paying 102 percent of your premium amount.

For example, if you had a policy through your employer with a premium of $500 and your employer was paying 80 percent of that cost while you were employed, you would have been paying $100 a month for that health insurance. Under COBRA, you’d pay $510 a month for the same coverage. Your other healthcare costs, such as deductibles, coinsurances, and copayments, would remain the same.

COBRA allows you to stay on the health plan offered by your employer even after you’ve left your job. You’ll be responsible for the entire premium amount, including the portion that was being paid by your employer.

You can use COBRA and Medicare together to cover your health needs and the needs of your family. Depending on your plan, COBRA might cover services that Medicare doesn’t, or it might cover them at a lower cost. Medicare is always the primary payer if you’re using Medicare and COBRA together.

Ultimately, the choice between using COBRA, Medicare, or COBRA and Medicare together is up to you. Consider your budget, medical needs, and family situation when you compare your options and their costs.

This article was updated on November 20, 2020, to reflect 2021 Medicare information.