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COBRA at Age 65 or Over? Don’t Do It. Here’s Why.

It rarely, rarely, RARELY makes sense if you are sixty-five or older to elect COBRA (the temporary extension of group coverage) even when it is subsidized by the former employer as part of a severance package.

If you are on COBRA when you become eligible for Medicare, the COBRA is typically supposed to end. One can elect COBRA when already on Medicare A and B but that is not usually sensible due to the cost of COBRA because the COBRA coverage is secondary for medical and hospital services.

The risks in electing COBRA at 65 or older include missing Medicare Part B enrollment deadlines and paying premium penalties, having a gap in medical coverage and being responsible for large medical bills you didn’t anticipate. When planning for healthcare coverage, plan to have active group coverage end one day and Medicare commence the next. The only time you might consider COBRA as secondary to Medicare is when you have catastrophic drug expense and COBRA drug coverage will cost less than Medicare Part D. However, this is RARE.

Let’s review a situation that recently came to our attention from a former colleague and friend. I am copying and pasting directly from her email below:

“She (woman seeking help) enrolled in Part A when she became eligible for it. She declined Part B because she had good coverage through her husband. When he was terminated from his job, they chose COBRA and she never enrolled in Part B. Now, only now, does she realize all the bad consequences. The COBRA is ending in April, 2019. She can enroll in Medicare Part B during the General Enrollment Period during the first quarter of 2019 but it won’t be effective until July 1, 2019 leaving her with a gap in coverage. She can’t get Obamacare because she has Medicare Part A.  And she will pay a Late Enrollment Penalty when she does get Part B. And, to top it off, the COBRA insurance carrier is trying to recoup $120,000 in expenses it has paid for her care on the grounds that she was Medicare-eligible and COBRA is secondary to Medicare, so she should pay what Medicare would have paid because it’s her fault she never signed up for Medicare.”

This sad story tells it all. Be very careful if your employer offers you COBRA at 65 or older to make sure you understand the issues to avoid these pitfalls.