COBRA at 65 Won't Stop Medicare's 10% Part B Penalty

COBRA keeps a former employer's plan alive after a job ends, but Medicare treats it as a coverage gap that can add a permanent 10% surcharge to Part B premiums for every year of delay.

"COBRA coverage does not count as coverage based on current employment, so it does not extend the enrollment protection," according to Medicare's guidance on working past 65.

The standard Part B premium is $202.90 a month in 2026. One full year of delay adds about $20.30 each month, or roughly $244 a year; a two-year delay adds 20%. The surcharge generally remains for as long as the beneficiary has Part B, and because it is calculated against the standard premium, the dollar cost rises when premiums increase.

Someone who already qualified for Medicare when the job ended has up to eight months after employment or active coverage ends to enroll in Part B without penalty. Choosing COBRA does not restart that clock. Waiting until COBRA's 18-month limit expires can mean waiting too long — and a missed deadline can force a wait for the General Enrollment Period from Jan. 1 through March 31, with coverage beginning the month after enrollment.

One Missed Year Adds $244 a Year, for Life

Medicare lets someone delay Part B when covered by a group health plan tied to their own or a spouse's current employment. The protection follows the job, not the insurance card. COBRA keeps an employer plan going after the employment relationship ends, but it does not turn that former job into current employment. Retiree health coverage generally works the same way.

Someone whose job ends before 65 should generally use the seven-month Initial Enrollment Period surrounding the 65th birthday. Waiting until COBRA expires can therefore mean waiting too long.

COBRA can also look reassuring while leaving a retiree exposed. Medicare warns that when someone is eligible for Medicare but has not enrolled, COBRA may pay only a small share of medical bills, leaving the patient with costs Medicare would have covered had coverage started on time. Once he finally enrolls in Medicare, COBRA will probably end if he elected it first.

There is better news on Medigap. Delaying Part B generally does not use up the federal Medigap open enrollment window. That six-month period usually begins once someone is at least 65 and Part B coverage starts.

Drug Coverage Gets Its Own 63-Day Test

COBRA prescription coverage may or may not be creditable, meaning it is expected to pay at least as much as standard Medicare drug coverage. If it qualifies, he can delay Part D without a penalty while that coverage continues. If it does not qualify and he goes at least 63 consecutive days without creditable drug coverage, a separate Part D penalty can begin. The plan administrator must provide a creditable coverage notice.

Three steps can keep the transition from becoming expensive. Ask Medicare or Social Security which enrollment period applies based on the date active employment ended, not the COBRA expiration date. Enroll during the Initial Enrollment Period if COBRA will be the only coverage at 65. Request the prescription plan's creditable coverage notice and keep it with enrollment records.

COBRA can preserve familiar coverage while someone gets his bearings. It cannot preserve the Medicare rights attached to a job that has already ended. The card may look unchanged, but at 65 the calendar matters more than the logo printed on it. Premium figures and enrollment rules change annually, so verify the latest numbers against Medicare's official announcements before making a decision.

This article is for informational purposes only and does not constitute investment advice.