Should I decline Medicare if I have COBRA?

Should I decline Medicare if I have COBRA?

April 30, 2021

Are you retiring before you’re eligible for Medicare? Is COBRA bridging the gap? If so, you could be subject to lifetime penalties or even a gap in coverage if you don’t enroll in Medicare correctly when the time comes.

Now, you might be asking yourself how this could be possible? Let’s dive in -  

Hopeful retirees are often delaying their early retirement plans due to high healthcare costs because they haven’t reached Medicare age yet.  Of those that have retired early, COBRA is one of the common solutions to this.  This strategy might allow you to retire early, but when it does come time to elect Medicare coverage, there are some careful considerations you must take.

Imagine this is you, and on your 65th birthday you enrolled in Medicare Part A but declined Part B, under the impression that COBRA would cover your outpatient hospital visits.

There are two important matters to be aware of for this:

  1. When a person becomes eligible for Medicare, Medicare becomes their primary insurance. Any other insurance type becomes secondary to Medicare. This means that Medicare will be responsible for paying the majority of your healthcare costs, and any other insurance would only pay over and above the Medicare limit if covered.


  1. *Medicare enrollment has two periods –
    • The Initial Enrollment Period (IEP)
    • The General Enrollment Period (GEP)

The IEP is triggered by your 65th birthday and is the first opportunity you have to enroll in Medicare Coverage. Everyone’s IEP is unique, beginning 3 months prior to your birth month, and continuing for 3 months after. If you chose not to enroll during this window, you must decline coverage and wait until the GEP to elect any Medicare coverage you may need.

GEP coverage is offered between January and March each year. Furthermore, if you previously declined coverage in certain situations, you may be subject to a late enrollment penalty if you elect that coverage in the GEP.  These enrollment penalties can be significant and last the remainder of your life.

Not only will it be challenging to have sufficient insurance because Medicare is now your primary insurer, but you will need to wait until the GEP rolls around to elect Part B. This could leave you exposed to a gap in heath insurance for months, and you will incur a late enrollment penalty that will last your lifetime. To avoid this penalty and lapse in coverage, be sure to enroll in both Parts A & B when enrolling for Medicare, even if you plan to retain COBRA.

Navigating healthcare benefits, especially as you near retirement and become Medicare eligible, can be confusing and may lead to financial consequences that follow you for years. If retiring early is a priority of yours, work with a professional to go through your specific situation to find a strategy to mitigate high healthcare costs. Not only can your wealth advisor and benefits broker talk through your options, but they can be there to walk hand in hand with you during these important decisions and answer questions as you near Medicare eligibility.


*Source: Medicare Portal

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.