COBRA medical and prescription coverag

Is COBRA medical and prescription coverage creditable?

This question to me comes up most often when a client is nearing or at 65 and is not on Medicare yet. They are considering retirement and going on their company’s COBRA medical and prescription coverage.

Staying on employer’s plan

Generally, if you remain employed and on your company’s plan past age 65, you do not need to enroll in Medicare Part B (Medical Services).  Medicare Part B has a monthly premium. Most individuals enroll in Part A (Hospitalization).  Part A is usually without cost.

Ending your employment and enrolling in your company’s COBRA medical and prescription coverage may be an available option. But you need to beware that you’re possibly creating a problem for yourself.

The government does not consider COBRA to be creditable medical coverage (medical or prescription drug coverage that has minimum coverage requirements). Group medical insurance and prescription drug coverage from your employer, while you are employed, is typically considered creditable coverage. COBRA medical coverage is not, although COBRA prescription drug coverage may be.

Eight month Enrollment Period

Medicare will allow you an eight month period to enroll in Medicare Part B once you have lost your employment. If you wait until after this eight month period has expired, you may be subject to a late enrollment penalty. Enrollment in COBRA does not extend this eight month period. Even though COBRA can last 18 months or longer, it does not extend the eight month period to enroll in Part B.

I recommend to my clients that they enroll in Part B when they go on COBRA medical and prescription coverage. Or, at the latest, within eight months of losing their employment. That way there will be no penalty for late enrollment.

Your company’s prescription drug coverage is usually considered creditable coverage.  But, be sure by asking that question of your company’s resource manager. I have the same advise if it is not creditable. Enroll in a prescription plan within eight months of leaving your employment.  There will be no late enrolment penalty.

Let us know if you need more information creditable coverage.

Jake Young
Individual and Family Specialist