You turn 65 and decide to retire. Your employer offers COBRA so you can stay on the company health plan for up to 18 months. Why not take it? You already know the doctors and the deductibles, and you can put off the Medicare paperwork. Eighteen months later your COBRA runs out, you call Social Security to sign up for Part B, and you find out you owe a Late Enrollment Penalty for the rest of your life. I call this the COBRA trap, and it is one of the most common and most expensive Medicare mistakes I see.
COBRA is not active employer coverage
For Medicare purposes, COBRA is not considered active employer coverage. Neither is retiree health coverage. The only coverage that lets you delay Part B without a penalty is an active employer or union group health plan tied to your current employment, or your spouse's.
The federal government's reasoning is that COBRA continues coverage from a job you no longer have. So the Medicare clock starts when your job ends, not when COBRA ends.
How the Special Enrollment Period works
If you delay Part B because you have active employer coverage, you have an 8-month Special Enrollment Period to sign up after that coverage ends. The 8 months start the month after employment ends or the month after the group health coverage ends, whichever comes first.
For most people retiring at 65 with COBRA available, the trigger is the employment ending. The 8-month clock starts then. Going on COBRA does not pause the clock.
The full breakdown of all enrollment windows is on the Medicare enrollment & change windows page.
The penalty math
If you miss your enrollment window and do not qualify for an SEP, Medicare adds a Late Enrollment Penalty to your Part B premium. The penalty is 10% of the standard Part B premium for each full 12-month period you were eligible but did not enroll. The penalty stays on your premium for the rest of your time on Medicare.
Using the 2026 standard Part B premium of $202.90 per month:
- 12 months late: 10% LEP = $20.29 extra every month
- 24 months late: 20% LEP = $40.58 extra every month
- Over 30 years of retirement, a 20% LEP costs around $14,600 in extra premiums
If you have already missed the window
If you delayed Part B while on COBRA and the 8-month SEP has already closed, the next chance to enroll is the General Enrollment Period, January 1 through March 31 each year. Coverage starts the first day of the month after you enroll.
A Late Enrollment Penalty will apply based on how long you were eligible but not signed up. There is no way to avoid the penalty once the SEP has closed, but enrolling at the next GEP gets you back into Medicare and stops the delay from making the penalty worse.
The safer plan
If you are approaching 65 and have COBRA available:
- Enroll in Medicare Part A and Part B during your Initial Enrollment Period (the 7 months around your 65th birthday)
- COBRA can sometimes work as secondary coverage to Medicare, but treat Medicare as your primary
- Talk to a broker before you decide. The right answer depends on your specific situation, your spouse's coverage status, and whether your prescription coverage is creditable for Part D
Talk to us
Worried about the COBRA trap, or already caught in it? Get in touch and I will walk through your timing with you.