COBRA does not stop the Medicare clock. Here is the math.

The company hands you 18 months of COBRA on the way out and it feels generous. Medicare's 8-month clock started the month you left, COBRA usually costs more than Medicare would, and no, you do not get to keep both. An engineer shows his work.

Read the full article: https://news.americanretirementadvisors.com/hir-cobra-does-not-stop-the-medicare-clock/

Part of the Healthcare in Retirement series from The American Retirement Advisor.

American Retirement Advisors helps families in Arizona and Nevada navigate healthcare, retirement income, and inheritance planning. Want to reach out? Text us at (602) 281-3898, email support@americanretire.com, or visit https://americanretirementadvisors.com.

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SPEAKER_00 0:01

Welcome to the American Retirement Advisor, coming to you from One to Three Z Studios. Real stories, real strategies, and straight talk about healthcare, retirement income, and inheritance planning. I'm Ian Schaefer, joined with Eddie and Betty. Let's get into it.

SPEAKER_08 0:16

Welcome back to the American Retirement Advisor. I'm here with Eddie, as always, and today we are getting into something that I think is going to hit close to home for a lot of people who are either right at retirement age or heading there soon. We're talking about Medicare, specifically about a trap that Ian Schaefer, our COO, laid out in a new article he wrote. And I want to say up front, when I read this piece, I had that stomach drop feeling. Like, how does anyone know this? Because it's not obvious at all.

SPEAKER_10 0:47

Thanks for bringing me in on this one, because this is exactly the kind of thing that looks simple on the surface and has a very expensive cliff hidden underneath it. Ian's piece is the first in a series he's calling healthcare in retirement, and he comes at it like an engineer, which I actually appreciate because he shows his math. He's not summarizing the rule, he's walking through what it costs when you get it wrong.

SPEAKER_08 1:10

So let's set the scene, because Ian sets it up really well. You leave your job at 66. Could be a choice, could be a layoff, it happens. And on the way out the door, your company offers you Cobra. And your first reaction is, great! I get to keep my same doctor's, same insurance card, no decisions to make right now. That sounds like a win.

SPEAKER_10 1:30

And for a lot of people, it feels like a gift. The company is being generous, or at least it feels that way. Same network, same coverage, you just write a check instead of having it come out of your paycheck. No disruption. So people take it. And then what? And then a clock nobody told you about just ran out. That is the whole article in one sentence. Here's how it works. When you leave employment at 65 or older, Medicare gives you what's called a special enrollment period to sign up for part B, the outpatient coverage piece. That window is eight months. It starts the month after your employment ends or the month after your group coverage ends, whichever comes first. Eight months. That's your window.

SPEAKER_08 2:11

That's most of a year, which feels like enough time.

SPEAKER_10 2:14

That's true if you know the clock is running. The problem is that Cobra runs for up to 18 months, and people assume that as long as they have Cobra, they're covered, and the Medicare clock is waiting for them. It is not. Ian quotes Medicare's own language directly in the article. Cobra isn't considered group health plan coverage. Getting Cobra doesn't change when this special enrollment period ends. So at month 8, your window to enroll in Part B without a penalty closes. Your Cobra still has 10 more months to go. Most people find out what happened at month 18 when the Cobra runs out.

SPEAKER_04 2:51

That's a brutal gap to discover.

SPEAKER_10 2:53

And here's what makes it worse: when your COBRA finally does run out, that is not a qualifying event. It does not reopen the Medicare enrollment window. So now you're waiting for the general enrollment period, which runs January through March, with coverage starting the month after you sign up. So depending on when your Cobra ends, you could be sitting without Part B coverage for months.

SPEAKER_08 3:16

And during that whole gap, if something happens, a hospital stay, a surgery, anything serious.

SPEAKER_10 3:23

The bill is entirely yours. That's what Ian says in the piece. No Part B means no Medicare outpatient coverage, and you're paying for it out of pocket, which is terrifying if you're 67 and something goes wrong.

SPEAKER_04 3:37

He even mentions a specific story, a woman who had two years of Cobra left and only realized she had two months of Medicare left to sort out.

SPEAKER_08 3:47

And he says it's not rare that their advisors hear a version of this every single season.

SPEAKER_10 3:53

And I believe it because the Cobra offer comes at the most chaotic moment in a person's working life. You're clearing out your desk, you're thinking about your last paycheck, you're worried about your next chapter. Nobody in that exit meeting is going to say, by the way, here's a separate federal enrollment window that Cobra doesn't affect. You're just handed a packet and pointed at a deadline to elect Cobra or not.

SPEAKER_08 4:15

So let's talk about the penalty, because I think people need to hear this clearly. What happens if you do miss that eight-month window?

SPEAKER_10 4:23

The penalty is 10% added to your Part B premium for every full 12 months you could have had Part B and didn't. And the critical word there is forever. This isn't a one-time fine. This is a permanent surcharge for as long as you have Part B, which for most people is the rest of their lives.

SPEAKER_08 4:42

Ian gives the 2026 number in the article. So 10% is about $20 and change.

SPEAKER_10 4:55

Right, and he notes that it doesn't sound like much, but then you multiply it by every payment for the rest of your life. And if you miss the window by more than one year, it's 20 or 30, stacking up with each full 12-month period you were late. That $20 turns into $40, turns into $60, and it never goes away.

SPEAKER_08 5:15

For the rest of your life. That's a really long time to pay for a mistake that nobody warned you about.

SPEAKER_10 5:22

And the thing is, it feels in the moment like you did the responsible thing. You didn't just drop coverage, you took Cobra. You thought you were being careful.

SPEAKER_08 5:31

Okay, so now let's talk about the cost comparison, because this is where Ian's article really got me. I assumed Cobra was expensive, but I didn't realize how expensive until I saw his numbers laid side by side.

SPEAKER_10 5:44

This part of the article genuinely surprised me. It's not subsidized. When you were working, your employer was paying a chunk of your health insurance premium, and you were paying the rest through your paycheck. When you go on it, you pay all of it plus a 2% administrative fee. Federal rules allow the plan to charge you up to 102% of the full cost. And what does that actually come out to? Ian Site's KFF data from 2025. That's what you're writing the check for every month when you thought you were keeping the same coverage for the same price.

SPEAKER_01 6:31

Most people genuinely don't know that number before they elect. They just think, same plan, a little more out of pocket.

SPEAKER_10 6:38

More than a lot, it turns out. Part B at $202.90. He uses Maricopa County as the example for a Medicare supplement, Plan G specifically, and he found 32 companies offering it this year with prices ranging from about $131 to $526 a month for a 65-year-old, and then a drug plan on top of that. And he notes that Arizona has standalone drug plans starting at $0 a month. So what does that come to all in? His range for the whole Medicare package, Part B plus a supplement plus a drug plan, is about $335 to $730 a month. Compare that to roughly $793 for Cobra alone. For most people at $65, Medicare is less expensive, sometimes significantly less. And Ian says it also carries far less exposure if you have a bad year health-wise than the average employer plan.

SPEAKER_08 7:43

So the company offering you Cobra on the way out the door, that feels generous, but it might be the most expensive option available to you at that point.

SPEAKER_10 8:00

And that's before you even get into the penalty risk.

SPEAKER_08 8:03

Now he does carve out one place where Cobra really does earn its place. What is that?

SPEAKER_10 8:08

The spouse who isn't 65 yet. Ian mentions it at the end of his cost comparison section and says he's saving the full math for his next article, because, quote, the math on that one surprised him even more. So if your spouse is younger, say 63, that's a different situation, and we don't want to get ahead of where the article goes. That one he's exploring separately.

SPEAKER_08 8:31

Fair enough. Let's talk about the thing that I think a lot of clever people try to do, which is just keep both. I'll take Cobra and I'll sign up for Medicare. Belt and suspenders, right? Cover all your bases.

SPEAKER_10 8:43

Aaron Powell Ian addresses this head-on. You cannot just lair them the way you might imagine. If you elect Cobra and then sign up for Medicare, the plan is allowed to end your Cobra coverage. Medicare's own guidance says Cobra will probably end once you sign up, so you don't get to have both running the way you're picturing.

SPEAKER_06 9:03

What about the reverse? What if someone already had Medicare when they decided to elect Cobra?

SPEAKER_10 9:09

Then technically you can hold both, but it doesn't work out the way you'd hope either. The later coverage pays second, which means it's only ever covering what the first leaves behind. And a supplement plan would do that same job for a fraction of the cost. So you're paying full freight for something that's mostly redundant.

SPEAKER_03 9:28

And then Ian gets into the claims coordination problem, which is just a nightmare, even when everyone is trying to do the right thing.

SPEAKER_10 9:35

This part of the article is so real. He describes one of their advisors spending months untangling a client's claims that kept getting denied because the system still listed an old employer plan as the other pair. Nobody was doing anything dishonest, it was just two insurers, one bill, and a coordination of benefits problem that fell on the patient to sort out. The bill lost, as Ian puts it.

SPEAKER_07 9:59

That image, the bill losing, it's not abstract. Someone is sitting at a kitchen table with a stack of explanation of benefit statements, trying to figure out why nobody paid and who to call.

SPEAKER_10 10:12

And they're probably 66 or 67. They may be dealing with whatever health situation generated the bill in the first place, and now they have a second job that's just making phone calls to insurance companies. That's a real cost that doesn't show up in any premium comparison.

SPEAKER_08 10:29

So let's get to the part of the article I found most practical, which is what a certified Medicare planner actually does about all of this. Because it sounds like it isn't just general advice, there's a pretty specific process. So ideally, you're having this conversation while you're still in the exit meeting, or at least before you've made any decisions.

SPEAKER_10 11:06

Right. Sign nothing first. And then what they do is put both clocks on one page, the Cobra months and the eight-month Part B window, side by side, so you can actually see where they cross. Because when you see that visual, it's obvious. Month 8 closes the Medicare window. Month 18 closes Cobra. There's a 10-month gap that's fully exposed. If someone showed you that picture at the exit meeting, you'd never make this mistake. Nobody shows you that. That's the problem. And then they price both columns with your actual numbers, not the averages Ian used in the article. Your specific situation, your county, your age, what plans are available to you. Ian used Maricopa County because that's the data he had. Your numbers might look different.

SPEAKER_08 11:52

There's also a detail he mentions that I had to read twice about what counts as creditable coverage for Part B versus Part D. Can you explain that one?

SPEAKER_10 12:02

This is one of the trickier pieces. Cobra doesn't count for Part B purposes, which is why the penalty clock runs even while you have it. But its drug coverage, the prescription drug part, often does count for Part D, the Medicare drug benefit. So one clock is running and the other is not. It's not that everything about Cobra is broken, it's that the rule applies differently depending on which part of Medicare you're talking about. And keeping those two straight is genuinely the kind of thing where I'd say, if you're not sure exactly how your specific Cobra plan's drug coverage interacts with Part D, that is a question to bring to one of our advisors before you make any decisions, because the exact rules there matter a lot.

SPEAKER_05 12:43

And then there's the paperwork piece, which Ian mentions at the end of the section, something about filing a form to prove work coverage.

SPEAKER_10 12:51

Right. A certified Medicare planner helps you file the form that documents your prior work coverage, so that when you do enroll in Part B, your start date is clean and the penalty question never even comes up. That's the thing, the penalty isn't inevitable, even if you're past 65. If you had legitimate job coverage, there's a process to document it properly. But that process has to be done right. Ian describes it as an hour of work. The penalty is a lifetime.

SPEAKER_05 13:19

An hour of work versus a permanent monthly surcharge. When you put it that way, it's not really a hard calculation.

SPEAKER_10 13:26

And that's exactly what Ian is trying to show with his whole approach to this article. He's an engineer. He's laying out the numbers the way he had to in order to understand them himself. And the numbers make the case better than any argument would.

SPEAKER_05 13:39

He also mentions a phone number in the article for the advisors directly: 602-281-3898. And he says, call before you sign anything on the way out the door. I like that framing because it puts the timing right.

SPEAKER_10 13:54

That's exactly where it matters. Not after you've had Cobra for 14 months and you're starting to wonder. That's where the conversation needs to happen. And the advisors at American Retirement Advisors do this every day. They're not going to have to think hard about your situation. They've seen it.

SPEAKER_09 14:10

There's also an event coming up that Ian mentions, a free workshop, well, at no cost to you, a public workshop where they're teaching all of this.

SPEAKER_10 14:18

Two sessions on Friday, October 2nd. One at Foothills Library in Glendale at 1030 in the morning, and one at Mustang Library in Scottsdale at 2.30 in the afternoon. No cost to attend. You can register at 123 Easymedicare.com slash Medicare-Workshop. Or you can call 877-220-1089.

SPEAKER_08 14:44

And I think the library setting matters. It's a public space. No pressure, you're just there to learn. If you've been putting off getting a handle on Medicare because it feels overwhelming, that's a really low-stakes way to get the whole picture in one sitting.

SPEAKER_10 14:58

And if October 2nd doesn't work, the phone number still does. 602-281-3898. You don't have to wait for an event to ask a question.

SPEAKER_08 15:09

You know, as we're wrapping up, I keep thinking about the person who is going to hear this episode and think, that's me. I left my job last year. I took Cobra. I haven't thought about Medicare yet. What do we tell that person right now?

SPEAKER_10 15:23

Figure out where you are on the clock today, not next week, today. When did your employment end? Count eight months from that date. If you're inside that window, you still have options and you need to move. If you're past that window, you need to talk to someone who can tell you what documentation you have and what the enrollment options look like from where you stand. Either way, the answer is the same. Make the call before another week goes by.

SPEAKER_04 15:51

And I want to say something to the person who already made this mistake, who is already paying the penalty, or who already missed the window. Ian's piece isn't a shame piece. He wrote it because this is common. We said it earlier, and I think it bears sitting with. These advisors are fielding this same conversation season after season, which means if it happened to you, you are in very crowded company. You are not alone in this. And there may still be things you can do to clean up the situation. That conversation is worth having.

SPEAKER_10 16:32

Even if the news isn't all good. You can't make smart decisions from a place of not knowing.

SPEAKER_08 16:38

Ian Schaefer says this is the first in what he intends to be an ongoing series on healthcare in retirement. And based on this piece, I'm genuinely glad he's doing it. This is hard material, and he makes it clear without making it feel scary. Well, maybe a little scary because the stakes are real, but the kind of clear that makes you feel like you can actually do something about it.

SPEAKER_02 17:03

That's what the best financial education does. It shows you the cliffs so you can go around it, not after you've already gone over.

SPEAKER_08 17:10

If this episode raised questions about your own situation, please don't let them sit. Write them down today and bring them to someone who can actually answer them for your specific numbers and your specific timeline. The advisors at American Retirement Advisors are at 602-281-3898. And if you want to learn in person, that workshop on October 2nd is a wonderful place to start. We're glad you were here with us today. Thank you for listening.

SPEAKER_10 17:40

A quick note before we wrap up: today's episode is for educational purposes only. It is not sponsored, endorsed, or otherwise representative of Medicare or the Federal Medicare program. American Retirement Advisors is not a government agency. For official Medicare information, visit Medicare.gov or call 1-800-Medicare.

SPEAKER_08 18:02

This is Betty with the American Retirement Advisor. Thanks for listening. If this episode helped you think differently about your retirement, share it with someone who needs to hear it. You can read the full article and browse hundreds more at AmericanRetire.com. Want to reach out? You can text us at 602-281-3898. Or email support at AmericanRetire.com. Be sure to subscribe so you never miss an episode. We publish daily. See you next time.

SPEAKER_00 18:36

Thanks, Eddie. Thanks, Betty. Until next time, this is Ian Schaefer coming to you from 123 Easy Studios. I hope you've enjoyed this recording of the American Retirement Advisor, where we make healthcare, income, and inheritance planning 123 Easy.