Avoid the Chaos: What Retirees Need to Know About COBRA and Medicare
If you’re retiring at 65 or older, choosing between COBRA and Medicare can be confusing—and costly if you get it wrong. Here’s what you need to know to avoid penalties, coverage gaps, and stress during your transition to Medicare.
Enrolling in Medicare After Retirement: SEP Process
If you delayed enrolling in Medicare while covered by active employer insurance and are now retiring, you’ll need to apply for Part B during your Special Enrollment Period (SEP).
To do this, you’ll complete:
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Form CMS-40B – to apply for Medicare Part B
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Form CMS-L564 – to prove you had employer-sponsored coverage
🔹 You can submit these forms online, by mail, or in person at your local Social Security office.
What’s the CMS-L564 Form and Why Is It Important?
This form proves you had active employer coverage, which protects you from late penalties. Here’s how it works:
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Section A is filled out by the retiree
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Section B is completed by the employer, verifying coverage dates and employment history
Even though the form has some conflicting guidance about whether the employer must sign it, we strongly recommend the employer sign Section B to avoid any delays or confusion with Medicare.
If Your Employer Won’t Complete the Form
If your employer is unavailable or unwilling to complete Section B, you can submit:
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W-2s showing pre-tax medical contributions
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Pay stubs with insurance deductions
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Insurance cards with effective dates
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Explanation of benefits
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Premium payment statements
These serve as secondary proof of coverage for your Medicare application.
Still Working at 65? Know Your Rights
Thanks to Medicare Secondary Payer (MSP) rules, if your employer has 20+ employees, your group health plan pays primary, and you can delay Medicare A and or B, without penalty.
However:
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Once you retire, your employer plan is no longer considered “active coverage.”
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You must enroll in Medicare promptly after retirement to avoid penalties and gaps.
COBRA without Medicare: RISKY
Many retirees assume COBRA gives them time to delay Medicare.Especially when an employer offers fully subsidized COBRA as an exit-agreement. It doesn’t.
Here’s why COBRA is not a substitute for Medicare:
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COBRA does not extend your 8-month SEP window to enroll in Part B
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COBRA does not prevent Medicare late enrollment penalties
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COBRA will often pay secondary (or nothing at all) if you’re Medicare-eligible but not enrolled
For example: If you’re eligible for Medicare but haven’t enrolled in Part B, COBRA may only pay the leftover portion Medicare would have paid—leaving you with large out-of-pocket bills. We have seen clients get hit with large medical bills for trying to game the system by using the 8-month SEP to enroll in part B and avoid IRMAA payments. This can backfire when COBRA refuses to pay the primary portion of your medical bills under Medicare Secondary Payor rules.
Timing Matters
If you’re planning to retire after age 65
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Enroll in Medicare B as soon as you find out your last day of coverage through your active work status.
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Enrolling in Medicare B within your 8 month SEP window will help you avoid late enrollment penalties but will likely subject you to gaps in your health insurance coverage.
Key Takeaways for Retirees and Employers
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Complete Form CMS-L564 + CMS-40B within a 90 day window from retirement.
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Avoid COBRA without Medicare when retiring after age 65.
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Medicare must be primary payor after retirement
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Fully subsidized COBRA won’t extend your Medicare Part B enrollment window and or protect you from penalties if you delay Medicare enrollment beyond your 8 month SEP.
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When in doubt, ask for help!
Need Help Navigating Medicare Enrollment?
At Steinlage Insurance Agency, we guide retirees step-by-step through Medicare enrollment—including working with employers to complete Form CMS-L564 and helping avoid late penalties and gaps in coverage.
Call us today at (636) 561-5060 or visit steinlageagency.com
Let’s make this transition clear, simple, and penalty-free.
