We recently met with a new client, age 66, who was laid off and wanted to talk about retiring early. He wasn’t too worried about health insurance, since he thought he had 18 months of COBRA coverage. COBRA (short for Consolidated Omnibus Budget Reconciliation Act) allows people to keep their employer health insurance for a limited time after leaving a job. This can happen after job loss, a reduction in work hours, divorce, death, or other big life changes.
But once you turn 65, Medicare becomes important too. In our client’s case, he became eligible for Medicare at 65 but didn’t sign up at that age and not even when he lost his job at age 66. He thought his health insurance and later COBRA would be enough. But here’s the problem: once you’re eligible for Medicare, and you (and your spouse) are not working anymore Medicare becomes the main insurance (called the “primary payer”). That means Medicare pays your medical bills first, and COBRA only pays after Medicare does.
So, if you don’t sign up for Medicare on time, COBRA may not cover your bills — or it may only cover a small part. You could be stuck paying the rest out of pocket. And you get a penalty for not signing up for Medicare in time. Many people don’t realize this. They think if they have coverage from a former employer or through COBRA, they don’t need to sign up for Medicare right away.
Here’s a general rule to follow:
If you’re still working at a company with 20 or more employees, your employer insurance pays first, and you can wait to sign up for Medicare.
But if your company has fewer than 20 employees, OR you are no longer working and are using COBRA, Medicare becomes the main payer — and you should sign up when you’re eligible – age 65.
This also applies to people under 65 who qualify for Medicare due to a disability. If they work at a company with fewer than 100 employees, Medicare usually pays first too. If you don’t sign up for Medicare when you should, you could be left with large medical bills. You may also have to pay a late enrollment penalty, which increases your Medicare premium for life.
Unfortunately, there’s no clear system that tells people when these rules change. The information is buried in a government handbook called “Medicare and You”, you can find it at https://www.medicare.gov/medicare-and-you it can be emailed to you or you can download it. If you’re unsure about when to sign up for Medicare or how it works with your health coverage, we can walk you through it or refer you to a Medicare specialist.
Important Update: Social Security Paper Checks Ending
If you still receive your Social Security benefits by mailed check, you’ll need to be aware of a change soon. Starting September 30, 2025, the Social Security Administration (SSA) will stop sending paper checks. All payments will be made electronically — either through direct deposit to your bank or by a government debit card. The SSA is sending letters to people who still get paper checks and will have staff ready to help with the switch to electronic payments.
