New Bill Protects Medicare Enrollment for Workers on COBRA, Waiving Late Penalties Starting 2026

The Medicare Enrollment Protection Act of 2025 is setting up a crucial safety net for people transitioning out of the workforce who rely on COBRA continuation coverage. Starting January 1, 2026, this legislation tackles a long-standing headache: how to move from employer-sponsored COBRA to Medicare Part B without getting hit with massive late enrollment penalties.

The COBRA-to-Medicare Headache, Solved

If you’re turning 65 or becoming Medicare-eligible due to disability, but you’re already covered by COBRA—which is essentially buying your old job’s health insurance—you face a tricky choice. Historically, if you didn’t sign up for Medicare Part B immediately, you could face a lifetime premium penalty when you finally did enroll. This bill fixes that by creating a special, one-time enrollment window just for people on COBRA. If you’re covered by COBRA (whether federal, state, or standard), you now get a Special Enrollment Period (SEP) that lasts for the entire time you are covered by COBRA, plus three months after that coverage ends. When you use this SEP to enroll in Part B, your coverage kicks in on the first day of the month after you sign up.

No More Penalty for Being Responsible

Perhaps the biggest win here is the penalty waiver. Imagine being laid off at 64 and needing COBRA to cover your family until you hit 65. Under previous rules, even though you were responsibly covered by COBRA, you’d still be penalized for not enrolling in Part B immediately. This bill explicitly states that the time you spend covered by COBRA will not count against you when calculating the Part B premium. For example, if you spend 18 months on COBRA after becoming eligible for Medicare, you won’t face a 10% or 20% lifetime penalty for those months. This is a game-changer for financial security, ensuring that people who maintain coverage don’t get punished for it later.

What It Means for Your Existing COBRA Plan

This legislation also clarifies the relationship between your COBRA plan and Medicare eligibility. If you’re eligible for Part B but choose to stick with COBRA for a bit—maybe because the COBRA plan is cheaper or has better doctors—your COBRA plan can’t penalize you or reduce your benefits just because you could have Medicare. They have to treat you as if you weren’t eligible for Part B at all. However, there’s a key detail: once you actually enroll in Medicare Part B, your COBRA plan is still allowed to terminate your coverage or reduce your benefits. This maintains the traditional rule that COBRA is often secondary or ends once Medicare Part B begins.

The Fine Print for Employers and Administrators

To make sure everyone understands these new rules, the bill requires the Secretary of Labor to update the official COBRA notices that employers provide to departing workers. By January 1, 2026, these notices must clearly explain the Medicare secondary payer rules and how they interact with COBRA. For the administrators and employers handling COBRA, this means updating their systems and communications to reflect the new SEP and the non-penalty rule. While this is primarily a consumer-protection bill, it does place a clear requirement on benefit administrators to improve transparency and adjust their notification processes.