Losing your job can be stressful enough without worrying about losing your health insurance, too. That’s where COBRA comes in. This federal program allows you to temporarily keep your employer-sponsored health coverage after leaving a job—whether you quit, get laid off, or your hours are reduced.
What Is COBRA Health Insurance?
COBRA stands for the Consolidated Omnibus Budget Reconciliation Act. Enacted in 1986, it gives employees and their families the right to continue their group health insurance for a limited time after a qualifying event, like job loss or divorce.
The catch? You usually have to pay the full cost of the plan—plus a small administrative fee.
Who Is Eligible for COBRA?
To qualify for COBRA continuation coverage, all three of the following must apply:
Your employer has 20 or more employees.
You were enrolled in the group health plan during your employment.
You experience a qualifying event.
Common Qualifying Events Include:
| For Employees | For Dependents |
|---|---|
| Voluntary or involuntary job loss | Employee’s job loss or death |
| Reduction in work hours | Divorce or legal separation |
| Transition between jobs | Dependent child aging out of coverage |
If your employer shuts down entirely or stops offering a group health plan to all employees, COBRA may not be available.
How Long Does COBRA Coverage Last?
The length of COBRA coverage depends on the qualifying event. Here’s a general breakdown:
| Qualifying Event | Coverage Duration |
|---|---|
| Job loss or reduced hours | Up to 18 months |
| Disability (within 60 days of job loss) | Up to 29 months total |
| Death of the employee | Up to 36 months for dependents |
| Divorce or legal separation | Up to 36 months for affected spouse |
| Child losing dependent status | Up to 36 months |
What Does COBRA Cost?
One of the biggest downsides of COBRA is the price tag. While you keep the same coverage, you lose the employer’s contribution. You’ll be paying:
100% of the monthly premium, and
Up to 2% administrative fee
For example, if your employer plan costs $600/month and they used to cover $400, your monthly COBRA premium could jump to around $612.
Sample COBRA Cost Breakdown
| Coverage Type | Employer Monthly Cost | Employee Monthly Cost | COBRA Monthly Cost |
|---|---|---|---|
| Individual | $400 | $100 | $510 |
| Family | $1,200 | $300 | $1,530 |
(These are estimates; actual costs vary by employer plan.)
How to Elect COBRA Coverage
If you become eligible, your employer or plan administrator must notify you within 14 days of your qualifying event. After that:
You’ll receive a COBRA election notice detailing your rights.
You have 60 days from the date of the notice (or the loss of coverage, whichever is later) to decide.
Coverage is retroactive to the date you lost your job if you choose to enroll.
You must also pay your first premium within 45 days of electing coverage.
Alternatives to COBRA: Are There Better Options?
COBRA isn’t your only option, and for many people, it’s not the cheapest either. Here are some alternatives to consider:
ACA Marketplace Plans
You qualify for a Special Enrollment Period (SEP) after losing employer coverage. These plans are often more affordable, especially if you qualify for subsidies based on income.
Spouse’s or Parent’s Plan
If your spouse or parent (if you’re under 26) has employer coverage, you may be able to join their plan.
Medicaid
If your income drops significantly, you might be eligible for Medicaid, which offers low- or no-cost healthcare.
Short-Term Plans
These are lower-cost, limited-coverage plans that may bridge the gap if you’re between jobs, though they don’t cover pre-existing conditions.
Who Should Consider COBRA?
While expensive, COBRA can be a solid option for:
People in the middle of treatment who want to avoid changing doctors or dealing with new coverage.
Those waiting for Medicare eligibility who need to bridge a short gap.
High-income earners who don’t qualify for ACA subsidies and want seamless coverage.
Tips for Managing COBRA Costs
Use an HSA: If you have a Health Savings Account, you can use it to pay COBRA premiums tax-free.
Ask your employer about severance packages: Sometimes, employers cover part of COBRA costs as part of a layoff agreement.
Reassess your needs: If you don’t need the full family plan, consider individual COBRA or Marketplace options.
Sources:
Wrapping Up
COBRA health insurance gives you a way to keep your existing health plan during tough transitions—but it’s not always the most budget-friendly option. If keeping your current doctors and coverage is important, and you can afford the premiums, it can be worth it. Otherwise, it’s smart to compare alternatives like ACA marketplace plans or Medicaid to see what fits your health needs and wallet best.
