COBRA

A federal law that lets you keep employer health insurance after leaving a job, at full cost.

COBRA (Consolidated Omnibus Budget Reconciliation Act) is a federal law that gives employees — and their covered dependents — the right to continue their employer-sponsored health insurance after leaving a job, losing coverage due to reduced hours, or experiencing other qualifying life events. Coverage can continue for up to 18 months for employment-based loss of coverage (36 months for some other qualifying events).

The critical catch is cost. Under COBRA, you pay the full premium — both the portion you previously paid and the portion your employer previously covered — plus a 2% administrative fee. For many people, this is a significant shock: if your employer was covering $800/month of a $1,100/month family plan, your COBRA premium would be $1,122/month instead of $300.

COBRA is triggered by specific qualifying events: termination (for any reason except gross misconduct), voluntary resignation, reduction in hours that causes loss of coverage, divorce or legal separation from a covered employee, a covered employee becoming eligible for Medicare, and a dependent child no longer meeting the plan's age requirements.

Because COBRA is typically expensive, it's often not the best choice for people who are healthy and can afford alternative coverage. The ACA marketplace and short-term health plans may be significantly cheaper depending on your income and the state you live in.

When COBRA Makes Sense

Despite its cost, COBRA has specific situations where it's the right choice. If you're between jobs for a short period (less than 60 days), COBRA allows you to avoid a coverage gap without switching plans. If you have ongoing medical care — a chronic condition, scheduled surgery, a pregnancy — staying on the same plan avoids changing networks, which can disrupt care with specialists who may not accept your new insurer. If your employer-sponsored plan is unusually comprehensive (low deductibles, broad network), COBRA may still be cheaper than what's available on the marketplace in your area.

COBRA Election and Timing Rules

  • Your employer must notify you of your COBRA rights within 14 days of a qualifying event.
  • You have 60 days from either the date of the qualifying event or the notice (whichever is later) to elect COBRA.
  • You have 45 days from your election date to pay the first premium — which can be backdated to your coverage loss date.
  • If you elect COBRA retroactively, you're covered for the entire period back to your qualifying event — useful if you incur medical expenses during the election window.
  • Once you elect, you have 30 days to pay each subsequent monthly premium. A grace period exists but exceeding it terminates coverage permanently.

Alternatives to COBRA

  • ACA Marketplace — losing employer coverage is a qualifying life event that triggers a 60-day special enrollment period. With income-based subsidies, premiums can be significantly lower than COBRA.
  • Spouse's or domestic partner's plan — a job loss qualifies as a special enrollment event for their employer plan.
  • Short-term health plans — cover catastrophic events at a lower cost but don't cover pre-existing conditions and don't count as ACA-compliant coverage.
  • Medicaid — if your income drops significantly after losing a job, you may qualify for Medicaid in your state.
  • New employer's plan — if your new employer has an immediate start date, you may be able to skip COBRA entirely.

Example

A marketing manager is laid off in October. Her employer-sponsored plan cost her $220/month; COBRA continuation costs $890/month for the same coverage. She elects COBRA for one month to bridge to her new employer's plan starting December 1 — paying $890 once rather than $1,780 for two full months of COBRA.