COBRA Health Insurance

The federal law that lets you keep your employer's health coverage after leaving a job — for up to 18 months, but at full cost, making it expensive but sometimes the best bridge option.

COBRA (Consolidated Omnibus Budget Reconciliation Act) is a federal law that gives employees and their covered dependents the right to continue employer-sponsored health insurance for a limited period after a qualifying event — most commonly job loss, a reduction in hours below benefits eligibility, or a voluntary resignation. COBRA applies to employers with 20 or more employees. The coverage is identical to what you had as an active employee, which is both the main benefit and the main cost: you're paying the full premium (your share plus the employer's share) plus a 2% administrative fee. The total premium is often $500–$700/month for an individual and $1,500–$2,000/month for a family — a significant expense that shocks most people who previously saw only their payroll deduction.

After a qualifying event, your employer is required to notify the plan administrator, who must then send you a COBRA election notice within 14 days. You have 60 days from receiving the notice (or from when coverage ended, whichever is later) to elect COBRA coverage, and then 45 days to make your first premium payment. Coverage is retroactive if you elect it — meaning if you incur medical expenses before electing and then elect within the 60-day window, COBRA covers those expenses. This makes the decision a bit more nuanced: you don't have to elect immediately. If you're healthy and unlikely to need care in the next 60 days, you can wait, see if you get a new job with coverage, and only elect if something comes up.

COBRA's 18-month maximum coverage period (36 months in some cases involving divorce or death of the covered employee) makes it a transitional tool, not a permanent solution. Alternatives worth comparing: marketplace plans through Healthcare.gov (available during a Special Enrollment Period triggered by job loss — you have 60 days), spouse's or domestic partner's employer plan (a qualifying life event usually allows mid-year enrollment), Medicaid if your income drops significantly, or short-term health plans (generally not recommended — they don't cover pre-existing conditions and have significant gaps). In many cases, a marketplace plan with an income-based subsidy will be cheaper than COBRA, particularly for people whose income drops substantially after leaving employment.

COBRA vs. Marketplace: How to Choose

  • If you have ongoing care or medications: COBRA preserves your existing network, in-progress deductibles, and formulary. If you're in the middle of treatment, switching plans mid-year is disruptive. COBRA is often the right call.
  • If you're healthy and cost-sensitive: check Healthcare.gov immediately. Marketplace plans with income-based subsidies (available when your income drops) can cost far less than COBRA.
  • If you have a job lined up within 30–60 days: you may be able to go without coverage briefly if healthy, or elect COBRA retroactively if you need care in the gap. The 60-day election window is your buffer.
  • If you have dependents: the stakes are higher. COBRA's continuity of care benefit is more valuable when children or a spouse have existing providers and care relationships.
  • If your new employer has a waiting period: many employers don't start health coverage on day one. COBRA can bridge the gap.
  • COBRA doesn't automatically renew: it terminates at 18 months, when you become eligible for Medicare, or when you gain other group coverage. Track your end date.

Timing and the Retroactive Election Trick

One of COBRA's most useful features is often misunderstood: you don't have to decide immediately. You have 60 days from the election notice (or from when coverage lapses) to elect, and once you elect, your coverage is retroactive to the day it lapsed. This means you can strategically wait: if you're healthy and don't anticipate needing care, you can delay the decision while you explore marketplace plans or wait to see if you get a new job quickly. If something medical comes up during that 60-day window — an emergency, an unexpected diagnosis — you can elect COBRA and have it cover expenses retroactively, paying only the premiums for the months you actually needed coverage. The trap is forgetting the 60-day deadline or misjudging your timeline: once 60 days pass, you lose the COBRA option and any coverage gap is permanent.

Example

A marketing manager leaves her job in October and receives her COBRA election notice. Coverage would cost $890/month for her and her two children. She checks Healthcare.gov and finds a silver plan for $310/month with a $200/month subsidy based on her projected income during her job search. Her pediatrician and the kids' allergist are both in-network on the marketplace plan. She switches to the marketplace plan, saves $580/month, and uses the savings to extend her job search runway by two months.