COBRA, which stands for the Consolidated Omnibus Budget Reconciliation Act, is a federal law that allows employees and their family members to continue their employer-sponsored health insurance for a limited period of time after they lose eligibility for coverage.
In other words, if you leave your job or experience another qualifying event, you may be able to keep the same employer-sponsored health plan instead of having to find new coverage right away.
However, you will usually be responsible for paying the full cost of the coverage, including the portion that your employer previously paid.
Who Can Use COBRA?
COBRA may apply when certain events cause you or your family members to lose health coverage through an employer.
Common qualifying events include:
- Leaving a job, except in certain cases involving termination for gross misconduct.
- Having work hours reduced, resulting in the loss of health coverage.
- Divorce or legal separation from the covered employee.
- The death of the covered employee.
- A child losing dependent status under the health plan.
How Does COBRA Work?
If you are eligible, you will receive a notice explaining your right to elect COBRA coverage.
Once you enroll, you may be able to continue using:
- the same insurance company;
- the same provider network;
- the same benefits;
- the same deductible amounts already accumulated during the year;
- the same covered prescription drug list.
This can help you avoid changing doctors or interrupting ongoing medical treatment.
How Long Does COBRA Last?
The length of COBRA coverage depends on the situation.
In general, COBRA coverage lasts 18 months for employees who leave a job or have their work hours reduced, and 36 months for certain other qualifying events, such as divorce or a child losing dependent status.
In some special circumstances, the coverage period may be extended under applicable law.
The Cost of COBRA
This is the part that surprises many people. While you are employed, your employer usually pays a significant portion of your health insurance premium.
When you switch to COBRA, you generally have to pay:
- the portion of the premium you previously paid;
- the portion previously paid by your employer;
- and a small administrative fee allowed by law.
As a result, COBRA is often much more expensive than the coverage you had while employed.
When Should You Consider COBRA?
COBRA may be a good option if you are in one of the following situations:
- You or a family member is currently receiving medical treatment and does not want to change doctors or healthcare facilities.
- You expect to start a new job within the next few months and want to avoid a gap in health insurance coverage.
COBRA or Marketplace?
This is a common question. If your income drops after leaving your job, Marketplace coverage may be a more affordable option because you may qualify for a Premium Tax Credit to help lower your monthly insurance costs. By contrast, COBRA allows you to keep your current health plan, but it usually does not come with subsidies like Marketplace coverage. This is one of the main reasons many people compare COBRA with Marketplace coverage before making a decision.
Before making a decision, you should compare the cost, benefits, and your healthcare needs.
For example, suppose you have just left your job. Your employer sends you a COBRA election notice, and the COBRA premium is $900 per month. After leaving your job, your income also drops significantly.
In that situation, you have two options: COBRA or Marketplace health insurance. Below are some general guidelines to consider.
Choose COBRA if you want to:
- keep your current health insurance plan;
- keep your current doctors and medical services;
- and you can afford to pay the full premium.
You may want to decline COBRA and buy Marketplace coverage if:
- you do not have ongoing medical treatment needs and are comfortable switching to a different health insurance plan;
- your income has dropped enough that you may qualify for a Premium Tax Credit, which could help reduce your monthly health insurance costs.
Does COBRA Apply to Immigrants?
If you are enrolled in an employer-sponsored health insurance plan and meet COBRA eligibility requirements, your right to continue coverage generally does not depend on whether you are a U.S. citizen or an immigrant.
However, specific eligibility rules may vary depending on the health plan and each person’s individual circumstances.
How to Enroll in COBRA
When a qualifying event occurs, your employer or the health plan administrator will send a notice explaining your right to elect COBRA coverage.
You should carefully review:
- the enrollment deadline;
- the premium amount;
- when coverage begins and ends;
- and the payment method.
If you miss the enrollment deadline, you may lose your right to continue coverage under COBRA.
Learn More
For more information about COBRA, you can visit the official websites of the following agencies:
- U.S. Department of Labor – the agency that provides guidance and oversight for COBRA.
- HealthCare.gov – a resource for comparing COBRA with Marketplace coverage and learning about other health insurance options.
Key Takeaways
- COBRA allows you to continue employer-sponsored health insurance after losing eligibility for coverage.
- You can usually keep the same health plan, doctors, and benefits.
- COBRA typically lasts 18 or 36 months, depending on the qualifying event.
- You usually have to pay the full premium plus a small administrative fee.
- Before making a decision, compare COBRA with Marketplace coverage based on cost, benefits, and your healthcare needs.