COBRA stands for the Consolidated Omnibus Budget Reconciliation Act, a federal law that lets you keep your employer-sponsored health insurance after you leave a job. For a price.
It’s not free and it’s not cheap. You pay the full premium that both you and your employer used to share, plus a 2% administrative fee. For many people, that comes out to three to five times more per month than they paid while employed.
How COBRA Works
While you’re employed, your employer typically pays a large share of your health insurance premium, often 70 to 80 percent. You pay the rest through payroll deductions. When you leave, that employer contribution disappears. Under COBRA, you cover the entire premium yourself.
Example: Your employer paid $900/month and you paid $200/month while employed. Your COBRA premium would be $900 + $200 + 2% = $1,122/month for the same coverage.
Who Is Eligible
COBRA applies to employers with 20 or more employees. If your company has fewer than 20, federal COBRA doesn’t apply, though many states have mini-COBRA laws that extend similar protections to smaller employers.
You’re eligible if you lose coverage because of:
- Voluntary or involuntary job loss (except for gross misconduct)
- Reduction in hours that eliminates coverage
- Divorce or legal separation from the covered employee
- Death of the covered employee
- Dependent child aging off the plan
- An employee becoming eligible for Medicare
How Long Coverage Lasts
Coverage duration depends on the qualifying event:
| Qualifying Event | Maximum COBRA Duration |
|---|---|
| Job loss or reduced hours | 18 months |
| Disability (SSA determination) | 29 months |
| Divorce, death, Medicare, dependent age-off | 36 months |
You can end COBRA earlier than the maximum if you get coverage elsewhere or stop paying premiums.
The Election Window
When you lose coverage, your employer (or plan administrator) must send you an election notice within 14 days of the qualifying event. You then have 60 days from the later of: the date coverage ended or the date the notice was mailed to elect COBRA.
If you elect COBRA, coverage is retroactive to the date your original coverage ended, meaning there’s no gap. That’s useful if you have a healthcare need during the decision window.
Payment is due within 45 days of electing coverage. The first payment covers all months back to the start of coverage.
What Is Covered
COBRA continues exactly the coverage you had. Same plan, same network, same deductible and out-of-pocket maximum. You can’t switch plans or coverage tiers when you elect COBRA, you keep what you had.
COBRA Alternatives
Before electing COBRA, compare these options:
Marketplace plans (healthcare.gov): Losing job-based coverage is a qualifying life event that triggers a 60-day special enrollment period on the ACA marketplace. If your income qualifies, subsidies (premium tax credits) can make marketplace plans significantly cheaper than COBRA, sometimes under $100/month. Run the comparison before assuming COBRA is your best option.
Spouse’s or partner’s plan: If your spouse or partner has employer coverage, losing your own coverage is a qualifying event that lets you join their plan immediately.
Short-term health plans: Temporary coverage that’s cheaper but often excludes pre-existing conditions and provides limited benefits. Not a primary coverage strategy, but may bridge a very short gap.
Medicaid: If your income drops significantly after a job loss, you may qualify for Medicaid. Eligibility varies by state.
When COBRA Makes Sense
COBRA tends to make sense when:
- You’re mid-treatment and can’t risk disruption to your care team or plan
- You’re close to meeting your annual deductible and switching plans would restart it
- Your new job starts in a few weeks and you need to bridge a short gap
- Marketplace plans in your area have poor networks or limited options
- You have specific medications or specialists that are in-network under your current plan but may not be elsewhere
COBRA rarely makes sense as a long-term solution given the cost. The 60-day comparison period exists for a reason, use it.
What Happens If You Miss a Payment
If you miss a COBRA premium payment after the initial 45-day window, you have a 30-day grace period before coverage terminates. If you don’t pay within the grace period, coverage is terminated retroactively to the date the missed payment was due. Any claims filed during that gap can be denied.
State Mini-COBRA Laws
If your employer has fewer than 20 employees, check your state’s continuation coverage laws. Many states have mini-COBRA laws that apply to smaller employers and offer similar continuation rights, sometimes for shorter periods.
Frequently Asked Questions
Q: What is COBRA health insurance?
COBRA is a federal law that lets you keep your employer-sponsored health insurance after leaving a job, experiencing reduced hours, or another qualifying event. You continue the exact same plan you had at work, but you pay the entire premium — both the employee and employer portions — plus a 2% administrative fee. Coverage typically lasts up to 18 months after job loss.
Q: What are COBRA benefits?
COBRA continuation provides the same benefits you had through your employer — the same plan, the same network, the same deductible, and the same out-of-pocket maximum. If your employer plan included medical, dental, and vision, each can be continued independently under COBRA. The trade-off is cost: you pay the full premium yourself, which is often three to five times more than you paid while employed.
Q: Can my employer cancel my COBRA?
COBRA coverage can be terminated early if you fail to pay premiums, the employer stops offering health benefits entirely, or you become covered under another group health plan or Medicare.
Q: Does COBRA cover dental and vision?
If your employer plan included dental or vision coverage, those plans are typically eligible for COBRA continuation separately from medical coverage. You can elect each independently.
Q: Will my new employer’s plan cover pre-existing conditions?
Under the ACA, employer-sponsored plans and marketplace plans can’t deny coverage or charge more for pre-existing conditions. COBRA continuation doesn’t offer any advantage there.
Q: Is COBRA premium tax-deductible?
COBRA premiums can be deducted as a medical expense if you itemize deductions and your total medical expenses exceed 7.5% of your adjusted gross income. If you’re self-employed, you may be able to deduct health insurance premiums (including COBRA) directly. Check with a tax professional.
Learn More
- Department of Labor: COBRA continuation coverage
- Department of Labor: An employee’s guide to health benefits under COBRA
- healthcare.gov: COBRA coverage
- healthcare.gov: Coverage options after losing job-based coverage