How Does COBRA Insurance Work?

What is COBRA insurance?

COBRA lets you keep the same health coverage temporarily if you would otherwise lose coverage.

COBRA stands for Consolidated Omnibus Budget Reconciliation Act. It's a federal law that was created in 1985. It gives individuals who experience a job loss or other qualifying event the option to continue their current health insurance coverage for a limited amount of time.¹

Who is eligible for COBRA health insurance?

COBRA health coverage can only be used in certain situations. These situations are sometimes called qualifying events.

COBRA Eligibility Checklist for Employees

You are eligible for COBRA if:¹

• You were enrolled in the employer’s group health plan before the qualifying event.
• Your employer has 20 or more employees, on average.
• A qualifying event occurred, such as:
  • Job termination (not for gross misconduct)
  • Reduced work hours
  • Divorce or legal separation
  • Death of the covered employee
  • Dependent child aging out of eligibility
  • Becoming entitled to Medicare (only for the employee; special rules apply for dependents)

You are not eligible if:¹

• Your job ended due to gross misconduct.
• The employer stops offering group health plans.
• The health plan is not required to comply with federal COBRA rules (for example, certain church plans).
• You were not enrolled in the plan before the qualifying event occurred.

If you are unsure whether you meet COBRA eligibility requirements, you can contact your employer’s human resources department or the insurance carrier for the health plan.

Do all employers have to offer COBRA?

Employers outside the federal government with more than 20 employees are required to offer COBRA coverage to those who qualify.

For small employers: If an employer typically has fewer than 20 employees, they may be required to meet state “mini‑COBRA” laws. These laws often have different time limits and costs compared to federal COBRA.¹

How do you elect COBRA?

You have 60 days to elect COBRA coverage. Coverage becomes retroactive once you pay on time, meaning you are covered starting the day your employer‑sponsored plan ends.¹

• The employer notifies the plan administrator of the qualifying event within 30 days.
• The plan administrator sends your COBRA election notice within 14 days.
• You have 60 days to choose COBRA, starting from the date you lost coverage or the date you received notice, whichever is later.
• Your first payment is due within 45 days of choosing COBRA.
• Payments are due monthly and include a 30‑day grace period.

What does COBRA cover?

Typically covered:¹

• Medical care (including inpatient and outpatient hospital care, physician care, surgery, and more)
• Dental care
• Vision care
• Prescription drugs

Typically not covered:¹

• Disability
• Life insurance

How much does COBRA cost?

Your monthly COBRA premium equals the full employer plan premium (your share plus your employer’s share), plus up to a 2% administrative fee. If you qualify for a disability extension, months 19 through 29 may cost up to 150% of the plan premium.¹

Example 1: Standard COBRA (102%)

• Full employer plan premium: $800 per month
• 2% administrative fee: $16
• Total COBRA premium: $816 per month

Example 2: Disability Extension (150% for months 19 through 29)

• Full employer plan premium: $800 per month
• Disability extension rate: 150% of $800 = $1,200
• Total COBRA premium (months 19 through 29): $1,200 per month

Important: Your first payment must be made within 45 days of electing COBRA. Missing payments after the grace period may end your coverage.¹

COBRA Pros and Cons

Pros of COBRA

• Provides the same coverage you had under your employer
• Allows you to continue seeing the same doctors
• Includes the same health plan benefits

Cons of COBRA

• Often costs more than typical health plans
• Only available for a limited amount of time

COBRA vs. Individual Health Insurance

An alternative to COBRA is purchasing an individual health plan. An individual plan is one you buy from a broker, an insurance carrier, or through a state or federal Health Insurance Marketplace.¹

Under the Affordable Care Act (ACA), loss of a job and related health coverage qualifies you for special enrollment. This allows you to shop for and purchase an individual health plan even when open enrollment is not available.

Depending on your expected income, you may qualify for subsidies, which could make an individual plan less expensive than COBRA. Visit HealthCare.gov to explore plan options.

COBRA FAQs (Frequently Asked Questions)

Is COBRA retroactive?

Yes. If you elect and pay on time, COBRA coverage goes back to the day after your group plan ends.¹

Can you get COBRA if you quit your job?

Yes. Voluntarily quitting is a qualifying event unless the termination is for gross misconduct.¹

Does COBRA cover dependents?

Yes. Covered spouses and dependent children can elect COBRA separately.¹