COBRA stands for the Consolidated Omnibus Budget Reconciliation Act. This 1980s federal law says that if you lose your job or have certain other life changes, you can keep your employer's health insurance for a while by paying the full cost yourself. Think of it as a bridge that prevents you from suddenly losing health coverage when you're already dealing with job loss or other major life disruptions.
The key word here is "temporary." COBRA isn't meant to be a long-term solution. It gives you time to find new coverage through a new employer, the marketplace, or other options. But during that transition period, it can be a lifesaver, especially if you have ongoing medical needs or family members who depend on your coverage.
Who actually qualifies for COBRA coverage?
You're eligible if you were covered under your employer's group health plan and you lose that coverage due to a "qualifying event." The most common scenario is losing your job (whether you quit, get fired, or are laid off), but it also applies to things like getting your hours reduced so you're no longer eligible for benefits, getting divorced if you were covered under your spouse's plan, or becoming ineligible for dependent coverage (like when you age out of your parents' plan).
There's a catch though: your former employer has to have at least 20 employees for COBRA to apply. If you worked for a smaller company, you're out of luck federally, though some states have their own "mini-COBRA" laws that cover smaller employers. Also, if your employer goes out of business entirely or stops offering health insurance altogether, COBRA won't help you.
How long can I actually stay on COBRA?
For most people who lose their jobs, COBRA lasts 18 months. If you become disabled during those first 18 months, you might be able to extend it to 29 months total. In certain cases, the coverage can last up to 36 months (e.g. divorce or a dependent child aging out).
It’s critical to know that these time limits are firm. Once your COBRA period ends, it ends. You can't get it back, and you can't restart the clock. This is why it's crucial to have a plan for what comes next before your COBRA runs out. Many people mistakenly think they can just keep renewing COBRA indefinitely, but that's not how it works.
What's this going to cost me?
COBRA is expensive. You'll pay the full premium that your employer was paying, plus up to a 2% administrative fee. So if your employer was paying $500 a month for your health insurance and you were paying $100, your COBRA bill will be around $612 per month ($600 plus the 2% fee). For family coverage, this can easily run $1,500-2,000 or more per month.
This sticker shock catches a lot of people off guard because most employees don't realize how much their employer was actually contributing to their health insurance. What seemed like affordable coverage when you were employed can suddenly become a major budget item when you're paying the whole thing yourself, especially if you're unemployed.
Do I have to decide about COBRA right away?
You actually get a 60-day grace period to decide, which starts from the later of either when you lose coverage or when you receive your COBRA election notice. If you find a new job with benefits quickly, you might not need COBRA at all. If you have a medical emergency during those 60 days and decide you need the coverage, you can elect COBRA retroactively and it will cover expenses back to when your original coverage ended.
But don't cut it too close. If you miss that 60-day deadline, you lose the right to elect COBRA entirely. And remember, even if you elect COBRA retroactively, you'll owe all the premiums from the date your original coverage ended, which could be a substantial lump sum.
What if I can't afford COBRA? Are there other options?
COBRA is often the most expensive option available, so definitely explore alternatives. The healthcare marketplace (Healthcare.gov) might have plans that cost significantly less, especially if you qualify for premium subsidies based on your income. If you're under 26, you might be able to get back on your parents' plan. Some states have their own programs for people between jobs.
Medicaid is another possibility if your income is low enough. Short-term health insurance plans are also available in most states, though they offer less comprehensive coverage than COBRA or marketplace plans.
Can my employer make COBRA easier or harder for me?
Your employer has specific legal obligations when it comes to COBRA. They must send you an election notice within 44 days of your qualifying event, and this notice has to include all the required information about your rights, costs, and deadlines. They can't make COBRA more expensive than the law allows (the actual premium plus up to 2% admin fee), and they can't make the process unnecessarily difficult.
Employers can certainly make severance easier through assistance with COBRA. Here's how it typically works: The employee still has to elect COBRA coverage themselves and is technically responsible for the premiums, but the company provides financial assistance to help pay for it. This usually happens in one of two ways:
Direct Premium Payment: The employer pays the COBRA premiums directly to the insurance company for a specified period (commonly 3-6 months). The employee doesn't have to pay anything during this period, but they do have to report this as taxable income.
Cash Assistance: The severance package includes extra money specifically intended for COBRA premiums. The employee gets the cash and is responsible for making the actual COBRA payments themselves.
This arrangement benefits both sides. For employees, it eases the financial shock of suddenly having to pay full health insurance premiums while job hunting. For employers, it's a relatively cost-effective way to show goodwill during layoffs and can help with recruitment and retention when times are good.
What happens if I'm late with a COBRA payment?
COBRA has specific rules about payment deadlines, and they're stricter than you might expect. Your first payment is due within 45 days of electing COBRA, and it has to cover all the months from when your original coverage ended. After that, monthly payments are due by the first of each month, with a 30-day grace period.
If you miss these deadlines, your COBRA coverage can be terminated, and once it's terminated for non-payment, you can't get it back. This is different from regular insurance where you might just have a lapse and can get back on track. If you're having trouble making payments, communicate with your COBRA administrator immediately to understand your options.
Is COBRA the same as the health insurance I had before?
Yes, COBRA coverage is identical to what you had as an employee. You can use the same doctors, same hospitals, and have the same prescription coverage. You’ll also be responsible for the same deductibles and copays. The only thing that changes is who pays the premium.
However, if your former employer changes their health plan offerings during your COBRA period, your COBRA coverage will change too. You'll generally get to make the same choices that active employees get during open enrollment periods.
What about dental and vision coverage?
If your employer offered dental and vision insurance, you can usually elect COBRA for those too, either separately or in combination with your medical coverage. The rules are the same. Since dental and vision premiums are typically much lower than medical premiums, keeping these through COBRA might be more affordable than you'd expect.
Can I drop COBRA if I find something better?
Absolutely. You can cancel COBRA at any time if you find other coverage, get a new job with benefits, or decide you don't want to keep paying for it. Just make sure you have other coverage in place before you cancel.
If you do find new employment, pay attention to timing. Most employer health plans have waiting periods before new employees are eligible for benefits. You might want to keep COBRA for a month or two to bridge that gap, then cancel it once your new coverage kicks in.
What's the biggest mistake people make with COBRA?
Probably assuming they can't afford it without actually doing the math. Yes, COBRA is expensive, but if you have ongoing medical needs, a chronic condition, or prescription medications, the cost of paying out of pocket could be much higher than COBRA premiums. People also sometimes choose cheaper marketplace plans without realizing they'll lose access to their current doctors or that their medications might not be covered.
Another common mistake is missing deadlines. COBRA has very specific timeframes, and they're not flexible. Missing the election deadline, the first payment deadline, or monthly payment deadlines can permanently end your COBRA rights. When you're dealing with job loss and other stress, it's easy to let paperwork slide, but COBRA paperwork has real consequences.
How has COBRA changed recently?
The biggest recent change came during COVID-19, when the government temporarily extended deadlines and paused time limits for people affected by the pandemic. Most of those special rules have now ended, but they showed how COBRA rules can be adjusted during emergencies.
There's also been ongoing discussion about making COBRA more affordable, possibly through government subsidies, but no major changes have been implemented. Some states have created their own programs to help with COBRA costs or provide alternatives, so it's worth checking what's available in your state.
The bottom line with COBRA is that it's an important safety net, but it's not your only option and it's not necessarily your best option. The key is understanding all your choices, doing the math on costs versus benefits, and making sure you don't miss any deadlines while you're figuring out your next step. For many people, COBRA provides valuable peace of mind during a transition period, but for others, marketplace plans or other alternatives might make more sense financially. The important thing is to make an informed decision rather than just defaulting to COBRA because it's what you know.
