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Losing your job can leave you without health insurance. COBRA insurance is one way to keep coverage, but it comes with a hefty cost.
It’s smart to know the pluses and minuses of COBRA health insurance, how much it costs, how to qualify, the deadlines and alternatives to consider.
Understanding COBRA Insurance
COBRA is a federal law that stands for “The Consolidated Omnibus Budget Reconciliation Act.” COBRA gives you the right to remain enrolled in a group health insurance plan if it meets COBRA requirements.
This enables qualifying individuals who quit, lose their job or qualify because a special circ*mstance to temporarily continue their employer-sponsored group health insurance coverage by paying the total health insurance premium themselves (including what was the employer’s portion).
COBRA allows workers who leave employment at a company with 20 or more employees to maintain group health coverage with their former employer for 18 months or longer after they terminate employment. Many states also have “mini-COBRA” laws that apply to companies with fewer than 20 employees.
Employees who have their work hours reduced below the group health insurance’s eligibility threshold can also qualify for up to 18 months of COBRA, according to Bryan Clickener, senior account executive for RSC Insurance Brokerage.
COBRA primarily targets employees who have lost or left their jobs, but it also applies to others who have “qualifying events” that made them lose health insurance.
Qualifying events also affect other family members on health plans, including a spouse or child, including:
- Getting divorced
- Having a child who turns 26 and ages out of family coverage
- An employee passes away and the covered relatives want to keep the employer’s coverage
- The employee becomes eligible for Medicare and relatives on the plan want to keep the employer’s plan
Pros and Cons of COBRA Health Insurance
COBRA offers a few benefits:
- Coverage is effective immediately, with no waiting period after the qualifying event.
- It’s the same coverage you had under your employer.
- You don’t have to change doctors or see if your current doctor accepts the plan.
Furthermore, COBRA insurance can be helpful after you lose a job if you or a family member on the plan has a chronic health condition, ongoing health concerns, or necessary treatments in progress that require maintaining predictable coverage and a trusted network of providers.
“COBRA may be your best choice, as well, if you have met your annual deductible and expect to need health care or prescription medications during the rest of the year,” says Cindy George, personal finance editor for GoodRx in Houston.
COBRA also has its drawbacks:
- Your former employer likely won’t help pay premiums. In most cases, you have to pay 100% of the entire premium—your portion and your former employer’s portion—as well as a 2% administrative fee to keep coverage. Paying the whole bill yourself could be a significant struggle, but is likely better than going without any health insurance.
- COBRA coverage expires. It typically lasts 18 months but may extend to 36 months, depending on the situation. After that time, you’ll have to find health insurance elsewhere.
Related: Best health insurance companies
What Does COBRA Insurance Cost?
COBRA generally makes the former employee pick up all of the costs for health insurance coverage, which was $7,739 on average for single coverage for an employer-sponsored health plan in 2021, according to the Kaiser Family Foundation.
Using this average expense, it would cost an employee likely $645 per month to continue the employer group health insurance coverage via COBRA.
Family coverage cost was $22,221 on average, which would cost $1,852 monthly without employer help. Those estimates also don’t consider a potential 2% administrative fee.
What you pay depends on your employer’s group health insurance plan and will be explained in your COBRA election notice. You should receive the election notice within 14 days of quitting, losing your job or qualifying because of a special circ*mstance.
Related: How Much Does Health Insurance Cost?
Who is Eligible for COBRA Insurance?
You can qualify for COBRA coverage if:
- You were enrolled in your employer’s group health insurance plan.
- Your employer has at least 20 employees.
- Your employer’s group health insurance plan remains active.
- A qualifying event caused you to lose coverage, including voluntary or involuntary job loss, a decrease in your hours worked, being involved in a divorce or if you die and your family needs health coverage.
What Is the Deadline to Sign up for COBRA Insurance?
You typically have at least 60 days from the date you receive a COBRA election notice from your former employer or the date you would lose health care coverage—whichever comes later—to enroll in COBRA.
You have that 60-day window to decide on COBRA. Even if you initially decline COBRA, you can later sign up if it’s within 60 days.
COBRA coverage begins as soon as you become eligible. You can choose COBRA at any point of the eligibility period and the coverage is retroactive whether you choose coverage on day 1 or day 59. That means if you need health care services on day five but don’t sign up until day 50, the COBRA plan will still cover the services because you were eligible for COBRA coverage.
How To Apply for COBRA Insurance
When you qualify for COBRA based on a qualifying life event, you must receive a COBRA election notice within 14 days of your qualifying event. This notice provides details about timelines and rules, including:
- How to enroll in COBRA
- How soon you have to make your COBRA decision
- How to notify your plan administrator
- The date COBRA coverage will begin
- The maximum duration of coverage
- Your monthly payment
- Due date for payment
“The employee, spouse or family member who qualifies for COBRA must complete the form requesting coverage that comes with the COBRA election notice and make a payment within 60 days, and make a payment within a specific time, usually within 45 days of election for COBRA,” says Michael Arrigo, CEO of No World Borders, a company that specializes in health care data, regulations and economics.
When Do You Lose COBRA Eligibility?
Your COBRA eligibility expires if you do not apply for COBRA by the deadline indicated in your COBRA election notice.
Once COBRA coverage is in place, you are generally eligible to continue coverage for up to 18 months, depending on why you become eligible for COBRA.
COBRA health insurance will terminate if you stop paying your COBRA premiums monthly in full or you reach age 65 and can receive Medicare coverage.
Here’s the longest you can keep COBRA insurance depending on the qualifying event and person.
How long can an employee or former employee keep COBRA?
| Reason you’re eligible for COBRA | Length of COBRA eligibility |
|---|---|
Termination of job as long as not for gross misconduct | 18 months |
Reduced hours so you’re no longer eligible for employer-sponsored health plan | 18 months |
Total disability | 29 months |
How long can a spouse of an employee or former employee keep COBRA?
| Reason you’re eligible for COBRA | Length of COBRA eligibility |
|---|---|
Employee was terminated from job, as long as it was not for gross misconduct | 18 months |
Employee got reduced hours so you’re no longer eligible for employer-sponsored health plan | 18 months |
Employee becomes eligible for Medicare | 36 months |
Death of employee | 36 months |
Divorce or legal separation from employee | 36 months |
How long can a dependent child of an employee or former employee keep COBRA?
| Reason you’re eligible for COBRA | Length of COBRA eligibility |
|---|---|
Employee was terminated from job, as long as it was not for gross misconduct | 18 months |
Employee becomes eligible for Medicare | 36 months |
Death of employee | 36 months |
Divorce or legal separation | 36 months |
Turning 26 and no longer eligible for parent’s health plan | 36 months |
Arrigo says that “mini-COBRA” plans, which apply to businesses with fewer than 20 employees, are offered in 40 states. A state may also expand COBRA eligibility.
“Coverage for the employee also can actually last for up to 36 months if state-based mini-COBRA coverage applies,” says Arrigo. “For example, you can be eligible for 18 months under the federal COBRA law and an additional 18 months if you live in California and qualify for Cal-COBRA,” says Arrigo.
States with mini-COBRA plans for small employers include:
- Arizona
- Arkansas
- California
- Colorado
- Connecticut
- Delaware
- District of Columbia
- Florida
- Georgia
- Illinois
- Iowa
- Kansas
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Minnesota
- Mississippi
- Missouri
- Nebraska
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- Rhode Island
- South Carolina
- South Dakota
- Tennessee
- Texas
- Utah
- Vermont
- Virginia
- West Virginia
- Wisconsin
- Wyoming
Mini-COBRA eligibility and how long you can keep coverage varies by state.
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Alternatives to COBRA Insurance
If you lose your employer-based insurance, you have other options than COBRA. You can also:
- Get added to a spouse’s health insurance plan.
- Sign up for an Affordable Care Act (ACA) marketplace plan.
- Buy an individual health insurance plan directly from an insurance company.
- Sign up for Medicaid (if you qualify).
- Purchase a short-term health insurance plan, which is low cost but also has limited benefits.
Going onto a spouse’s health insurance plan may be the cheapest way to get comprehensive health insurance. Losing your employer’s coverage typically sparks a special enrollment period when you can get added to a spouse’s health insurance.
Another option is an ACA plan. Natasha Cantrell, director of individual and family sales for eHealth, says the ACA considers losing employer coverage as a qualifying life event, which gives you a 60-day window to enroll in an ACA plan rather than waiting for the open enrollment period.
“Depending on your estimated annual income, you may qualify for subsidies under the ACA that can significantly lower your monthly premium. Individuals purchasing health insurance on their own without a subsidy may face monthly premiums in the $400 to $600 range, but those qualifying for subsidies may pay less than $100 per month,” says Cantrell.
Related: How To Get Health Insurance
COBRA Insurance Frequently Asked Questions
What is a mini-COBRA insurance plan?
Many states require a mini-COBRA plan for smaller employers and may also expand COBRA eligibility.
Federal COBRA coverage protects employees with group health insurance who work for companies with 20 or more workers. But if you work for an employer with fewer than 20 employees, your state may also have a continuation of coverage mandate in place, better known as “mini-COBRA.”
A mini-COBRA plan will guarantee continuation of health insurance coverage if you have a qualifying event.
Why is COBRA so expensive?
Employers don’t typically contribute to help a former employee with COBRA costs. The individual has to pay both the employee and employer’s portion of premiums, which makes COBRA coverage expensive.
Can you get COBRA if you quit your job?
Yes, you qualify if you were enrolled in a group health insurance plan offered by your employer before your termination date. Your employer must still offer COBRA coverage if you quit.
Can you cancel COBRA insurance if you get another coverage?
Yes, you can switch to an ACA marketplace plan during open enrollment. You will have to drop COBRA coverage when the new marketplace plan coverage begins.
If you voluntarily drop your COBRA coverage or stop paying premiums after open enrollment ends, you won’t be eligible for a special enrollment opportunity and will have to wait until the next open enrollment period. That will leave you with a gap in health insurance.
