COBRA Continuation Coverage

COBRA (Consolidated Omnibus Budget Reconciliation Act) continuation coverage is a federal law that allows employees and their dependents to temporarily continue their employer-sponsored group health insurance after a qualifying event that would otherwise end their coverage, such as job loss, reduction in work hours, divorce, or aging out of a parent's plan.

Enacted in 1985, COBRA applies to private-sector employers with 20 or more employees, as well as state and local governments. The law gives qualified beneficiaries the right to keep the exact same group health plan they had while employed, including the same doctors, network, benefits, and coverage levels. However, beneficiaries must pay the full premium (both the employee and employer portions) plus a 2% administrative fee.

COBRA is designed as a temporary bridge — not a permanent insurance solution. Coverage typically lasts 18 months for job loss or reduced hours, and up to 36 months for other qualifying events. Many people use COBRA to maintain coverage while transitioning to a new employer's plan, a marketplace plan, or Medicare.

What COBRA Covers

COBRA continues the exact same group health plan benefits you had as an employee. This includes:

• All medical, surgical, and hospital benefits from your former employer's plan
• Prescription drug coverage
• Dental and vision coverage (if included in the employer's plan)
• Mental health and substance abuse services
• Preventive care and wellness benefits
• Same provider network, same formulary, same plan design

Important Notes

• You keep the same plan — same deductible progress, same out-of-pocket maximum tracking
• If the employer changes plans for current employees, your COBRA coverage changes too
• Life insurance and disability insurance are typically NOT included in COBRA
• Flexible Spending Accounts (FSAs) may be continued under COBRA, but Health Savings Accounts (HSAs) are not affected by COBRA
• COBRA coverage is retroactive — if you elect COBRA within the election period, coverage applies back to the date it would have been lost

Who Is Eligible for COBRA

Three conditions must be met:

• Employer Size: Former employer must have 20+ employees on more than 50% of typical business days in the prior year
• Plan Coverage: You must have been enrolled in the employer's group health plan on the day before the qualifying event
• Qualifying Event: An event that causes loss of group health coverage

Qualifying Events and Duration

• 18 Months: Voluntary or involuntary job loss (except gross misconduct); reduction in work hours
• 29 Months: If you become disabled (per SSA determination) within the first 60 days of COBRA
• 36 Months: Divorce or legal separation from covered employee; death of covered employee; covered employee becomes entitled to Medicare; dependent child aging out of plan eligibility

Qualified beneficiaries include the employee, spouse, and dependent children who were covered under the plan. Each can independently elect COBRA — a spouse can elect COBRA even if the former employee does not.

COBRA Costs

• Premium: Up to 102% of the total group health plan cost (employee share + employer share + 2% administrative fee)
• Disability Extension: Up to 150% of premium during the 11-month disability extension period (months 19-29)
• Average Monthly Cost (Individual): $700-$900/month (varies widely by plan and employer)
• Average Monthly Cost (Family): $2,000-$2,500/month

COBRA is often expensive because you are now paying the full premium that was previously subsidized by your employer. For context, employers typically paid 73-83% of premiums while you were employed, so your cost can increase 3-5x.

Cost Comparison

Before electing COBRA, compare costs with ACA marketplace plans. With Premium Tax Credits, a marketplace plan may be significantly cheaper than COBRA, especially for individuals and families with moderate incomes. Losing employer coverage is a qualifying life event for a 60-day Special Enrollment Period on the marketplace.

How to Enroll

• Notification: Your employer must notify the plan administrator within 30 days of the qualifying event. The plan administrator then has 14 days to send you a COBRA election notice.
• Election Period: You have 60 days from the date of the election notice (or the date coverage ended, whichever is later) to elect COBRA coverage.
• Payment: First premium payment is due within 45 days of electing COBRA. Subsequent payments due on the 1st of each month with a 30-day grace period.
• Retroactive: Once elected, COBRA applies retroactively to the coverage loss date, so there is no gap in coverage.

Important Deadlines

• You must notify the plan administrator within 60 days of certain qualifying events (divorce, child aging out)
• Missing the 60-day election deadline permanently forfeits your COBRA rights
• Late premium payments beyond the grace period can result in permanent loss of COBRA coverage

Consider consulting with a benefits advisor or marketplace navigator before electing COBRA. Compare COBRA costs against marketplace plans, spouse's employer plan, Medicaid eligibility, or short-term health insurance.

Pros

• Keeps the exact same health plan, doctors, network, and benefits — no disruption in care
• No medical underwriting or pre-existing condition exclusions
• Coverage is retroactive to the qualifying event date, ensuring no gap
• Each family member can independently elect or decline coverage
• Useful bridge during job transitions, especially if mid-treatment with a specific provider
• Deductible progress from the current plan year carries over

Cons

• Very expensive — you pay 102% of the full premium (employer + employee share + admin fee)
• Temporary coverage only (18-36 months depending on qualifying event)
• No employer subsidy makes COBRA 3-5x more expensive than what you paid as an employee
• ACA marketplace plans with subsidies are often significantly cheaper
• Strict deadlines — missing election or payment deadlines permanently ends COBRA rights
• Only applies to employers with 20+ employees (small employers may be exempt)