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HEALTH Insurance
HEALTH INSURANCE INSIGHTS

Find out about COBRA, how much it costs, how long it lasts and other health insurance options after you lose your job. 

After you quit or lose a job, you can temporarily continue your employer-sponsored health insurance coverage through a federal law known as COBRA.

But here's the catch: You have to pick up the entire tab, plus up to 2% for administrative costs. Prepare for sticker shock if you're accustomed to the employer paying the premium.

KEY TAKEAWAYS
  • COBRA lets you extend your former employer's health plan.
  • COBRA requires you to pay 100% of the health insurance costs plus up to 2% adminstrative fee.
  • You have 60 days to decide whether to sign up for COBRA. Remember, if you sign up on day 59, you will have to pay retroactive premiums.

What is COBRA insurance?

Congress passed the Consolidated Omnibus Reconciliation Act two decades ago to give families an insurance safety net. Before then, people who lost health insurance had to try to find affordable individual insurance on their own, which wasn't easy. Oftentimes, that was impossible -- especially if you had pre-existing conditions like diabetes and heart disease. People often got turned down or faced exorbitant premiums.

COBRA lets you extend your former employer's health plan. You benefit from the same coverage, though your former employer stops contributing money to pay for coverage. 

There are also other options under the Affordable Care Act (ACA). The ACA created health insurance exchanges that allows people to shop for an individual plan. People with an ACA plan can qualify for subsidies to help pay for premiums if they meet household income guidelines. 

However, there still only one way to keep your employer-sponsored coverage after losing your job -- COBRA.

Cobra Insurance

You can elect COBRA for you and your family if you otherwise would lose coverage because:

  • You quit your job.
  • You were fired, unless it was for "gross misconduct."
  • Your hours were reduced.
  • You lost coverage because of a death or divorce.

How does COBRA insurance work?

If you become eligible for a COBRA plan, such as losing your job, the employer will contact the health insurer about the situation within 30 days of your last day.

The health insurance company will then notify you with information about how to sign up for COBRA. That information will include cost estimates, so you understand how much you have to pay to keep the health plan through COBRA.

You can sign up for COBRA coverage or decline coverage. You have 60 days to make that decision.

Once signed up for COBRA, you’ll use your health insurance plan like you did when employed. However, you’ll pay all of the costs with no help from your former employer.

You can keep COBRA for at least 18 months. In some cases, you can have a COBRA plan for even longer -- up to 36 months -- depending on the qualifying event.

At the end of your eligibility period, you need to find another health plan if you want insurance. Check the COBRA coverage alternatives section later on this page for other options.

How much does COBRA cost?

COBRA requires you to pay 100% of the health insurance costs plus up to 2% adminstrative fee. You no longer get any help from your former employer. 

How much COBRA costs varies by how much the plan costs the employer. The average annual employer-sponsored health insurance costs for family coverage is more than $22,000. Employers usually pick up well more than half of premium costs. However, with a COBRA plan, the former employee has to pay all the costs -- oftentimes, that means paying four times what the former employee was paying in premiums for coverage when you were employed. 

COBRA is pricey, but there are some possible avenues to help. One possibility is to use Health Savings Account (HSA) to help pay for COBRA. HSAs are found in high-deductible health plans. These savings accounts let people save tax-free money for health care costs, inclunding for COBRA. 

Another option is federal income tax credits, but eligiblity is limited. The U.S. Department of Labor offers a Health Coverage Tax Credit (HCTC) for people who lose their jobs because of the “negative effects of global trade.” The HCTC pays 72.5% of premiums. If you’re eligible, the HCTC could help make your COBRA premiums similar to what you were playing when you were employed.

Who qualifies for cobra?

COBRA is a great option for those who have lost their employer sponsored health insurance. You could get financial aid from COBRA by having experienced one of these qualifying events-

  • Being fired from your job
  • The loss or reduction in work hours
  • If you quit your job

COBRA is not just for employees anymore. Dependents can also apply to receive it or may qualify if they encounter certain qualifying events, such as:

  • Demise or disability of covered employee
  • Losing one's dependent status on account of a divorce or legal separation.
  • Becoming eligible for Medicare coverage and losing dependent protection
  • Losing dependent status after turning 26.

How to apply for COBRA

The employer must notify the health plan within 30 days when you lose or quit your job, die or become entitled to Medicare. Your health insurance plan will send you information about how to extend coverage via COBRA. 

You have 60 days to decide whether to sign up for COBRA. Remember, if you sign up on day 59, you will have to pay retroactive premiums going back to when you became eligible for COBRA. 

How long does COBRA last?

COBRA lets you keep your former employer's coverage for up to 18 months.

However, your spouse and dependents in some cases can stay covered for up to three years. In addition, dependents can elect COBRA if they lose eligibility for coverage because of:

  • Death of the covered employee
  • Age -- an adult child turns 26 and can no longer stay on a parent's plan
  • Divorce or legal separation from the covered spouse
  • Eligibility by the covered employee for Medicare.

Keep in mind that you must be covered by the employer-sponsored plan at the time of your job loss or other event. If not, you aren't eligible for COBRA.

COBRA health insurance eligibility

COBRA applies to private-sector companies with 20 or more employees as well as state and local governments. Some states also have "mini-COBRA" laws that apply to employers with fewer than 20 workers. See the section below for more information about mini-COBRA plans. 

If you have a family health plan, not all family members have to enroll in COBRA. For instance, you can waive the option, but your spouse and kids could still elect COBRA, or vice versa.

If you waive COBRA coverage, you can revoke the waiver later -- as long as you're still within the 60-day election period. The coverage is retroactive to when you became eligible for COBRA, as long as you pay the premiums retroactively.

You can also cancel COBRA coverage at any time -- you're not locked into an 18-month commitment when you sign up.

COBRA coverage ends when you:

  • Reach the end of your coverage period
  • Stop paying premiums
  • Become eligible for Medicare

COBRA coverage also ends if the employer:

  • Goes out of business
  • Stops offering health insurance benefits to workers

If the employer changes health plans, you can switch to the new plan like everybody else, but you can't keep the old plan in that case.

COBRA insurance state laws

Most states have mini-COBRA laws for people who were employed by small businesses. Mini-COBRA laws pertain to former employees of companies with 20 or fewer employees. 

These state laws provide COBRA health insurance for former employees just like the federal COBRA law. However, the length of COBRA eligibility may differ:

  • Sixteen states allow mini-COBRA coverage for 18 months.
  • New York and California allow mini-COBRA for 36 months.
  • Connecticut lets residents have a mini-COBRA plan for 30 months.

Not all states allow mini-COBRA plans. Other states have more limited eligibility:

  • Georgia, Hawaii and Tennessee only allow three months.
  • Oklahoma only allows mini-COBRA plans for 63 days.
  • North Dakota allows 39 states.

States also allow for expanded eligibility for certain issues:

  • Florida allows 11 more months of coverage if you’re disabled.
  • Illinois lets spouses 55 or over keep COBRA coverage until they become eligible for Medicare, but that comes with a 20% administrative fee. 
  • Massachusetts extends coverage to 30 months if the former employee is disabled and expands eligibility for 36 months for dependents if the employee dies.
  • North Dakota extends COBRA coverage to 36 months for people involved in a divorce.
  • Oklahoma allows six more months of coverage if the person is pregnant or needs surgery. 

As you can see, state laws vary significantly, so make sure you check with your state’s Department of Insurance to find out specifics about mini-COBRA laws.

Stimulus package cuts COBRA costs until September

The American Rescue Plan of 2021, also known as the latest COVID-19 stimulus package, included a provision to help people with COBRA.

The $1.9 trillion package calls for paying 100% of COBRA coverage costs through September for people recently laid off because of the COVID-19 pandemic. The package will wipe out COBRA costs until September. After that, COBRA plan members will again pay the full cost of COBRA insurance.

The package also gives people a 60-day window to decide on whether to take a COBRA plan. That window started on April 1. People who earlier declined COBRA are once again eligible for a limited time.

The COBRA subsidy will eliminate COBRA coverage costs temporarily, but not everyone is eligible. People eligible for Medicare or another group health plan can’t receive the COBRA subsidies. So, if you could join a spouse’s health insurance plan through an employer, you’re not eligible for the cost-cutting COBRA subsidies.

Contact your former employer about the COBRA subsidies.

COBRA coverage alternatives

Consider all your options before you elect COBRA coverage. You could find a more affordable deal elsewhere.

Here are your choices besides COBRA:

  • Buy a health plan through the health insurance marketplace. Losing employer-sponsored coverage entitles you to purchase coverage outside the normal open enrollment period. Under the health care reform law, insurers can't charge much higher premiums or reject your application because of your health. You might also be eligible for financial assistance to purchase a marketplace plan if your income falls below 400% of the federal poverty level. That's about $103,000 for a family of four. 
  • Buy a health plan through an insurance agent, insurance company or website. (See “How to buy an individual health insurance plan.”) You can buy an ACA-compliant health plan with benefits that match those offered in the marketplaces, but you can't get a subsidy or tax credit if you buy outside the marketplaces. On the other hand, you may find plans not offered in the marketplaces with more convenient provider networks, your preferred doctors or benefits that go above and beyond what marketplace plans provide.
  • Sign up for coverage with your new employer when you get another job.
  • Ask your spouse to add you as a dependent on his or her employer-sponsored plan.
  • Buy a catastrophic health plan if you're eligible. Only people under 30 and people facing specific hardships, such as homelessness, are able to get catastrophic health insurance. These plans have low premiums, but high deductibles. They also provide comprehensive coverage similar to what's in a standard ACA plan. 
  • Check whether your children are eligible for coverage through the federal and state Children's Health Insurance Program, a federal and state health insurance program for low- and moderate-income families.
  • Buy a short-term health plan. These low-cost plans don't provide nearly the same level of protection. For instance, you might have trouble finding a short-term plan that covers prescription drugs and mental health care.  These plans are good for a year and you can renew two more times. A handful of states forbid the sale of short-term plans and more states restrict how long you can keep a short-term plan. 

If you decide on a COBRA alternative, make sure to check the provider networks and what's covered. You likely won't want to lose your doctor and certain protections you've come to expect in your employer-sponsored plan. 

Find out more about your options by using our Health Insurance Finder tool.

Frequently asked questions about COBRA

How does COBRA insurance work if I quit my job?

Whether you quit or lose your coverage in another way, the COBRA continuation coverage works the same.

Your employer will notify the health insurance company about the employment change within 30 days of your last day. Your health insurer will contact you with information about how you can sign up for COBRA and how much that coverage will cost you.

At that point, you have 60 days to sign up for COBRA insurance. You don’t have to sign up immediately. You can delay sign up until the end of the 60-day period if you want.

Is COBRA coverage expensive?

Yes, COBRA is usually more expensive than other types of health coverage. 

With COBRA, you get to keep your former employer’s plan, so you don’t have to switch providers or learn a new plan. However, COBRA plan members pay for all of the health plan costs. The former employer doesn’t pay anything.

The average job-based health plan costs more than $22,000 annually for family coverage. Employers usually pay for more than half of premiums costs. With COBRA, all of the financial responsibility goes to you. That can lead to expensive health insurance.

Is COBRA insurance right for you?

COBRA may be a wise decision if you want to make sure your providers are in the network and you can’t find a more affordable plan that they take.

COBRA coverage may also be good if you expect to get another health insurance plan soon and want to make sure you have comprehensive health insurance for a limited time.

Is it worth it to get COBRA insurance?

COBRA is expensive, but it could be worth it if you can’t find a better alternative. For instance, let’s say the only individual health insurance options in your area are expensive, your providers aren’t part of the individual plans’ networks and don’t offer as much coverage as your COBRA plan.

In that case, you may decide to go with a COBRA plan.

You may also want a COBRA plan if you expect new coverage will begin soon, such as with a new employer, and just want to bridge coverage between employers.

Can you get COBRA if you quit?

Yes, you can sign up for COBRA health insurance coverage if you quit your job.

You’re also eligible for COBRA insurance if you lost your coverage because of a spouse’s death or divorce; your employer cut your hours; or you’re fired and not for gross misconduct.

What happens to my health insurance if I quit my job?

If you quit your job, your employer may or may not offer COBRA insurance. You can find out by asking a manager if they have any programs in place to provide health coverage after the employee leaves the company. If there are no provisions available from one's employer, then individuals will need to look into other options like purchasing individual healthcare policies on their own or looking into public services including Medicaid for example.

Does COBRA have dental and vision insurance?

Yes, COBRA covers dental and vision premiums for 18 months. It covers dental and vision coverage as a secondary insurance, which means that the employer pays first in order to cover these benefits.

If you are laid-off or quit your job, COBRA will pay your health care costs up until 18 months following termination of employment. However, you must have both dental and vision coverage while employed if you want them covered by Cobra after quitting.

For example, if you have a dental and vision plan through an employer, when leaving your job and becoming eligible for COBRA, you do not need to worry about losing the coverage. If your dental and vision is separate from your medical insurance, you can choose to keep one or the other through COBRA. If the dental or vision is bundled with your medical insurance, you should continue both.