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HEALTH Insurance
HEALTH INSURANCE INSIGHTS

COBRA is a plan that allows you to keep your employer’s health insurance even after you leave your job. It’s expensive but prevents a lapse in coverage.

If you’re leaving your job and don’t have new health insurance lined up, COBRA allows you to keep your previous employer’s plan for up to 18 months.

You’ll have to pay the entire premium, plus up to 2% for administrative fees. COBRA health insurance costs can come as a shock if you're accustomed to your employer paying the premium.

So how do you get COBRA health insurance? Can you get COBRA if you quit? Read on to learn more about how COBRA works.

KEY TAKEAWAYS
  • COBRA requires you to pay 100% of the health insurance costs plus up to 2% in administrative fees.
  • You have 60 days to sign up for COBRA, but premiums are retroactive if you wait.
  • COBRA allows you to keep your employer-sponsored health insurance for up to 18 months after leaving your job.

What is COBRA insurance?

COBRA is the Consolidated Omnibus Reconciliation Act, created as a health insurance safety net.

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.

Before the Affordable Care Act (ACA), people with pre-existing conditions had difficulty getting health insurance on the private market. Although the ACA removed pre-existing condition clauses, COBRA is still an option for keeping health insurance during the transition.

You can elect COBRA for you and your family when:

  • 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 COBRA your employer will notify the insurance company within 30 days of your last day.

The health insurance company will send you information about how to sign up for COBRA and how much it will cost. You have 60 days to sign up.

With COBRA, you can 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 up to 36 months, depending on the qualifying event.

How does COBRA insurance work if I quit my job?

COBRA coverage works the same way if you quit your job. Regardless of the reasons for leaving your job, you can elect COBRA within 60 days of your last day.

Nothing about your coverage, eligibility, or the length of time you can keep COBRA changes if you quit vs. a layoff or being fired.

How much does COBRA cost?

COBRA requires you to pay 100% of the health insurance premium plus up to a 2% administrative fee. Your former employer will no longer pay any part of the cost.

The cost of COBRA depends on the health insurance plan. According to the Kaiser Family Foundation, the average cost of an employer-sponsored family plan in 2021 was $22,221. The employer paid a portion of that cost when you were employed, but with COBRA you will pay the entire amount.

COBRA is pricey, but there are some options for help. First, you can use Health Savings Account (HSA) funds to pay your COBRA premiums, if you have one.

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.

Why are COBRA insurance premiums so high?

COBRA insurance premiums are high because when you leave a job, you're no longer part of an employer-sponsored health plan, which means you have to pay the full cost of the coverage. Usually, employers pay a significant portion of an employee's healthcare premiums.

Can I start or stop COBRA coverage at any time?

You can start COBRA coverage at any time during the 60-day period, even if you waived coverage at first, but premiums will be retroactive. You can also cancel COBRA coverage at any time.

COBRA coverage ends automatically 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.If you have a family health plan, not all family members have to enroll in COBRA.

What is mini-COBRA insurance?

Mini-COBRA permits employees of companies with 20 or fewer employees to continue health insurance coverage. It allows you to pay group rates for a specified time period. Most states have mini-COBRA laws for people who were employed by small businesses.

These state laws work like the federal COBRA law, but the length of 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, and others have limited eligibility. State laws vary significantly, so make sure you check with your state’s Department of Insurance for specifics about mini-COBRA laws.

COBRA coverage alternatives

Alternatives to COBRA include a catastrophic health plan, short-term health insurance, or an ACA-compliant health plan. Any of these may be more affordable.

  • The health insurance marketplace. Losing employer-sponsored coverage entitles you to buy an ACA plan 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.
  • The private market. You might be able to find an individual health insurance plan outside the marketplace that offers you better benefits and still costs less than COBRA.
  • A spouse’s plan. If your spouse has their own insurance, you can likely be added to the plan.
  • A catastrophic health plan. These ACA plans are available to people under 30 and people facing specific hardships. They have high deductibles but provide low-cost protection.
  • Children’s Health Insurance Program (CHIP). If coverage for your kids is your main concern, see if they qualify for CHIP.
  • Short-term health plans. Short-term plans bridge the gap until you get new insurance, but have some limitations. Some states don’t allow short-term plans and more states restrict how long you can keep one.

If you decide on a COBRA alternative, make sure to check the provider networks and what's covered. Find out more about your options by using our Health Insurance Finder tool.

Is COBRA insurance worth it?

COBRA is expensive, but it could be worth it if you can’t find a better alternative. If you have a lot of medical needs and can’t be without coverage, COBRA is an easy way to continue with the same network and providers.

You may also want a COBRA plan if you expect new coverage will begin soon, such as with a new employer, but there is an anticipated gap before your new coverage kicks in.

Frequently asked questions about COBRA

Does COBRA have dental and vision insurance?

Yes, COBRA includes your dental and vision insurance for the same time period of 18 months.

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, it will continue that way.

Can you change from COBRA to a Marketplace plan?

Yes, you can change from COBRA to a Marketplace plan during the open enrollment period if:

  • You decide to end your COBRA plan early.
  • Your COBRA insurance plan is going to expire soon.
  • The amount you usually pay for COBRA changes because your former employer stopped contributing towards your health insurance plan or you lost a government subsidy, and now you will have to pay the full cost.

Can I continue my COBRA coverage for a longer period?

Yes, you can extend your COBRA continuation coverage under two circumstances under which you may be eligible for an extension. The first is when a qualified beneficiary becomes disabled and meets specific requirements. They are entitled to an 11-month extension on their maximum period of continuation coverage.

The second is if you experience another life event that qualifies you for an extension, such as:

  • Divorce or legal separation
  • Death of a covered employee
  • If the qualified employee becomes eligible for a Medicare health care plan (in specific situations)
  • If you lose dependent child status under the program.

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