What is COBRA Insurance?

Two decades ago, Congress passed the Consolidated Omnibus Reconciliation Act to give insurance networks to families. Earlier, people who have lost health insurance had to try to find inexpensive, not easy, personal insurance alone. That was often unlikely – especially when you had previous conditions such as diabetes and heart disease. People have also faced exorbitant payments or have turned down.

COBRA allows you to expand the insurance plan of your former employer. Your former employer ceases paying money to coverage, and you profit from the same coverage.

The Affordable Care Act also has other choices (ACA). The ACA has established exchanges for health insurance to allow people to purchase a single plan. Individuals with an ACA plan will be eligible for help to pay prizes when they follow the requirements on household income.

But after losing your work, there is only one way to retain the coverage sponsored by your employer - COBRA.

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."
It has reduced your hours.
Due to a death or divorce, you lost coverage.

How long does COBRA insurance last?

COBRA allows you to maintain coverage for up to 18 months for your former employer.

Your spouse and employees can however remain protected up to three years in some cases. Moreover, employees will elect COBRA if they lose coverage eligibility for:

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
The protected Medicare employee's eligibility.

Please note that at the time of your work loss or other incident, you must be compensated by the employer approved plan. Otherwise, you are not COBRA eligible.

COBRA health insurance eligibility

COBRA refers to businesses with a staff of 20 or more, as well as to state and local authorities in the private sector. Few states also have 'mini-COBRA' rules for employers with less than 20 employees. For details on the mini-COBRA plans see the following section.

Not all family members have to participate in COBRA if you have a family health plan. For example, your wife and children may still opt for COBRA, or vice versa.

You can withdraw the waiver later, if you do not cover the COBRA, as long as you remain in the election duration of 60 days. The policy is retroactive, provided you pay the premiums retroactively, as you qualify for COBRA.

Also, you can cancel COBRA coverage at any time — when you sign up you are not bound to an 18-month engagement.

Coverage of COBRA ends if 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.

How does the COBRA insurance work?

If you are entitled to a COBRA plan such as losing your job, within 30 days of the last day, you can contact the health insurer.

You will be notified by the health insurance provider on how to register for COBRA. This information would contain projections of costs, so you can understand how much you have to pay for maintaining the COBRA health plan.

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

You will use your health care coverage as you did when you were working until you signed up for COBRA. But without the assistance of your former employer, you can pay for all expenses.

For a minimum of 18 months, you can maintain COBRA. In certain situations, depending on the qualifying event, you can still have a COBRA plan for longer — up to 36 months.

You must select another health plan at the conclusion of your eligibility period if you want insurance. Check this page for other choices in the COBRA Coverage Alternatives section.

COBRA insurance state laws

Most states have mini-COBRA legislation for small companies. Former employees of firms with 20 or less employees are governed by the Mini-COBRA Acts.

The State legislation provides retired workers with COBRA health care, much like the federal legislation of COBRA. The period of eligibility for COBRA can however vary:

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:

If you are sick, Florida allows 11 more months of coverage.
Illinois allows spouses 55 years or older to retain COBRA coverage before they qualify, however, for an administrative fee of 20 percent.
If the former employee is injured and eligibility for dependents expands for 36 months if the employer dies, the Massachusetts coverage shall be extended to 30 months.
For people engaged in divorce, North Dakota extends COBRA coverage to 36 months.
If the person is pregnant or requires an operation, Oklahoma provides six more months of cover.

State laws vary widely, so consult with the Department of Insurance in your state to find out details of mini-COBRA laws.

How much does COBRA cost?

COBRA allows you to pay 100% of health care expenses plus a management charge of up to 2%. Your former employer no longer gives you any support.

How much COBRA costs depends on how much the employer's plan costs. The estimated average cost of family coverage sponsored by employers is over $22,000. Usually, employers cover just over half of insurance expenses. With a COBRA contract, however, the previous employee is obliged to pay all the expenses - often four times what the old employee paid while working.

COBRA is expensive, but some ways to help are available. One way to pay for COBRA is to use the Health Savings Account (HSA). In highly deductible insurance plans, HSAs are found. This saving allows people to save tax-free money, like COBRA, for healthcare costs.

Federal income tax loans are another choice, but there is restricted eligibility. For people who lose employment as a consequence of "negative consequences of global trade," the U.S. Department of Labor provides a health coverage tax credit (HCTC). 72.5% of premiums are paid by the HCTC. The HCTC will help to keep your COBRA premium comparable to what you played when you were working if you are eligible.

How to apply for COBRA

Within 30 days if you lose or abandon the job, die or are entitled to Medicare, the employer must contact the insurance plan. You will be informed by your health insurance company of how coverage is extended by COBRA.

You have 60 days to decide if you want to register for COBRA. Please be aware that you must retroactively pay premiums when you become eligible for COBRA if you register on day 59.

Stimulus package cuts COBRA costs until September

A plan to assist people with COBRA was included in the American Rescue Plan 2021, also known as the new COVID-19 stimulus package.

The bundle of $1.9 trillion calls on people who had been recently laid off because of the COVID-19 pandemic to cover 100% of COBRA by September. Until September, the kit will eliminate COBRA costs. Then the entire cost of COBRA insurance will be paid again by COBRA plan owners.

The kit also allows people to determine if they want to adopt a COBRA plan for 60 days. On April 1, the window began. People who have previously decreased COBRA again qualify for a short period of time.

COBRA subsidy would temporarily reduce the cost of COBRA coverage, but not all are eligible. The COBRA subsidies cannot be received by individuals qualified for Medicare or any other medical plan. So you can't qualify for the COBRA subsidy cost-cutting if you can enter a spouse's health insurance plan with an employer.

Talk about the COBRA subsidies in your former employer.

COBRA coverage alternatives

Until choosing a COBRA coverage consider all of your choices. Anywhere else you might find a cheaper price.

In addition to COBRA, here are your choices:

Purchase a health plan on the market for health insurance. Without employer-sponsored coverage, you can buy coverage after the usual time of open registration. The health care reform legislation does not allow insurers to charge a significantly higher premium or refuse your application because of their health. If your income falls below 400 per cent of the federal poverty level, you may also be eligible for financial assistance. For a family of four this is around $103,000.
Purchase a medical plan from an insurance provider, insurance or website. (See "How to buy an insurance plan for a person.") You can purchase a health plan that is consistent with ACA with benefits matching those provided on the market but if you buy outside the market you cannot get a subsidy or tax credit. On the other side, planes with more convenient networking of providers, favorite physicians or profits that go beyond what business plans have cannot be found in market areas.
Register when you get another job to cover your new boss.
Please request your wife to add you to the scheme funded by your employer.
If you are eligible, purchase a catastrophic insurance plan. The only way to get catastrophic health benefits are people under 30 and people suffering serious difficulties such as homelessness. These plans are low, but have high allowances. They also offer a wide coverage similar to the traditional ACA plan.
Verify that your children are entitled to cover the health care schemes for low- and moderate-income families in both the federal and the state.
Purchase a medical plan for a short period. These low-cost schemes do not provide almost the same degree of safety. For example, a short-term plan covering prescription medicines and mental health services can be difficult for you to develop. These policies are valid for one year and can be renewed twice more. Some States ban the selling of short-term schemes and more states limit how long a short-term contract can be maintained.

Be sure to review the provider networks and what is included when you decide on a COBRA substitute. You would probably not lose your doctor and some insurance in your employer-sponsored scheme that you've come to expect.

Use our Health Insurance Finder tool to find out more about your choices.

How does COBRA insurance work if I quit my job?

The continuity coverage of COBRA works the same if you stop or lose your coverage in some other way.

Within 30 days of the last day your employer shall inform the health insurance provider of the job shift. Your health insurer will contact you with information about how you can sign up for COBRA and how much that coverage will cost you.

There are 60 days to register for COBRA insurance at this stage. You don't have to register straight away. If you like, you can postpone registration until 60 days.

Frequently asked questions about COBRA

Is COBRA coverage expensive?

Yeah, typically COBRA is costlier than other health plan forms.

With COBRA, you can't exchange providers or learn a new plan. You can keep the plan of your former employer with you. However, all premiums for the insurance plan are covered by COBRA plan members. There is little that the former employer pays.

The total occupational health benefit costs for family coverage more than $22,000 per year. Employers generally cover over half of the cost of insurance. With COBRA, you are responsible for all financial matters. This could lead to costly health benefits.

Is COBRA insurance right for you?

If you want to make sure your providers are on the network and you can not find a more competitive plan, COBRA could be a good choice.

COBRA coverage is also useful if you anticipate that you will soon get another health insurance offer and want to ensure that you have full health insurance for only a small period.

Is it worth it to get COBRA insurance?

COBRA is pricey, but if you can't find a better option, it may be worth it. For example, let's say your region has costly single health insurance options, your providers do not form part of the individual plans networks and do not cover your COBRA plan as well.

You can choose to go through a COBRA strategy in that situation.

If you expect to see new coverage, such as a new employer, start soon and want only to bridge coverage between employers, a COBRA plan may also be wanted.

Can you get COBRA if you quit?

Yes, if you leave your job, you will register for COBRA health insurance.

If you lose your policy due to the death or divorce of your partner, or your employer reduces your hours, if not because of gross misconduct, then you are still liable for COBRA insurance.