Joe Dyton has been a professional writer since 1999. He's been writing about the auto insurance industry for 15 years and was an in-house marketing copywriter for GEICO for a decade. Learn more about Joe at joedyton.com.
7+ years in business and financial services content
Chris is a seasoned writer/editor with past experience across myriad industries, including insurance, SAS, finance, Medicare, logistics, marketing/advertising, and many more.
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Health insurance accessis perhaps one of a full-time job’s biggest benefits. But what happens if you quit your job or are let go? Does your coverage just stop?
Technically, your coverage will end, but it doesn’t have to. That’s thanks to the Consolidated Omnibus Budget Reconciliation Act (COBRA), which allows you to temporarily maintain your health insurance benefits after your employment ends.[1] This coverage also extends to your dependents.
Keep reading to get a better understanding of what COBRA is, how it works, the associated costs, COBRA eligibility requirements, and more.
Understanding how COBRA works
COBRA gives you and your family the option to maintain the health benefits your employer provided, for a limited period of time. Here’s a brief overview of how COBRA coverage works.
Eligibility
To maintain your coverage, you have to meet three requirements. First, COBRA must cover your group health plan.
Secondly, a qualifying event has to cause your job loss. Qualifying events include:
Termination of employment or a decrease in the employee’s covered hours
Covered employee’s death
Divorce or legal separation from a covered employee
A covered employee becomes eligible for Medicare
A child or dependent loses their health insurance coverage under the plan
Finally, only qualified beneficiaries are eligible for COBRA. Qualified beneficiaries include employees, spouses or former spouses, and dependent children.
COBRA coverage duration
COBRA is a temporary solution in the event your employment ends and you lose your health insurance. You can typically maintain COBRA coverage for 18–36 months.
COBRA and dependents
Fortunately, your spouse and dependent children don’t have to look for new coverage if they were on your health insurance policy at the time of your termination. They’re also eligible to receive COBRA benefits.
When and how to apply for COBRA
If you lose your job, you should apply for COBRA right away to ensure there’s a minimal lapse in your coverage. If you choose to wait for any reason, you have 60 days from your qualifying event, or from when your employer mailed your COBRA notice, to apply for coverage.
Your notice will include details on how to sign up if you choose to do so. If you elect to enroll in COBRA, your company will have 30 days from your qualifying event to let your COBRA administrator know you’ve opted into the coverage.
It’s also important to note there are no savings in delaying the process. COBRA is retroactive to the day your coverage ended, meaning you’ll have to pay your health insurance premiums for the time you delay as well.
COBRA typically lasts 18 months, but you may be able to extend your coverage if you meet certain expectations. For example, if you’re a qualified beneficiary who’s disabled and meets certain requirements, coverage may continue for an additional 11 months. The Social Security Administration must determine that the qualified beneficiary was disabled prior to the 60th day of continuation coverage and that the disability continues through the 18-month period of continuation coverage.
Additionally, a second “qualifying event” could extend your 18-month COBRA period. For example, if a covered employee passed away while on COBRA or a divorce or legal separation occurred during that time.
COBRA can be beneficial in a time of need. No one wants to be without health insurance if they can help it. Just like any insurance coverage, COBRA has its positives and negatives.
Here are a few things to consider before you decide to enroll in COBRA:
Pros
COBRA allows you and your dependents to maintain your health insurance even after your employment ends or your covered hours are reduced by your employer.[2] The coverage you had with your employer also remains in place.
Funds paid toward your deductible will apply for the remainder of the year — versus restarting at $0 with a new plan.
COBRA, like the Affordable Care Act, doesn’t use medical underwriting, so your medical history isn’t a factor when you apply for coverage.
Cons
You’ll remain on your employer’s plan, even if you don’t care for the plan.
COBRA can be costly. Without subsidies, you have to pay your plan’s full price. This includes the part your company covered previously. You must also pay a 2% administration fee. The average rate for a single employee on COBRA was $703 per month in 2023. The average family rate was $1,997 per month.
COBRA isn’t all-encompassing. A company has to meet certain regulations to be eligible to offer COBRA to its employees. For example, companies with fewer than 20 employees don’t qualify for COBRA coverage.
Comparing COBRA and private insurance
If you find yourself suddenly unemployed, you have other options besides COBRA. You can shop for private insurance on the open market. The private insurance route has pros and cons as well, though.
Private insurance offers plan and coverage flexibility that COBRA doesn’t, but private insurance can be even more expensive than COBRA. Determining the best route for you comes down to comparing the benefits of a private policy against your COBRA coverage and considering how the prices differ.
COBRA vs. Medicare
If you’re eligible for Medicare, you can use this coverage in tandem with COBRA.[3] If you need medical attention, Medicare would pay first, and COBRA could supplement some or all of what Medicare doesn’t cover. Keep in mind, though, that if you enroll in COBRA when you already have Medicare, you’ll have to pay both premiums.
On the other hand, if you have COBRA and then become eligible for Medicare, you may lose your COBRA coverage.
Managing COBRA costs
COBRA coverage can be expensive because you have to pay the full rate for coverage without employer support. But you may be able to lower your costs by asking your former employer if they offer a lower-cost plan with less coverage. This could be a good option if you’re relatively healthy and don’t anticipate needing a lot of medical attention.
Additionally, if you have a health savings account, you can put those funds toward your COBRA premiums and other medical expenses.
How COBRA works FAQs
COBRA helps you maintain your health insurance after your employment ends or your employer decreases your covered hours. Here’s some additional information about how COBRA works.
What is COBRA coverage, and who is eligible for it?
COBRA stands for the Consolidated Omnibus Budget Reconciliation Act. This coverage allows qualified workers to temporarily keep their group health insurance after they lose their job (voluntarily or involuntarily).
Employees who work at a private sector company with 20 or more employees are typically eligible for COBRA. Their spouse, former spouse, and dependent children are also typically eligible.
How does COBRA work if I quit my job?
When you enroll in COBRA after quitting your job, your medical insurance will be available to you just as it was when you worked for your company.
The big difference is you’ll likely have to pay the premium yourself, along with a 2% administration fee. But you ’ll have the same coverage as you did during your employment and will enjoy your former employer’s group rate.
How does COBRA work if I move out of state?
You can maintain your COBRA coverage even if you move to a different state. Your former employer will still provide you continued coverage for at least 18 months.
How do I elect COBRA coverage?
When you leave your job, your employer notifies your health plan. You’ll receive an election notice and have 60 days to decide if you want to enroll in COBRA.
If you decide to enroll, COBRA will cover you beginning the day your employer-based coverage ended.
How much does COBRA coverage cost?
COBRA costs can vary. But you can expect to pay the same as you did with your former employer for health insurance coverage, pluswhat the company paid on your behalf, along with a small administration fee.
The single employee average payment was $703 per month in 2023, while families paid $1,997 per month.
How long does COBRA coverage last?
COBRA is temporary, and coverage lasts 18–36 months. COBRA enrollees can request continued coverage for unique circumstances, such as someone on the policy becoming disabled.
What happens if I miss a COBRA payment?
Missing a COBRA payment could result in your provider canceling your coverage until you make the payment. In that instance, your provider would retroactively reinstate your coverage to when your coverage period began.
The grace period is only so long, though. If you can’t make your COBRA payment before the grace period ends, you could lose your COBRA rights altogether.
Joe Dyton has been a professional writer since 1999. He's been writing about the auto insurance industry for 15 years and was an in-house marketing copywriter for GEICO for a decade. Learn more about Joe at joedyton.com.
7+ years in business and financial services content
Chris is a seasoned writer/editor with past experience across myriad industries, including insurance, SAS, finance, Medicare, logistics, marketing/advertising, and many more.
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