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COBRA health insurance: Know your rights

If you lose your workplace health insurance due to a lay-off, divorce or death of a spouse, you can temporarily continue your employer-sponsored health plan coverage through a federal law known as COBRA.

But here's the catch -- you have to pick up the entire tab for the premiums, plus up to 2 percent for administrative costs. If you're accustomed to the employer paying the premium, then prepare for sticker shock. Nonetheless, paying for the health insurance through COBRA could be cheaper than buying a health plan on your own.

COBRA health insurance informationCongress passed the Consolidated Omnibus Reconciliation Act two decades ago to give families an insurance safety net. Back then, lots of folks who lost health insurance at work had trouble qualifying for coverage when they tried to buy it on their own. They'd get turned down or face exorbitant premiums if they had health conditions.

Now, because of the Affordable Care Act, you can’t be shut out of the health insurance market – insurers must sell you an individual or family plan no matter what your medical condition. But if you really want to keep your employer-sponsored coverage, COBRA lets you do that for up to 18 months, and your spouse and dependents in some cases can stay covered for up to three years.

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 and you no longer qualify as a full-time employee for the workplace health plan.

In addition health plan “dependents” (such as spouses and children) can elect COBRA if they lose eligibility for coverage because of:

  • Death of the covered employee.
  • Age -- an adult child turns 26 and can be kicked off a parent's plan.
  • Divorce or legal separation from the covered spouse.
  • Eligibility by the covered employee for Medicare.

The law lets you continue coverage for up to 18 months if you quit or a lose a job or your hours are reduced, and up to three years if the coverage loss was due to other reasons.

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

COBRA coverage periods

Qualifying event

 eligible for COBRA


Voluntary or involuntary termination of job other than gross misconduct

Reduced hours



Dependent child

18 months

Total disability


29 months

Employee entitled to Medicare

Divorce or legal separation

Death of employee


Dependent child

36 months

Loss of dependent-child status

Dependent child

36 months

How COBRA health insurance works

The COBRA law 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.

The employer must notify the health plan within 30 days if you lose or quit your job, die or become entitled to Medicare. You must notify the plan, generally within 60 days, if the reason for COBRA eligibility is because of divorce, legal separation or losing dependent status as a child.

The health plan then has 14 days to respond with information about how to elect COBRA, and you and your family have 60 days to decide. Not all of you have to elect COBRA. Even if you waived the option, for instance, 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 the “qualifying event,” such as the job loss, 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, you stop paying premiums or you become eligible for Medicare. It also ends if the employer goes out of business or stops offering health insurance benefits to workers. If the employer simply changes health plans, you can switch to the new plan like everybody else, but you can't keep the old plan.

Health insurance options other than COBRA

Consider all your options before you elect COBRA coverage. You might find a more affordable deal elsewhere. Here are your choices besides COBRA:

  • Buy a health plan through your health insurance marketplace. You can find your state’s marketplace through HealthCare.gov. Losing employer-sponsored coverage entitles you to purchase coverage outside the normal open enrollment period. Under the health care reform law, insurers cannot charge extra 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 percent of the federal poverty level.
  • 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 workplace health 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.

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