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I was laid off from my job. What happens to my health insurance? How does COBRA work?


Most likely you will be able to temporarily continue your health insurance benefits.

The federal law known as COBRA (sometimes called "continuation coverage") protects the health care rights of workers who are laid off, as well as spouses and dependents of those workers, in certain situations. It enables you to keep your benefits for 18 months, and sometimes up to 36 months, depending on the circumstances.

While the law is pretty generous, there are several conditions that must be met for you to be eligible for COBRA coverage. For instance, your company is required to provide COBRA only if it has at least 20 employees total (full-time and part-time) and continues to offer a health plan to its existing employees. And you won't be eligible if you were dismissed for "gross misconduct" on the job.

To learn more about how to get COBRA and what to do with it once you've got it, read our feature, Know your COBRA rights. This story explains how your company must notify you of your rights, what to do if you're a part-timer, and who gets "custody" of the health benefits when there's a divorce. So what's the catch with COBRA?

You will be responsible for paying the full monthly premiums that your employer previously paid, plus a slight administrative fee (up to 2 percent). For a single person, premiums could easily top $600 a month, and $1,200 or more for a family.

While those payments might come as a shock to your wallet, the alternative is trying to find an individual health plan until — or if — you can get into another group plan. An individual or family plan may be more expensive than COBRA for the same benefits. These plans are medically underwritten. Most insurance companies will decline to offer coverage to applicants with a serious illness and will also exclude pre-existing conditions from coverage. This makes COBRA an especially good option for someone with an existing illness.

If it turns out you aren't eligible for COBRA or you just want to take a pass on it, here are Tips on buying individual insurance.

Last updated: Dec. 7, 2009
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Penny Gusner Consumer Analyst
Penny Gusner has been working in the insurance business for more than 10 years. She researches your questions, from the routine to the bizarre, with equal enthusiasm. Read More

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