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COBRA insurance lets you maintain your employer-sponsored health insurance if you lose your job. However, keeping your former job’s health plan is usually pricey.

COBRA is seen as a safety net during a job loss and not meant as a long-term solution. It is meant to provide you with a health insurance bridge between jobs, but to end after you get new coverage.

The COBRA plan works exactly like your employer-sponsored plan. It’s the same health coverage and provider network. The one difference is that COBRA can cost four times more than what you pay in premiums under an employer-based plan.

Key Takeaways

  • COBRA insurance provides employees with a temporary continuation of coverage for their health plan if they lose their job.
  • The COBRA Continuation Coverage is only available for private sector companies with 20 or more employees, state and local governments.
  • When you lose your job that was not your fault you qualify for COBRA health insurance.
  • The monthly cost of COBRA insurance depends on what a specific health insurance plan cost.

What is COBRA insurance?

COBRA insurance stands for the Consolidated Omnibus Budget Reconciliation Act. The federal law helps people who lose health insurance because of a change of job.

Not everyone is eligible for COBRA continuation coverage. The coverage is only for private-sector companies with 20 or more employees and state and local government.

COBRA insurance coverage has a time limit. COBRA coverage periods vary by the qualifying event. Here are the differences:

COBRA continuation coverage periods

Qualifying eventCOBRA eligibilityMaximum coverage time

Voluntary or involuntary termination of job other than gross misconduct

Reduced hours



Dependent child

18 months
Total disabilityEmployee29 months

Employee entitled to Medicare

Divorce or legal separation

Death of employee


Dependent child

36 months
Loss of dependent-child statusDependent child36 months

How does COBRA insurance work?

Coverage under COBRA works just like your regular employer-based health plan. You get the same benefits and you have the same provider network.

However, you pay 100% of your health costs, plus up to 2% administrative costs. An employer doesn’t help you pay for premiums or out-of-pocket costs. Instead, the company allows you the opportunity to keep the benefit and coverage.

How do you qualify for COBRA health insurance?

You qualify for COBRA health insurance when you lose your job that was of no fault of your own. People also become qualified if their spouse loses health insurance or their own a parent’s plan and turn 26.

COBRA eligibility

COBRA continuation coverage is available to people who quit their job or are:

  • Laid off.
  • Fired and it wasn’t for “gross misconduct.”
  • Without insurance because an employer reduces hours.
  • Without health coverage because of a divorce, a spouse’s death or other qualifying events.

A qualifying event can also effect dependents, even if the former employee doesn’t sign up for COBRA coverage. Reasons for why family members might get coverage include if:

  • You die.
  • Your child turns 26 and drops off a parent’s plan.
  • There’s divorce or legal separation.
  • You sign up for Medicare.

How much does COBRA coverage cost?

The monthly COBRA insurance costs depend on what a particular health insurance plan costs.

Kaiser Family Foundation estimated that the average annual premium for employer-sponsored health insurance family coverage was more than $21,000 in 2020. Employees paid on average about $5,600 for that health coverage. Without an employer picking up the remaining money, those same employees would pay an average of more than $21,000 plus an up to 2% administration fee. That’s about four times more for the same employer-sponsored plan.

There are avenues that may help you, though. You can use money you’ve saved in a Health Savings Account (HSA) to pay for COBRA coverage. HSAs, which are connected to high-deductible health plans, allow you to save tax-free for future healthcare costs, including COBRA costs.

Something else that might help is federal income tax credits. 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 U.S. Department of Labor’s HCTC pays 72.5% of premiums. If you’re eligible, the HCTC could help make your COBRA premiums similar to what you were playing when you were employed.

How to sign up for COBRA

Your employer should contact you with paperwork about COBRA insurance within 30 days of your last day or if you become eligible for Medicare. Your job will also inform your spouse about the health coverage if you die.

You should notify your employer within 60 days if you or a dependent become eligible for COBRA coverage because of a divorce. The same is true if a child turns 26 and is no longer covered by a parent’s insurance.

You and your dependents have 60 days to sign up for COBRA. You don’t have to enroll immediately. Coverage is retroactive for when you become eligible, which is usually your last day of work.

You can cancel COBRA at any time. For instance, if you start a new job or get new health insurance coverage.

How long does COBRA coverage last?

You may keep COBRA insurance for between 18 and 36 months, depending on your situation. However, there are times when you can lose coverage.

Here are three examples:

  • Your employer stops group health plans.
  • You don’t pay your premiums on time.
  • You commit fraud.

When you should and shouldn’t get COBRA

COBRA insurance makes sense in some situations. Here’s why you may want COBRA and when you likely want to avoid it.

Why get COBRA

  • You want to keep your same health plan.
  • You want to make sure you get to keep your doctors.
  • You want to make sure your prescription drugs are covered.
  • You don’t have any other access to affordable health insurance.

When not get COBRA

  • Your new employer offers a similar or better health plan.
  • Your spouse is eligible for a similar health plan with lower costs.
  • You’re eligible for lower-cost insurance, such as Medicaid or a subsidized Affordable Care Act (ACA) marketplace plan.

Alternatives to COBRA

There are other options to COBRA that could cost you less.

Likely cheaper options include:

  • Your spouse’s employer’s health plan: This is likely the easiest option. If you qualify to get added to your spouse’s plan, the job would start a special enrollment period for you since you just lost your employer’s health plan. During that period, you can get added to your spouse’s plan. If you don’t sign up during that special enrollment period, you have to wait until the employer’s open enrollment period.
  • An ACA marketplace plan: You may find a less expensive plan in the individual market. The ACA marketplace offers individual health plans that have income-based subsidies or tax credit if you make more than 400% of the federal poverty limit. You can look for an off-market plan, but those don’t qualify for subsidies or tax credits. Off-market plans are usually more expensive than a subsidized ACA plan, but could still be cheaper than signing up for COBRA coverage.
  • Medicare: If you’re eligible, Medicare offers comprehensive health benefits at usually lower costs than employer-based plans.
  • Medicaid: Medicaid is low-cost coverage that’s based on your income. If you qualify, you may pay little to nothing for premiums. Some providers don’t accept Medicaid, so you’ll want to make sure your doctors and facilities take your state’s Medicaid program before signing up.
  • Catastrophic health plan: Catastrophic health insurance offers low premiums with comprehensive benefits — and high deductibles. However, only people under 30 or someone facing specific hardships are eligible. If you qualify, you can get a plan through the ACA marketplace.
  • A short-term health plan: Short-term health plans are usually cheaper than regular health plans, but they typically don’t provide the same level of patient and consumer protection. For instance, you may have trouble finding a short-term plan that covers maternity care, prescription drugs and mental health. They can also have hefty out-of-pocket costs. Short-term plans are available for one year with the chance for two renewals. Some states forbid short-term plans or limit how long you can have one.

Whether COBRA is the right choice for you depends on what you want from your health plan and how much you’re willing to pay for it.

Frequently Asked Questions

How much does COBRA insurance cost a month?

The cost of COBRA depends on how much your former employer spent on health insurance.

One important thing to remember about COBRA coverage — employers usually pay for well more than half of an employer’s health insurance. It’s true that group health plans can cost a lot of money for employees, but employers still pick up more than half of the costs.

COBRA health insurance puts all of the costs on the former employee. You no longer get any help from your previous job.

The average monthly employer-sponsored group plans costs for a family plan are more than $1,600 with employees picking up less than $500 per month on average.

For COBRA, the former employee pays the full amount for health insurance plus an up to 2% adminstrative fee.

How do you calculate COBRA cost?

Your former employer will send you a COBRA election notice. In that notice, you should see information about the cost you will pay for COBRA insurance.

COBRA insurance is the full cost of health insurance and an up to 2% administrative fee. So, once you see the full cost of the health plan, you can times that amount by .02 to figure out the administrative fee. Add that onto the cost of health insurance and you get what you should pay for COBRA coverage.

Is COBRA cheaper than individual insurance?

COBRA health insurance is usually more expensive than individual insurance, especially if you qualify for ACA plan subsidies. ACA subsidies reduce the cost of ACA plans. The subsidies are only eligible for ACA plans.

Those subsidies can reduce ACA plan costs for hundreds of dollars. You don’t get that kind of assistance with COBRA coverage. That said, you may qualify for COBRA coverage with no costs until September 2021. The American Rescue Plan of 2021 included a piece that temporarily waives COBRA costs for people who lost their job-related health coverage because of Covid-19.

It’s a good idea to compare COBRA coverage costs with other types of health plans if you lose your job. If you’re married, check to see how much your spouse’s employer’s group health plan would cost. Get quotes from the ACA health insurance marketplace.

Once you compare the plans’ costs, including premiums and deductibles, you have a better idea which plan might work best for you.

Is it worth it to get COBRA insurance?

COBRA coverage may be worth it if you want to make sure your providers accept your health insurance.

COBRA is costly but having the peace of mind knowing that your providers will see you and your health insurance plan will cover it may be with the cost.

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Les Masterson


Les, a former managing editor, insurance, at QuinStreet, has more than 20 years of experience in journalism. In his career, he has covered everything from health insurance to presidential politics.