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In the U.S., losing your job often means losing your health insurance. But there’s hope for coverage if you become unemployed. You may be eligible for the continuation of your health insurance benefits through a federal law known as COBRA — short for the Consolidated Omnibus Budget Reconciliation Act.

COBRA lets you keep your former employer’s group health plan for 18 months after your last day at work, and bridges the gap between group health insurance plans for qualified workers, their spouses and their dependent children when their health insurance gets cut off. It’s a safety net for families in the midst of crisis, such as unemployment, divorce or the death of a spouse — but that coverage can be expensive. 

How does COBRA insurance work? Here’s what you need to know about COBRA:

Key Takeaways

  • COBRA lets you keep your former employer’s group health plan for at least 18 months after your last day at work.
  • If you are a COBRA beneficiary, you have 60 days to decide whether to elect COBRA coverage.
  • There are other less-expensive options than COBRA, such as buying a health plan through the ACA marketplace. Losing your job is a qualifying life event that starts a special enrollment period in the ACA marketplace.
  • You may not be eligible for COBRA coverage if your employer goes out of business or drop its employee health insurance plan.

1. Certain qualifying events trigger 36 months of COBRA coverage for your dependents

Voluntary or involuntary job loss (except in instances of gross misconduct) triggers 18 months of COBRA coverage for you and your dependents, but your spouse and dependent children are entitled to 36 months of continued coverage under certain circumstances:

  • You become eligible for Medicare.
  • You get divorced or legally separated.
  • You die.

Additionally, your dependent child is eligible for 36 months of continued coverage under COBRA when they lose dependent-child status on your health insurance plan.

2. If your former employer goes out of business, they can cancel your COBRA coverage

When an employer goes out of business or drops its employee health insurance altogether, COBRA law doesn’t apply because there is no health plan to continue. Also, if the company reduces its employees under 20, you’re no longer eligible to receive group health plan COBRA coverage.

3. If you move outside your COBRA health plan’s coverage area, you lose your COBRA benefits

If you leave your job in New York and decide to seek new employment in Texas, you can still enroll in COBRA, but you may not be able to find local doctors on your plan.

Many health insurance plans require that you use their local provider network and your employer isn’t required to offer you a plan in your new area.

4. You must pay all of your health insurance premiums under COBRA

Cost is a major factor to consider when buying COBRA coverage. By law, you can be charged 100% of the plan’s premiums, plus up to a 2% administrative fee. Employers usually pay more than half of those health insurance premiums when you are their employee.

With COBRA, the former employee has to pay all the premiums. The average employer-sponsored family health plan costs more than $20,000, so COBRA can be expensive. 

5. There are more affordable alternatives to COBRA

COBRA was once the only avenue for most Americans to get health insurance after a layoff. Now, people have access to potentially affordable health insurance coverage through the Affordable Care Act marketplace or a short-term health plan.

Losing your job is a qualifying life event that starts a special enrollment period in the ACA marketplace. You may also get added to a spouse’s employer’s plan during the special enrollment period.

ACA plans also provide subsidies to lower-middle-class Americans. These subsidies help reduce the cost of the ACA plan. When looking for an ACA plan, your state’s insurance exchange will take your household into account and provide premium estimates with subsidies in mind.

6. If you’re eligible for Social Security disability benefits, you may receive 29 months of COBRA coverage

If the United States Social Security Administration (SSA) determines that you’re disabled, you may be entitled to up to 29 months of COBRA if:

  • You experience an 18-month qualifying event for COBRA (voluntary or involuntary job loss).
  • SSA determines you were disabled either before the COBRA event or within the first 60 days of COBRA continuation coverage.
  • Your health plan administrator has a copy of your SSA disability determination within 60 days after the determination is issued and before the end of the initial 18 months of COBRA.

7. Many states have their own “mini-COBRA” laws that grant broader COBRA eligibility

Even if you work at a small company that’s exempt from federal law, you may still benefit from COBRA. Many states have their own “mini-COBRA” laws that give workers at firms who have between two and 19 employees the right to continue their group health plans.

While COBRA applies to self-funded plans and group health plans offered by employers with 20 or more employees, mini-COBRA laws don’t apply to self-funded plans.

8. Under COBRA, you have the same health benefits as your former employer’s active employees

If your former employer offers an open enrollment period to active employees and you’re on COBRA, you — and your COBRA-enrolled spouse and dependent children — have the right to switch health insurance plans at that time.

You may also add new dependents if your employer offers this option to active employees. Newborns can be added at any time during the year as long as they are added within 30 days of birth.

9. Because COBRA is a federal law, the U.S. Department of Labor has jurisdiction over COBRA grievances

Contact the U.S. Department of Labor, the agency that administers COBRA, if you believe your employer is in violation of COBRA law. The toll-free telephone number is (866) 444-EBSA (3272). Or see COBRA information on the Employee Benefits Security Administration Web site.

10. COBRA beneficiaries get 60 days to decide whether they want COBRA coverage.

How long do you have to sign up for COBRA? COBRA beneficiaries have 60 days to decide whether they want COBRA coverage. If you enroll in COBRA before the 60 days are up, your coverage is then retroactive, as long as you pay the retroactive premiums.

This means that if you incur medical bills during your election period, you can retroactively — and legally — elect COBRA and have those bills covered.

COBRA is expensive, but it also provides you peace of mind if you ever lose your job. Whether going with COBRA is the right choice for you depends on what you want from your health plan and how much you’re willing to spend.

Final thoughts

COBRA is a great option for those who need to maintain their health insurance, COBRA insurance coverage can last up to 18 months, but you’ll need to pay the full premium, plus a 2% administrative fee. 
There are other less-expensive options than COBRA, such as buying a health plan through ACA marketplace or short-term health insurance.

Frequently asked questions

Is COBRA retroactive?

Yes, COBRA is retroactive. If you initially choose not to opt in for COBRA insurance, you can still opt for coverage later. However, retroactive benefits mean that if you opt in for COBRA coverage, the start date is the day after you lost your employer’s insurance. Because of this, you would need to pay back any premiums for the months before you opted in for coverage.

What is COBRA retroactive reimbursement?

If you enroll in COBRA after paying for some medical expenses on your own, you may be reimbursed by your insurer. You will need to submit these claims to your insurer and they will decide if your expenses will be reimbursed.

Are there any COBRA loopholes or traps?

One small trap of COBRA is that if you purchase coverage later, you have to pay back the premiums for all the months you could have had COBRA but did not. Additionally, if you become seriously injured or ill, you may be locked into expensive COBRA coverage longer than anticipated and have to pay higher than normal premiums for health insurance.

How long do you have to enroll in COBRA? 

If you qualify for COBRA coverage, you will get an election period of at least 60 days to decide whether to elect continuation coverage.

*Les Masterson contributed to this story*

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Nupur Gambhir
Managing Editor


Nupur Gambhir is a content editor and licensed life, health, and disability insurance expert. She has extensive experience bringing brands to life and has built award-nominated campaigns for travel and tech. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service.