If you lose your employer’s health insurance, COBRA insurance softens the blow by allowing you to keep the group health plan temporarily.

COBRA continues your employer’s health insurance after your last day. So, you get to benefit from the same health insurance coverage, including health benefits and provider network. However, it comes with a hefty price tag.

You pay all of the costs for COBRA health insurance — without any help from your former employer.

Let’s take a look at COBRA insurance, how to sign up and how it works.

Key Takeaways

  • COBRA health insurance lets you keep your former employer’s health insurance plan for at least 18 months.
  • The former employer no longer chips it to pay for health insurance when you have COBRA, so you pick up all of the costs.
  • You have 60 days whether to take COBRA or decline the coverage.
  • There are other less expensive options than COBRA, such as going on your spouse’s health plan or getting a plan on the health insurance marketplace.

What is COBRA insurance?

COBRA, which stands for the Consolidated Omnibus Budget Reconciliation Act, bridges the insurance gap for people who lose their jobs.

You’re able to stay on your former employer’s plan for a limited time. It’s the same plan. You get the same care and benefits. The only difference (and it’s a significant one) is you don’t get help from your former employer. You pay for all the costs.

Though COBRA typically costs much more than a standard employer-based health plan, the American Rescue Plan of 2021 included a provision to help people with COBRA.

Through September 2021, the plan will pay 100% of COBRA coverage costs for people recently laid off because of the COVID-19 pandemic. After September, COBRA plan members will again pay the full cost of COBRA insurance.

Not everyone is eligible for the subsidies. People who can sign up for Medicare or a group health plan, such as a spouse’s plan, can’t receive the COBRA subsidies.

Reach out to your former employer about the COBRA subsidies.

How does COBRA insurance work?

COBRA coverage works just like your former employer-sponsored plan.

You have the same insurance company, the same benefits and the same provider network. One major difference is that the employer no longer helps you with health insurance costs.

That means you pick up all of the costs, which can be substantial.

COBRA insurance rules

COBRA continuation coverage only applies to private-sector companies with 20 or more employees, as well as state and local governments. However, you may find your state has a similar COBRA law for smaller companies.

COBRA is available for people who quit their job or were:

  • Laid off
  • Fired and it wasn’t for “gross misconduct”
  • Lost health insurance because an employer cuts your hours
  • Lost coverage because of a divorce, a spouse’s death or another qualifying event

How to get COBRA continuation coverage?

Your employer should notify you or your dependents of the COBRA option within 30 days of your last day or if you become eligible for Medicare. Your employer may also tell your spouse about COBRA if you die.

If you or a dependent become eligible for COBRA because of a divorce or if a child turns 26, you should notify your employer within 60 days.

You have 60 days to decide whether to sign up for a COBRA plan. COBRA lets your dependents approve coverage even if you decline COBRA.

If you initially reject COBRA, you can still get it later as long as it’s within the 60-day window. Your coverage is retroactive to the qualifying event, such as your last day.

COBRA insurance cost

COBRA allows you to keep your employer’s health insurance, but that’s not cheap. You have to pay the entire tab for the premiums plus up to 2% administrative costs. The employer will no longer help you with your costs. It’s all on you.

The average employer-sponsored health insurance family plan costs more than $20,000 in premiums. An employer usually picks up more than half of health insurance costs. However, the employer doesn’t pay for a COBRA plan, so those costs are passed onto the former employee. That means a significant COBRA premium.

See more about COBRA costs.

One cost-effective option is to wait to see if you need coverage under COBRA within the 60-day window. That way, you won’t pay premiums and can see whether you need the health coverage.

However, if you find that you need coverage, you would get retroactive coverage back to the qualifying date. One downside to that option though is you’d then have to pay the premiums for the entire period in which you’re eligible, even if you sign up 60 days later. In other words, if you sign up on day 59, you still have to pay all the premiums from the 59 days.

You might be eligible for a federal income tax credit to help you with COBRA premiums. The U.S. Department of Labor said the Health Coverage Tax Credit (HCTC) is potentially open to people who lost their jobs because of the “negative effects of global trade.”

You may also be eligible if you receive benefits under the Trade Adjustment Assistance Program or receive pension payments from the Pension Benefit Guaranty Corporation.

The HCTC pays 72.5% of premiums. You fork over the remaining 27.5%. If you’re eligible, you might wind up paying similar premiums as you did when you were employed.

COBRA benefits

A COBRA plan’s benefits are just like the former employer’s group health plan. You have the same provider network.

The biggest difference is the costs. You shoulder the whole burden of health insurance costs without any help from your former employer.

That’s what makes COBRA coverage so expensive and why many people decide to either go without health coverage between jobs or find another type of lower-cost coverage.

How to sign up for COBRA?

If you qualify for COBRA, your employer should notify you within 30 days of your last day.

You then have 60 days to decide whether to continue the group plan coverage with COBRA.

How long does COBRA last?

COBRA provides the same benefits as your employer-sponsored plan. COBRA limits you to 18 months of coverage, though. The exact COBRA eligibilty period depends on the qualifying event, such as whether you’re eligible for COBRA because you got laid off, had a legal separation or because your spouse died.

You can request an 18-month extension if you or a dependent is disabled. You can also request one if you face another qualifying event, such as a spouse’s death. In some cases, COBRA coverage can extend for 36 months.

COBRA Coverage Periods

Qualifying eventBeneficiary eligible for COBRAMaximum 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

You can cancel the COBRA coverage at any time within 18 months. You’re not locked in. You will likely want to drop COBRA once you become eligible for a different health plan, such as if you get another job.

If you stop paying premiums, COBRA coverage will end automatically. Make sure to pay your premiums promptly.

A health plan may also terminate a COBRA plan if your former employer drops group health insurance coverage.

Frequently Asked Questions

How much is COBRA health insurance per month?

Family coverage in an employer-sponsored health plan averages more than $1,600 a month, but the cost of COBRA coverage varies by health plan.

Employers usually pick up more than half of those costs. With COBRA coverage, you would pay the full amount and up to a 2% administrative fee.

So, if you have a COBRA plan and have family coverage, you can expect to pay more than $1,000 a month to keep your health insurance.

Can I continue COBRA with a new job?

You can keep COBRA coverage when you get a new job. That even includes if your new employer offers you a new health plan.

Why would you want to keep expensive COBRA coverage if your new employer offers you a plan? One reason is the provider network. If you see multiple doctors and they don’t take the new employer’s plan but accept the COBRA plan, you may find it makes sense to pay more for COBRA coverage and keep the same provider network.

One important note: if you decline your new employer’s health plan, you have to wait until the open enrollment period to get onto the new employer’s group health plan.

Are there alternatives for health coverage other than COBRA?

COBRA is a way to keep your current employer plan after losing your job temporarily. But it’s not the only health insurance option.

You can instead:

  • Sign up with your new employer.
  • Go onto your spouse’s health insurance group health plan. Losing your job kicks in a special enrollment period. That period gives you time to go onto a health plan at your spouse’s employer.
  • Get a plan through the ACA health insurance marketplace or an individual health plan. If your income is below 400% of the federal poverty level, you can find subsidized ACA plans or tax credits to help pay for coverage. That’s about $50,000 for an individual and slightly more than $100,000 for a family of four. You don’t get that benefit from individual health plans that aren’t sold through the exchanges.
  • See about a catastrophic health plan. People under 30 and those who qualify for a hardship exemption can get a catastrophic plan. This coverage has low premiums but offers comprehensive coverage. However, it also has high deductibles, so you pay more when you need care.
  • Sign up for a short-term plan. Most Americans can now sign up for a short-term plan that can last a year. You can also request two renewals. Short-term plans are low cost, but they provide limited benefits. Many plans don’t offer prescription drug coverage, mental health, pregnancy or infant care. Plus, they can have large out-of-pocket costs. Short-term plans can be a stop-gap until you can get another employer-sponsored health plan but understand short-term coverage’s limitations.
  • See if you qualify for Medicaid. More than three dozen states expanded Medicaid eligibility. The expansion makes people with incomes up to 138% of the federal poverty level or below eligible for a Medicaid plan. That’s slightly more than $17,000 for an individual and about $35,000 for a family of four. Medicaid usually costs much less than any of the other options.

No matter what option you choose, make sure that your doctors accept that health insurance. Also, check to see how much your medications will cost and that the health plans cover your prescriptions.

Once you compare costs, including premiums and out-of-pocket money, you can figure out whether COBRA insurance is the best option for you.

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