What COBRA is and when you can use it

COBRA is a federal law that lets you stay on your employer's health insurance plan for a limited time after you leave your job—even though your employer is no longer paying for it. You pay the full premium yourself, plus a small administrative fee. It is not a new plan; it is the same coverage you had while employed, just with you footing the entire bill instead of splitting it with your employer.

You can use COBRA if your employer has 20 or more employees and you lose coverage because you were laid off, fired (for reasons other than gross misconduct), or quit. It also applies if your hours are cut so you no longer may have access to for benefits, if your employer closes, or if you go through a divorce and lose coverage as a spouse or dependent.

COBRA is temporary. Most people can keep it for 18 months. If you are disabled when you lose coverage, you may extend it to 29 months. Spouses and dependents can sometimes stay on for 36 months after a divorce or the employee's death.

Key Takeaways

  • COBRA lets you continue your current employer health plan after leaving your job, but you pay the full premium plus about 2 percent administrative fee.
  • Your employer must notify you of COBRA rights within 14 days of the event that ended your coverage, and you typically have 60 days to decide whether to enroll.
  • Most COBRA coverage lasts 18 months, though it can extend to 29 months if you are disabled or 36 months for spouses and dependents in certain situations.
  • COBRA is usually more expensive than marketplace insurance, but it may be worth it if you have ongoing medical treatment or prescriptions that require continuity of care.

How much COBRA costs and who pays

You pay 102 percent of what your employer paid for your coverage. That means you cover the full premium your employer was already paying, plus 2 percent on top to cover administrative costs. If your employer was paying $400 a month for your health insurance, you would pay about $408 per month under COBRA.

The actual cost depends entirely on the plan your employer chose and the coverage tier you were on—individual, family, or something in between. There is no standard COBRA price across all employers or all plans. You will not know the exact amount until your employer or the plan administrator sends you a formal notice with the premium spelled out.

You are responsible for paying the full amount yourself. Some people set up monthly payments; others pay quarterly or annually. If you miss a payment, you typically have 30 days to catch up before your coverage ends.

How to learn about you are may be able to access and what to do next

Your employer or health plan must send you a written notice explaining your COBRA rights within 14 days of the event that ended your coverage. This notice will include the premium amount, the important date to enroll, and instructions for how to sign up. Read it carefully—the important date to decide is usually 60 days from the date you lost coverage, not from the date you receive the notice.

If you do not receive a notice within 14 days, contact your employer's human resources department or the health plan directly. You can find the plan's contact information on your insurance card or your last explanation of benefits statement. Ask them to send you the COBRA election form and premium information.

To enroll, you fill out the election form the plan sends you and return it by the important date. You will need to specify which coverage tier you want (individual, family, etc.) and confirm your mailing address for premium bills. Once enrolled, your coverage typically starts on the first day of the month after the plan receives your election form.

COBRA versus marketplace insurance and other options

COBRA is usually more expensive than buying a plan on the health insurance marketplace, especially if you are young or healthy. On the marketplace, you may also may have access to for tax credits that lower your monthly cost, depending on your income. COBRA does not come with tax credits.

However, COBRA keeps you on the exact same plan and network of doctors you had before. If you are in the middle of cancer treatment or seeing a specialist, switching plans can mean changing doctors or losing coverage for ongoing care. If continuity matters more to you than cost, COBRA may be worth the higher premium.

Other options include coverage through a spouse's employer, Medicaid (if your income drops low enough), or a short-term health plan while you search for a new job. Short-term plans are cheaper but cover less and usually do not include pre-existing conditions. Compare all your options before deciding.

What happens when COBRA ends

When your COBRA coverage ends—whether after 18 months or whenever you choose to stop paying—you lose that insurance. You will need another plan in place before your COBRA ends, or you will have a gap in coverage.

If you find a new job with health benefits, your new employer's plan usually starts on your first day of work or after a waiting period. If you are not working, you can enroll in a marketplace plan during open enrollment (November through January) or within 60 days of losing COBRA coverage. Losing COBRA counts as a may have access to life event, which means you can enroll outside the normal enrollment window.

If you do not enroll in another plan and go uninsured, you may owe a penalty when you file your taxes, depending on the year and your state. More importantly, any medical bills you incur without insurance are your responsibility to pay in full.

Special situations: disability, divorce, and death

If you become disabled while on COBRA or within 60 days of losing your job, you can extend your coverage from 18 months to 29 months. You must notify the plan administrator within 60 days of the disability information from Social Security or the Railroad Retirement Board. The plan will then bill you for the extended period at a higher rate—150 percent of the premium instead of 102 percent.

If you are a spouse or dependent and your coverage ends because of divorce or the employee's death, you have the right to stay on the plan for up to 36 months. You have 60 days from the divorce decree or death to elect COBRA. After 36 months, you will need to find coverage elsewhere.

Frequently Asked Questions

Can I enroll in COBRA after the 60-day important date?

No. The 60-day election period is firm. If you miss it, you lose the right to COBRA. The only exception is if your employer or plan failed to notify you of your rights within 14 days—in that case, the important date may be extended. Contact the plan when ready if you think this happened.

Does COBRA cover dental and vision?

Only if your employer's plan included dental and vision coverage. COBRA continues the exact same benefits you had before. If your old plan did not cover dental, COBRA will not add it. Check your old plan documents or call the plan administrator to confirm what was included.

What if I get a new job before COBRA ends?

You can drop COBRA whenever you want. Once your new employer's plan starts, you can stop paying COBRA premiums. Notify the plan in writing that you are terminating coverage. You do not have to use all 18 months.

Can I switch to a different health plan while on COBRA?

No. COBRA locks you into the same plan your employer chose. You cannot switch to a different plan within the employer's offerings or to a marketplace plan while COBRA is active. You can only change plans when COBRA ends or if you experience another may have access to life event like marriage or birth.

Is there any way to make COBRA cheaper?

Not through COBRA itself. However, if your income drops significantly after job loss, you may may have access to for Medicaid, which is free or very low cost. You can also compare marketplace plans to see if a subsidized plan costs less than COBRA. Some states have programs that help laid-off workers pay COBRA premiums, though these are rare and time-limited.