Using COBRA for Health and Medical Insurance Coverage

The Consolidated Omnibus Budget Reconciliation Act, also known as COBRA, requires employers to continue to offer health or medical insurance coverage to employees or their families after certain qualifying events. This limited extension of coverage can give you time to transfer to a new healthcare plan.

What Is COBRA?

If you leave your job voluntarily or are terminated for reasons other than gross misconduct, you can extend your coverage for up to 18 months, and for an additional 11 months if you are disabled. This also applies if your work hours are reduced to the point where you no longer qualify for your employer's health insurance coverage. Your spouse or children may continue coverage for an additional 18 months if there is a second qualifying event, such as your retirement, divorce, or death.

There are additional COBRA qualifications and stipulations for employers. For example, COBRA only applies to employers who have 20 or more employees. They may be private sector employers, employee organizations, or state or local government employers. Find more information about employer qualifications and rules on the US Department of Labor's COBRA website.

In some states, there is a state-based continuation of coverage for employees who work for smaller companies and don't have access to COBRA.

How to Apply

When you are ready to leave your job, your employer must give you COBRA information which will include the steps you'll need to take to extend your coverage after you leave your job. If you have not received that information within 14 days, contact your employer's HR department and ask them to provide it to you.

You have 60 days to decide whether or not to continue your coverage with COBRA. This will give you time to see what other coverage may be available. You won't have any gaps in coverage under your former plan as long as you make a decision by day 59. You are responsible for your COBRA premiums that apply during that period. Your COBRA coverage will be backdated so it covers any medical expenses you incurred during that period.

Be sure you don't go past the 60-day window without applying for another healthcare plan. You may need to fill in the gap with short-term health insurance if you are waiting for a new employer's health insurance to take effect. Medicaid may also be an option for you.

Your Coverage Under COBRA

If you take advantage of COBRA, the coverage plan you will have is the one you had at the time of the event that triggered your loss of employer health care. The plan itself won't change unless you elect a new plan when the open enrollment period comes around.

With the same health insurance as you had before, you won't have to change doctors and you'll have the same coinsurance, deductible, and copayments you are used to paying.

Cost

Employers are allowed to charge you, their former employee, 102% of their cost of the insurance. Of course, 100% covers the employer's cost to insure you. The extra 2% covers any administrative costs the employer must absorb to take care of the paperwork. Another wrinkle is that if you are receiving the additional 11-month disability extension of coverage, your premium in those additional months can be raised to 150% of the plan's total cost of coverage.

Employees are often shocked at what COBRA coverage will cost them. Often, your premium while employed was only part of your total health insurance plan cost while your employer paid a percentage or even the entire cost. Now you will bear the entire cost.

Unfortunately, as expensive as COBRA coverage may seem, it will probably still cost you less than individual health insurance. Compare the costs and the coverage to ensure it's the best choice. You may have a lower-cost option through the individual healthcare marketplace.

Length of Coverage

In most cases, a former employee or family member may keep COBRA health insurance coverage for up to 18 months after the last date of employment. If the person covered through COBRA becomes disabled, then benefits may be extended for up to 11 more months. Premiums will increase for that extension.

Note that if you miss a monthly COBRA payment, you will lose coverage and you won't be able to get it back. The plan doesn't have to send you a bill, so you will need to ensure you make your payments.

Family members (spouse or dependent child) may get an 18-month extension if there is a second qualifying event, bringing their total length of coverage to 36 months. These events would be the death of the covered employee, divorce or legal separation, Medicare entitlement in certain circumstances, or loss of dependent child status under the plan. The second event must have been one that would have caused the qualified beneficiary to lose coverage under the plan if the first qualifying event hadn't occurred.

How to Prepare for the End of Your COBRA Coverage

While you are still covered under COBRA, monitor pricing for a new health insurance plan you can shift to once your COBRA coverage ends. You may also want to explore whether you now qualify for Medicaid.

If the Affordable Care Act Health Insurance Marketplace is available for you, check for the date of the open enrollment period. You can enroll during that period whenever it occurs while you are covered by COBRA. You will also be eligible to enroll in the Marketplace at the end of your COBRA benefits, as that is a qualifying event. However, note that changes in the Affordable Care Act will impact that option and you should check to see if it is still available.

A Word From Verywell

The prospect of losing healthcare insurance when your job situation changes can be very stressful, especially if you are under treatment for a condition or you want to ensure your family has healthcare benefits. Explore your options and know your rights. Changes to the healthcare laws may also impact the choices you will have other than COBRA.