COBRA Health Insurance Eligibility and Alternatives
COBRA is a way to extend employer-based health insurance you’d otherwise lose, but it can be very pricey.
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Most people in the United States get health insurance coverage through an employer, so losing a job could also mean losing coverage. To help ease the transition, COBRA gives workers legal rights to temporarily keep employer-based health benefits under certain circumstances.
What is COBRA and how does it work?
COBRA allows you to keep employer-based health insurance coverage for a limited time after you stop working for the employer or if you lose coverage as an employee’s spouse or dependent.
While you can keep your coverage with COBRA, you’ll still have to pay for it — and your bill might be much higher than you paid when you were active with the employer.
If you qualify for COBRA, you’ll have at least 60 days to choose whether to continue your coverage. If you choose to continue, your coverage must be the same as what you had or what’s currently available to similar employees still active with the employer.
COBRA coverage is usually available for 18 months, but can be longer in certain circumstances.
The acronym COBRA stands for the Consolidated Omnibus Budget Reconciliation Act of 1985, the law that established rights to keep employer coverage. Most people just call this coverage COBRA, pronounced like the snake.
Who’s eligible for COBRA health insurance?
COBRA applies to private employers with 20 or more employees. Some states also have “mini-COBRA” laws that apply to smaller employers.
You become eligible for COBRA coverage after a qualifying event. Qualifying events are generally events that would cause you to lose employer-provided health coverage.
If you’re the employee, qualifying events involve changes in your employment.
If you have employer-sponsored health insurance and: | You and your family can buy COBRA health insurance for: |
|---|---|
You quit or are terminated for any reason other than “gross misconduct.” | 18 months. |
Your weekly hours are reduced to the point where you lose health coverage. | 18 months. |
You have a qualifying disability and quit, are terminated or your hours are reduced. | 29 months. |
If you’re a spouse or dependent of the employee, there’s a wider range of qualifying events.
If you have employer-sponsored health insurance and: | Your spouse and/or dependents can buy COBRA health insurance for: |
|---|---|
You enroll in Medicare. | 36 months. |
You become entitled to Medicare less than 18 months before losing your job or having hours reduced. | 36 months from Medicare eligibility. |
You divorce or legally separate. | 36 months. |
You die. | 36 months. |
There's COBRA eligibility for children who lose access to coverage they had as a dependent when they turn 26, too.
If you have employer-sponsored health insurance and: | Your child can buy COBRA health insurance for: |
|---|---|
Your child turns 26, losing dependent status. | 36 months. |
The time periods above are the minimums required by law. Plans can choose to offer COBRA coverage for longer periods.
How much does COBRA health insurance cost?
COBRA coverage can be very expensive — three to five times what you paid previously, or more. That’s because you generally lose employer subsidies for your coverage, so you may become responsible for the full cost of the insurance, plus a 2% administration fee.
Private employers cover about 80% of premiums for individual employees’ health insurance coverage, while employees pay for the other 20%, according to the Bureau of Labor Statistics. An individual could go from paying 20% of the total cost while employed to 102% of the total on COBRA.
For family coverage, private employers pay about 68% of the premium, while employees pay for the other 32%. So if you paid $500 per month for family coverage while employed, you might have to pay over $1,500 per month on COBRA, for example.
The employer can choose to subsidize your COBRA premium and cover part of the cost, but it’s not common.
» MORE: How much is health insurance?
COBRA health insurance deadlines
For termination or reduction of hours
The employer must notify the health plan administrator about a qualifying event. | Within 30 days of the qualifying event. |
The health plan administrator must notify the individual about COBRA rights. | Within 14 days of being notified by the employer. (Within 44 days of the qualifying event, if the employer runs its own health plan and there’s no separate administrator to notify.) |
Qualified beneficiaries can choose whether to continue coverage. | At least 60 days after being notified about COBRA rights. |
For divorce, separation or a dependent no longer qualifying
The employee or beneficiary must notify the health plan administrator about a divorce, legal separation or a dependent losing dependent status. | Within 60 days of the qualifying event. |
The health plan administrator must notify the individual about COBRA rights. | Within 14 days of being notified by the employer. |
Qualified beneficiaries can choose whether to continue coverage. | At least 60 days after being notified about COBRA rights. |
Alternatives to COBRA
COBRA is expensive and temporary, so you might want to find other health insurance coverage.
Marketplace health insurance plans
You can shop for new health coverage on the health insurance marketplace, and you might even qualify for premium tax credits to make it more affordable.
Losing health insurance due to a change in employment is a qualifying life event. That means that you can sign up for a new individual health insurance plan outside of open enrollment. This is true even if you are the spouse or child of the employee who lost coverage, or if you lost insurance because you turned 26.
You can use the health insurance marketplace accessible through HealthCare.gov or work with an agent or broker to find a health insurance plan that works for you.
Other health insurance options
Here are other potential options for health insurance that might be worth considering:
Buy other employer coverage if you get a new job with health benefits, or if your spouse’s employer offers a plan you can move to. Check with that plan’s benefits administrator to know for sure.
Buy a private health plan through an insurance broker or directly from an insurance company.
Apply for Medicaid if your income is low enough to qualify.
» MORE: How to Get Health Insurance
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