How Does COBRA Insurance Work?
Understanding how COBRA works requires understanding the timeline from the moment you lose employer-sponsored health coverage. COBRA continuation coverage follows a defined sequence: your employer notifies the benefits administrator, you receive an election notice, you have 60 days to apply, and you have 45 days to make your first payment. This section outlines each step so you can understand the process and meet all deadlines.
When Will You Receive Your COBRA Election Notice?
Your former employer must notify your health benefits administrator within 30 days of your coverage loss. The administrator then sends your official COBRA election notice within 14 days. You should receive your COBRA election notice within 45 days of the qualifying event. This notice describes your continuation coverage rights, enrollment deadlines, and payment instructions.
How Do You Apply for COBRA?
You have 60 days from the date you receive your election notice to apply for COBRA continuation coverage. This election period is your opportunity to enroll. If you do not apply within 60 days, you forfeit COBRA continuation coverage and cannot retroactively elect it. Learn how to enroll within the COBRA election period.
When is Your First COBRA Payment Due?
After you elect COBRA, you have 45 days to submit your first premium payment. This first payment is due within 45 days of your election date. Your health insurance coverage may be cancelled if payment is not received by this deadline. See guidance on how and where to pay.
When Does COBRA Coverage Start?
COBRA continuation coverage is retroactive to the date your employer-sponsored health insurance ended. This means you have coverage for any medical services you received during the gap between your employer plan ending and your COBRA election date. If you enroll and pay your first premium within 60 days, your coverage continues without interruption. More information is available on start date rules.
How Long Does COBRA Last?
Standard COBRA continuation coverage lasts up to 18 months from the date your employer coverage ended. Certain events may extend your coverage period. Eligible dependents may qualify for COBRA continuation coverage lasting up to 36 months. The length of your COBRA coverage depends on the type of qualifying event that caused your loss of coverage. Learn how long COBRA lasts.
Cost of COBRA Insurance
The most common feedback about COBRA is that it is too expensive. This is because individuals are required to pay the full cost of their health insurance premium, which was previously subsidized by their employer.
As a result, monthly premiums typically range from $400 to $700 per individual, depending on the plan and coverage.
Qualifying Life Events That Trigger COBRA
The COBRA federal health insurance law applies to private sector employers with 20 or more employees and gives employees and their families the option to keep their group health plan for a limited time should a qualifying life event occur that otherwise cause them to lose their health insurance. Several common situations allow someone eligibility for COBRA continuation coverage:
- Employment Termination: Most employees who lose coverage due to job termination or voluntary resignation qualify for COBRA as long as the termination was not due to gross misconduct.
- Reduction in Hours: Workers who lose eligibility because their hours were reduced often qualify for COBRA even if they remain employed.
- Dependent Children Turning 26: Adult children who age out of a parent’s health plan at 26 may qualify for COBRA to continue coverage.
- Divorce or Legal Separation: A spouse or dependent may qualify when a marriage ends in divorce or separation and results in the loss of health insurance.
- Retirement: Retiring employees who lose active employee coverage may be eligible for COBRA continuation coverage.
- Death of the Covered Employee: Surviving spouses and dependents may qualify for COBRA when the covered employee passes away.
To find out if you qualify take the COBRA Eligibility Survey.
Exclusions from COBRA Eligibility
While COBRA provides a continuous health coverage for many employees, certain groups and circumstances are not covered by COBRA continuation laws. Federal COBRA applies only to private-sector employers with 20 or more employees, leaving some individuals ineligible for coverage. Additionally, certain employers and situations are excluded from COBRA coverage:
- Federal Employees: Workers employed by the federal government are not covered under COBRA but may have similar rights under separate federal laws, such as the Federal Employees Health Benefits (FEHB) program.
- Church Employers: Organizations considered church employers are exempt from federal COBRA requirements.
- Small Employers: Businesses with fewer than 20 employees are not required to offer COBRA continuation coverage under federal law.
- Gross Misconduct Exception: Employees terminated due to gross misconduct are not eligible for COBRA coverage.
Availability of Mini-COBRA in Select States
In many states, businesses with a workforce of 19 or fewer employees are required by law to offer continued health insurance coverage to former employees, similar to the federal COBRA regulations. Please be aware that the deadlines and time frames for making a decision about coverage may differ based on state laws.
Find your state in the COBRA State-by-State Guide.
Regulatory Oversight
Federal oversight of COBRA is shared by the Department of Labor, the Department of the Treasury, and the Department of Health and Human Services. Each agency administers the provisions under its authority.
The Department of Labor oversees compliance for private-sector group health plans. The Department of the Treasury addresses the tax provisions, and the Department of Health and Human Services administers requirements for public-sector group health plans.
How To Get Health Insurance Between Jobs
Having health insurance during a period of transition between jobs helps prevent unexpected medical expenses. Reviewing available options can provide uninterrupted coverage until new employment begins. Here are three ways to remain insured between while between jobs:
- Continuing Current Coverage: COBRA allows individuals to maintain their existing health insurance plan without exclusions or pre-existing condition limitations. This option ensures access to medical care and prescriptions under the same coverage terms as the previous employer-sponsored plan.
- Affordable Marketplace Plans: The Affordable Care Act (ACA) marketplace offers comprehensive plans that are similar to employer-sponsored insurance. Many individuals qualify for federal subsidies, making these plans a cost-effective alternative. Marketplace plans also have limited enrollment periods following qualifying events.
- Short-Term Coverage: Short-term health plans provide temporary month-to-month coverage and can be a practical solution for those in good health or waiting for new employer-sponsored insurance to begin. Explore short-term health plans.
Alternatives to COBRA Coverage
If COBRA is unavailable or too expensive, finding a more affordable alternative health plan may be the right solution. Health plans like short-term health insurance plan, Affordable Care Act (ACA) marketplace coverage, or Medicaid may provide cost-effective solutions.
These temporary solutions, along with COBRA, offer ways to maintain health insurance during gaps between jobs.
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