COBRA gives workers and their families the right to keep the group health coverage they had, for a limited period, after an event that would otherwise end it. The coverage is identical. What changes is who pays for it.
The rules are federal, the deadlines are strict, and one of them costs people their marketplace options if they get it backwards.
Who and what is covered
COBRA generally applies to group health plans sponsored by employers with 20 or more employees in the prior year. Smaller employers are not subject to federal COBRA, though many states have their own continuation laws covering smaller groups. What applies in your case varies by state and by employer size.
Qualifying events include voluntary or involuntary job loss other than for gross misconduct, a reduction in hours that ends eligibility, the death of the covered employee, divorce or legal separation, the covered employee becoming entitled to Medicare, and a dependent child aging out of the plan.
Each qualified beneficiary has an independent right to elect. A spouse or dependent can elect COBRA even if the former employee does not, and each must be notified separately.
How long it lasts
| Qualifying event | Maximum continuation period |
|---|---|
| Termination of employment, other than gross misconduct | 18 months |
| Reduction in hours ending eligibility | 18 months |
| Death of the covered employee | 36 months for spouse and dependents |
| Divorce or legal separation | 36 months for spouse and dependents |
| Covered employee becoming entitled to Medicare | 36 months for spouse and dependents |
| Dependent child losing eligibility under the plan | 36 months |
Two extensions can lengthen an 18-month period:
- Disability extension. An additional 11 months, for a total of 29, where a qualified beneficiary is determined to have been disabled under Social Security rules within the required timeframe and the plan is notified as required.
- Second qualifying event. An additional 18 months, for a total of 36, where a second qualifying event occurs during the initial period and would itself have caused a loss of coverage.
The deadlines that matter
These are the numbers to write down.
- 60 days to elect. Your election period runs 60 days from the later of the date coverage ends or the date the election notice is provided or mailed to you. If you initially waive coverage, you can still elect within that 60-day window.
- 45 days to make the first payment, measured from the date of your election. That first payment must cover the period back to the date coverage would otherwise have ended, which is why the first bill is often larger than a single month.
- 30-day grace period on subsequent payments, at minimum. Plans are not required to send monthly bills, so tracking the due dates is your responsibility. Missing a payment beyond the grace period can end the coverage permanently.
- 60 days for you to notify the plan if the qualifying event is a divorce, a legal separation, or a dependent child losing eligibility. The employer will not know about these events unless you tell them, and missing this notice can forfeit the right entirely.
- Plan notice deadlines run 44 days after a qualifying event the employer knows about, or 14 days after you notify the plan of one it would not know about.
Because election is retroactive, some people deliberately wait during the 60-day window, knowing they can elect later and have coverage backdated if a medical need arises. That is legal, but it is a gamble on the timing of the election and payment deadlines, and it leaves you without a card in hand in the meantime.
What it costs
The plan may charge you up to 102 percent of the cost to the plan for similarly situated individuals. That is the full premium, both the share you used to pay and the share your employer paid, plus up to 2 percent for administration.
During the 11-month disability extension, the plan may charge up to 150 percent of the cost of coverage while the disabled beneficiary remains covered.
This is the source of most of the sticker shock. The coverage did not get more expensive; you are simply seeing its full cost for the first time. What that amount will be for your plan is on the election notice.
When COBRA can end early
A plan may terminate continuation coverage before the maximum period if premiums are not paid in full and on time, if the employer stops maintaining any group health plan, or if the qualified beneficiary becomes covered under another group health plan or becomes entitled to Medicare after electing COBRA.
The alternatives, and one trap
Losing job-based coverage triggers a special enrollment period on the health insurance marketplace, generally 60 days. That runs at the same time as your COBRA election window, so you can weigh both.
Options generally worth considering:
- A marketplace plan, where premium tax credits may be available depending on household income. Someone whose income dropped along with the job may find the calculation looks very different than it did while employed. See marketplace subsidies explained.
- A spouse's or parent's employer plan. Losing your coverage is a qualifying event for their plan's special enrollment as well. Adults under 26 may be able to join a parent's plan.
- Medicaid or CHIP, which have no enrollment window at all and can be applied for at any time.
- COBRA itself, which is often the right answer when you are mid-treatment, have met most of your deductible for the year, or need to keep a specific provider network.
The trap: exhausting COBRA at the end of its maximum period is a qualifying event that opens a marketplace special enrollment period. Voluntarily dropping COBRA partway through, or losing it for non-payment, generally is not. If you elect COBRA and then decide months later that you want a marketplace plan instead, you may be waiting for the next open enrollment. Decide before the 60-day marketplace window closes, not after.
Weighing COBRA against a marketplace plan
Beyond cost, three questions usually decide it:
- Have you already met the deductible? COBRA continues the same plan year and the same accumulators. A new plan restarts them at zero, which can matter a great deal late in the year.
- Are you in active treatment? Keeping the same network, the same prior authorizations and the same formulary has real value mid-course.
- How long is the gap? For a short gap before new employer coverage begins, continuity often wins. For an indefinite one, the marketplace calculation deserves a careful look.
COBRA rights are federal, but state continuation laws, employer plan terms and marketplace options vary by state and by employer. Your election notice, your plan administrator, the Department of Labor's Employee Benefits Security Administration, your state exchange or a licensed agent can answer questions about your own situation.
Related reading: open enrollment and special enrollment periods. To get connected with licensed carriers and agents offering health plans in your area, you can request health insurance quotes.