How COBRA continuation coverage works
COBRA takes its name from the Consolidated Omnibus Budget Reconciliation Act, the budget law that created it. It covers group health plans of private employers that had at least 20 employees on more than half of their typical business days in the prior year, and plans of state and local governments. Part-time staff count as fractions of a full-time worker.
What you keep is the plan you already had, not a new policy: the same benefits, network, deductibles and copays as active employees, including medical, prescription, dental and vision coverage, and the same right to switch options at the employer’s open enrollment. If the plan changes for active workers, it changes for you.
COBRA does not apply to plans of the federal government or of churches and certain church-related organizations. Federal employees have a similar law of their own, and many states have mini-COBRA laws for employers with fewer than 20 workers.
Who qualifies and how long COBRA lasts
You need three things: a plan covered by COBRA, a qualifying event that ends your coverage, and to have been on the plan the day before as the employee, spouse or dependent child. Leaving a job qualifies whether you quit, retire or are laid off, unless you are fired for gross misconduct, and so does a cut in hours.
The event sets the clock, as the table shows. A job loss or reduced hours gives 18 months. Events that end coverage for a spouse or child, such as divorce, the employee’s death or a child aging off the plan, give 36 months. Plans may offer more time, never less.
Two extensions can stretch an 18-month period. If Social Security determines that anyone in the family was disabled at some point in the first 60 days of COBRA, and the disability lasts through the 18 months, everyone on the continuation gets 11 more months, 29 in all. A second qualifying event during the 18 months, such as a divorce or the employee’s death, can extend a spouse or child to 36 months. Both require you to notify the plan in time.
What COBRA costs
The plan can charge up to 102% of what coverage costs for a similar active employee: your old share, your employer’s share and 2% for administration. Because employers usually pay much of the premium, the COBRA bill is often several times what came out of your paycheck, as the example shows. During the 11-month disability extension, the charge can rise to 150%. Premiums are generally set before each 12-month premium cycle, and you can ask to pay monthly.
A few things can soften the bill. Some employers pay part or all of COBRA as part of a severance package, so ask before you sign. A health savings account can pay COBRA premiums tax-free, one of the few kinds of premium it may cover. The federal Health Coverage Tax Credit, which once helped some displaced workers pay for COBRA, is no longer available.
For anyone budgeting a sabbatical or an early retirement, the full premium belongs in the plan from the first month without a paycheck, alongside deductibles and copays.
Notices, election and payment deadlines
COBRA runs on deadlines, and missing one can end your rights. After a job loss, reduced hours, the employee’s death or Medicare entitlement, the employer has 30 days to notify the plan, and the plan then has 14 days to send you an election notice. For a divorce, legal separation or a child losing dependent status, you must tell the plan yourself, within a time limit that can’t be shorter than 60 days.
You then get at least 60 days to elect, counted from the later of the notice or the date coverage would end. Coverage elected in that window is retroactive to the day the job-based plan ended, so an election on day 50 can still cover a doctor’s visit on day 10, once you pay the premiums due for those weeks.
- Election: at least 60 days, and each family member can choose separately.
- First payment: due no sooner than 45 days after you elect; missing it can end your COBRA rights.
- Later payments: at least a 30-day grace period for each, and the plan doesn’t have to send a bill.
- Early end: unpaid premiums, the employer dropping all group health plans, joining another group plan, becoming entitled to Medicare, or fraud.
COBRA vs. a Marketplace plan and other options
Losing job-based coverage opens a Special Enrollment Period on the ACA Marketplace: you generally have 60 days before or after the loss to pick a plan. A Marketplace plan may cost far less if your income qualifies for the premium tax credit. Being offered COBRA doesn’t block the credit, but you can’t receive it for any month you are enrolled in COBRA.
COBRA keeps the identical plan, so your doctors, drug coverage and progress toward this year’s deductible generally carry over, which can matter in the middle of treatment or late in a plan year.
Timing is the trap. If your COBRA runs out, or your former employer stops contributing to it, you get a new 60-day Marketplace window. If you simply drop COBRA or stop paying, you don’t, and you wait for Open Enrollment, when anyone can switch. Some people keep COBRA to finish a plan year and move to a Marketplace plan on January 1.
Three other options are worth checking before you elect:
- A spouse’s or parent’s job-based plan: losing coverage generally lets you join it without waiting for its open season, if you ask within 30 days.
- Medicaid or CHIP: you can apply at any time, and coverage starts right away if you qualify.
- Medicare, if you are eligible: choosing COBRA instead can leave you with a late-enrollment penalty.
Illustrative numbers
An illustrative family plan after a job ends
- Total monthly cost of the plan
- The employee’s share plus the employer’s share for a similarly situated active employee
- 102%
- The full cost plus a 2% administrative charge
- 150%
- The ceiling for months 19–29 of a disability extension
This is a legal ceiling; a plan may charge less, and a former employer may subsidize part of it.
Plan’s total monthly cost for family coverage$2,000
Employee’s share while working$500 a month
Maximum COBRA premium: 102% × $2,000$2,040 a month
Increase over the old paycheck deduction$1,540 a month
All 18 months at $2,040$36,720
Disability extension, months 19–29: up to 150%$3,000 a month
The family keeps the same coverage but pays about four times its old deduction, $36,720 over 18 months before any deductibles or copays. Price Marketplace plans for the same months, and check for a severance subsidy, before the 60-day election window closes.
At a glance
COBRA qualifying events and the longest coverage the law requires
| Qualifying event | Who can elect | Maximum coverage |
|---|---|---|
| Job ends, other than for gross misconduct, or hours are cut | Employee, spouse, dependent children | 18 months |
| Same, with a Social Security–determined disability in the first 60 days | Every qualified family member | 29 months |
| Second qualifying event during the 18 months | Spouse, dependent children | 36 months in total |
| Divorce or legal separation | Spouse, dependent children | 36 months |
| Death of the employee | Spouse, dependent children | 36 months |
| Employee becomes entitled to Medicare | Spouse, dependent children | 36 months |
| Child loses dependent status under the plan | Dependent child | 36 months |
Put it in your plan
COBRA in MoneyWhatIf
MoneyWhatIf has no COBRA setting. Its Health coverage section prices marketplace coverage from the household’s last retirement until each adult reaches Medicare at 65, and its guide says it does not model every employer-coverage gap. To see what a COBRA stretch would cost, add the premium as a spending entry dated from your retirement; partial years count only the months covered. Marketplace coverage, if switched on, is still priced from that same retirement, so both premiums would land in those months. Use What-If to compare the projection with and without the entry.
Common questions
COBRA FAQs
Can I get COBRA if I quit my job?
Yes. Leaving employment for any reason other than gross misconduct is a qualifying event, so quitting, retiring and being laid off all count, as does a cut in hours that ends your coverage. Your spouse and children on the plan get their own right to elect and can decide separately. The employer must have had 20 or more employees, or state law may offer something similar.
What happens to COBRA when I become eligible for Medicare?
Don’t let COBRA stand in for Medicare. If you lose a job after your Medicare initial enrollment period, you get an 8-month special enrollment period starting the month after the job or the group coverage ends, whichever comes first, and electing COBRA doesn’t pause it. Taking COBRA instead of Part B can mean a late-enrollment penalty. With both, Medicare generally pays first. See Medicare enrollment periods.
Can I use an HSA to pay COBRA premiums?
Yes. HSA money generally can’t pay insurance premiums, but COBRA is one of the exceptions, along with long-term care insurance, coverage while you receive unemployment compensation, and Medicare premiums other than Medigap once you are 65. The withdrawal is tax-free, so the premium is effectively paid with pre-tax dollars saved in earlier years.
What if my employer has fewer than 20 employees?
Federal COBRA doesn’t apply, but many states have similar laws, often called mini-COBRA, for smaller employers’ health plans, with their own rules on length and cost. Your state insurance commissioner’s office can tell you what is available. If nothing is, losing the coverage still opens a 60-day Special Enrollment Period on the Marketplace.