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What COBRA Insurance Is and How It Works

COBRA is a type of health insurance that allows people to continue paying for their health coverage after they leave their job.

The Federal COBRA Act provides protection for workers who might otherwise lose their health coverage and ensures that they can maintain continuity of care.

The COBRA Law

The Consolidated Omnibus Budget Reconciliation Act, or the COBRA Act, was passed by the US government in 1985. The law gave workers and their families the right to continue their health insurance coverage if a qualifying event occurs where they would otherwise lose their health care.

All businesses that have 20 or more full-time workers, must offer continuation of health benefits.

What Is COBRA, Then?

To use and pay for your most recent group health plan is commonly known as COBRA insurance.

COBRA Health Insurance Eligibility

When a qualifying event happens, like job loss or a family event, your past employer has to offer you the same insurance coverage under a special open enrollment period. As long as you were enrolled in a qualified group health plan for one day, you can keep that insurance.

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COBRA Eligibility

Rules Of COBRA Insurance

In simple terms, this is how you obtain COBRA insurance:

  1. Your employer’s work health insurance ended due to a qualifying event
  2. Within 45 days of the qualifying event, the employer sends you an election notice to restart your workplace insurance
  3. Within 60 days of the election notice, you may choose to enroll back into your health plan where the coverage will pick up back up after making your first premium payment
  4. Your copays, coinsurance, deductibles, out-of-pocket expenses and insurance cards for the year stay the same
  5. You have 45 days to make your first COBRA premium payment
  6. The coverage is retroactive and any medical expenses you incur before the COBRA plan starts may be submitted for reimbursement

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How Much Is COBRA?

Because COBRA is the same work health insurance you previously had, you are responsible for the entire premium payment, including the employer’s portion. The national average for this type of traditional health insurance is $438/month per person.

When Do COBRA Benefits Begin?

Your coverage will begin immediately upon receipt of your first premium payment. If fact, it will be retroactive to the date you lost coverage. 

Employers Are Required To Provide COBRA Continuation

The U.S. Department of Labor oversees the federal COBRA law and requires all companies with 20 or more full-time employees to provide continued access to the same group health plan coverage to workers if that health insurance would stop.

This means if you lose your work insurance, you may keep the same coverage you had. The employer is responsible for notifying you of COBRA eligibility in a timely manner.

COBRA Is The Same Insurance You Had

By using your COBRA right, you simply have the same employer-sponsored health plan you just had before you lost it.

When you elect to stay on your employer’s health insurance, you keep your same doctors, copays and prescription coverage. If you had dental and vision coverage previously, then your COBRA will have dental and vision .

COBRA is Available For 18 or 36 Months

The good news for many people is that a COBRA health plan from their former employer satisfies the individual ACA mandate while protecting their family’s health and well-being as they previously had. COBRA insurance coverage may last up to 18 months.

Additionally, COBRA continuing health coverage is available to former spouses after divorce, retirees before they begin Medicare and children that lose their dependent status.

You May Cancel COBRA At Any Time

To cancel COBRA coverage, you will need to let your plan administrator know.

Health Insurance After Quitting Your Job

If your employer is required to allow you access to their group health insurance, then it doesn’t matter how your job ended. Your COBRA rights allow you the option of keeping your workplace insurance if you quit your job or the company downsized.

Should You Choose A COBRA Plan?

If you have had recent or ongoing health problems, often times its best to stay on your former employer’s group health plan. Learn more about when to choose COBRA or look for an alternative for continued health insurance.

Some States Have Mini-COBRA

The federal COBRA act is in force for all companies with 20 or less employees. Many states have their own laws regarding continuation of workplace insurance. These “Mini-COBRA” laws may allow works more time to continue the insurance after the federal time period has been exhausted. You’ll have to check if your state has additional insurance laws.

Affordable COBRA Alternatives

If the cost of COBRA insurance is too much, you may want to consider a short-term medical plan.

If you are in reasonably good health and without pre-existing medical conditions, there are affordable temporary health insurance plans options available.

Are You Eligible For COBRA?

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