COBRA continuation coverage, governed by the Consolidated Omnibus Budget Reconciliation Act of 1985, is a federal regulation that allows employees and their dependents to continue their group health insurance after losing eligibility due to job loss or other specific life events. This coverage helps individuals avoid sudden loss of health insurance, providing a safety net while they secure alternative coverage.
How COBRA Works:
When an employee leaves a job or experiences a qualifying event such as reduced work hours or divorce, the employer must notify the individual within 14 days about their right to elect COBRA coverage. Eligible persons then have 60 days from the notice to elect coverage. If chosen, they can maintain the same health, dental, and vision benefits they had on the employer’s group plan.
However, since COBRA coverage shifts the full premium cost to the individual, including the employer’s previous contribution plus a 2% administrative fee, it can be costly. Despite this, COBRA often remains more affordable than individual health plans purchased on the open market, especially during short-term coverage gaps.
Eligibility:
COBRA applies to group health plans from employers with 20 or more employees. To qualify, an individual must have been covered by the employer’s plan and experience one of these “qualifying events”:
- Job termination for reasons other than gross misconduct
- Significant reduction in work hours
- Divorce or legal separation from the covered employee
- Death of the employee
- The employee becoming Medicare-eligible
- Dependent child aging out of coverage
Coverage Duration and Extensions:
The standard COBRA period is 18 months. Extensions up to 36 months may be available under particular circumstances such as disability or multiple qualifying events. Divorce, death of the covered employee, or Medicare entitlement typically extend continuation coverage for dependents up to 36 months.
Common Scenarios When COBRA Is Used:
- An employee laid off from work keeps their health insurance while seeking new employment.
- Following a divorce, a spouse elects COBRA to maintain coverage through the former partner’s plan.
- Family members retain benefits after the covered employee passes away.
Important Considerations:
- Act Quickly: Missing the 60-day election window means losing COBRA coverage rights.
- Cost Management: Carefully compare COBRA premium costs against marketplace or Medicaid options.
- Paperwork: Keep all COBRA notices and premiums payment records organized.
- Subsidies: Some government programs, such as temporary subsidies under the American Rescue Plan, have periodically reduced COBRA costs.
Common Misconceptions:
- COBRA is not automatic; you must elect coverage.
- It is a temporary solution, not permanent insurance.
- The premiums include the full cost, not just the employee portion.
- It only applies to employer group health plans, not other types of health coverage.
COBRA Qualifying Events and Coverage Length
| Qualifying Event | Typical Coverage Length | Possible Extensions |
|---|---|---|
| Job loss or reduction of hours | 18 months | Up to 36 months for disability |
| Divorce or legal separation | 36 months | None |
| Death of covered employee | 36 months | None |
| Covered employee Medicare eligibility | 36 months | None |
| Child aging out of coverage | 36 months | None |
FAQs
Can I use COBRA if I quit voluntarily? Yes, unless termination is due to gross misconduct.
Does COBRA maintain my original insurance benefits? Yes, coverage terms and providers remain the same.
Can my employer deny COBRA coverage? Employers with 20+ employees must comply with COBRA regulations.
Are there alternatives to COBRA? Yes, options include marketplace plans, Medicaid, or coverage through a spouse’s employer.
Additional Resources
For official information, visit the U.S. Department of Labor COBRA webpage and the IRS COBRA guidance page.
In summary, COBRA continuation coverage provides a vital bridge by allowing you to retain your employer group health benefits during transitional periods triggered by job loss or other qualifying life events. Understanding your rights and deadlines ensures you maintain health coverage when you need it most.