COBRA

Healthcare insurance is often provided by your employer. When you leave or lose a job, a common fear is that you’ll also lose your health coverage. Luckily, if you were enrolled in a large employer group plan (more than 20 employees), you can continue to have that insurance under the Consolidated Omnibus Budget Reconciliation Act (COBRA). Some states have also expanded these rights to continue coverage for employers that have fewer than 20 employees.

COBRA coverage is essentially the same health insurance coverage you had at your former employer and covers your spouse and/or dependents if they were also on the plan. Most often, COBRA coverage extends for up to 18 months, but in some special circumstances, coverage can last up to 36 months.

Most employers share some of the cost of the health insurance plan’s monthly premium when you are actively employed. The major difference under COBRA coverage is that your employer no longer cost-shares the premiums for the plan with you. The premium will be the full cost of the plan plus an [additional 2% to cover the administration of the coverage. For this reason, COBRA coverage is often more expensive compared to what you were paying for your share when you were actively employed.

So when is COBRA a good option? Evaluating COBRA costs and coverage against other available options is an important consideration. Here are some factors to consider when deciding whether or not to use COBRA:

1. The individual market (also known as the Marketplace) is available when you lose employer health insurance. Subsidies such as cost-sharing reductions and premium tax credits can now make this coverage more affordable than COBRA coverage. Alternatively, if your income is high and you don’t qualify for subsidies in the individual market, COBRA coverage can be less expensive than Marketplace coverage.
2. If you have a strong preference for your current providers, you may want to continue your employer coverage under COBRA. This is because providers may not participate in some plans on the individual market.
3. If you have already reached your deductible and/or out-of-pocket costs for the year, this continues under COBRA. If you select an individual plan when you lose employer coverage, your deductible resets and you must reach it before your individual plan begins to cost share with you. This financial analysis can impact the decision of the optimal choice for you.
4. If you anticipate being re-employed in the near future with access to new employer benefits, COBRA costs may be more acceptable to avoid multiple plan changes (e.g., COBRA to an individual plan to a new employer plan vs. COBRA to a new employer plan).

COBRA eligibility can stem from several life events, not just your employment ending. These life events may include being on disability or having a reduction in work hours. It's also important to evaluate your options carefully if you're on COBRA and become eligible for Medicare. See below for a more comprehensive list and the length of COBRA coverage available.

Learn More:

COBRA: 7 important facts | Medicare.gov

Am I Eligible for COBRA Health Insurance | VeryWell Health

Last Reviewed August 8th, 2024