What COBRA is and when you can use it

COBRA is a federal law that lets you keep your employer's health insurance for a limited time after you leave your job, get laid off, or lose hours. You pay the full premium yourself — both the part your employer was paying and the part you were paying — plus a small administrative fee. COBRA is not a new insurance plan; it is the same plan you had at work, just with you footing the entire bill.

You can use COBRA only if your employer had at least 20 employees and offered health insurance. If you worked for a small company, a government agency, or a church, COBRA does not explore to you — you will need to look at other options like the Affordable Care Act marketplace or Medicaid.

COBRA typically lasts 18 months after you leave your job. If you were laid off or had your hours cut, the clock starts the day your coverage would have ended. If you quit or were fired for misconduct, the same 18-month window applies. Some situations — like your spouse losing coverage due to your death or divorce — extend COBRA to 36 months for your dependents.

Key Takeaways

  • COBRA lets you keep your work health plan for up to 18 months after leaving your job, but you pay the full premium plus a 2% administrative fee.
  • Your employer must notify you of COBRA rights within 14 days of the event that ends your coverage, and you have 60 days to decide whether to take it.
  • COBRA costs significantly more than employer coverage because you now pay what your employer was subsidizing, so comparing marketplace plans is essential.
  • If you do not notify your plan administrator within 60 days, you lose COBRA rights and cannot get them back.
  • You can switch to a marketplace plan, Medicaid, or another insurance at any time during your COBRA period without penalty.

How to learn about COBRA is available to you

Your employer is required by law to send you a notice explaining your COBRA rights. This notice must arrive within 14 days of the event that ends your coverage — a layoff, resignation, reduction in hours, or termination. Read this notice carefully; it contains the name of your plan administrator, the important date to notify them, and the premium amount you will owe.

If you do not receive a notice within 14 days, contact your former employer's human resources or benefits department directly. Ask them for the name and contact information of your health plan administrator. The plan administrator is the company that actually manages the insurance — it may be your employer, an insurance company, or a third-party administrator. You will be dealing with the plan administrator, not your former employer, once you elect COBRA.

Keep the notice in a safe place. You will need it to understand your important date and premium amounts. If you lose it, you can request another copy from your plan administrator.

The 60-day window to decide

You have exactly 60 days from the date your coverage ends to tell your plan administrator that you want COBRA. This is not a grace period — if day 61 arrives and you have not notified them, you lose COBRA rights permanently and cannot get them back later.

The notification important date is often the hardest part of COBRA because it sneaks up. If you are laid off on March 15 and your coverage ends on March 31, your 60-day window closes on May 30. Mark this date on your calendar the day you receive your notice. Do not assume you have time to decide later.

To notify your plan administrator, follow the instructions in your COBRA notice. Most plans accept notification by mail, email, or phone. Send or call as soon as you know you want COBRA — do not wait until day 59. Keep a record of when you notified them and how (email confirmation, certified mail receipt, or a phone call note with the date and person's name).

What COBRA actually costs

COBRA premiums are typically 120% to 150% of what your employer paid for your coverage. The law allows the plan to charge you 102% of the full premium — that is 100% of the actual cost plus a 2% administrative fee. However, the actual cost of your plan may be much higher than what you were paying as an employee.

For example, if you paid $200 per month for health insurance at work, your employer may have been paying another $400 or $600 per month. Under COBRA, you pay the full amount — $600 to $800 per month or more — plus 2%. This is why COBRA is often more expensive than buying insurance through the Affordable Care Act marketplace.

Your COBRA notice will state the exact premium amount. Before you commit to COBRA, get a quote from your state's health insurance marketplace (Healthcare.gov or your state's equivalent) to compare costs. You may find that a marketplace plan with subsidies is cheaper, even if it has a different deductible or network of doctors.

How to enroll and when coverage starts

After you notify your plan administrator that you want COBRA, they will send you enrollment paperwork. Complete this paperwork and return it according to their instructions. Your coverage typically starts on the first day of the month following your election, though some plans backdate coverage to the day your employer coverage ended.

You must pay your first premium by the important date stated in your enrollment paperwork — usually 30 to 45 days after you elect COBRA. If you miss this important date, your coverage will not start. Set a reminder for this date as well.

Once you are enrolled, you use COBRA exactly as you used your employer plan. Your doctors, hospitals, and prescriptions remain the same. Your deductible, copays, and out-of-pocket limits are the same. The only difference is that you are now paying the full premium instead of splitting it with your employer.

When COBRA ends and what happens next

COBRA coverage lasts 18 months in most situations. Your plan administrator will notify you when your coverage is about to end — usually 30 to 60 days before. At that point, you need a new plan.

You have several options. You can buy a plan through the Affordable Care Act marketplace, which you can do at any time during your COBRA period without waiting for open enrollment. You can look into Medicaid if your income has dropped. You can join a spouse's employer plan if you have one. Or you can go without insurance, though this exposes you to medical debt and potential tax penalties depending on your state.

If you lose COBRA coverage involuntarily — because you could not pay the premium or because your employer's plan was cancelled — you may be able to switch to a marketplace plan outside the normal open enrollment period. This is called a "may have access to life event." Losing COBRA coverage counts as a may have access to event in most states, giving you 60 days to enroll in a marketplace plan.

COBRA versus marketplace insurance: what to compare

Before you elect COBRA, spend an hour comparing it to marketplace plans. The marketplace is often cheaper, especially if your income has dropped since you left your job.

On Healthcare.gov or your state marketplace, enter your information and see what plans are available. The marketplace will show you the monthly premium, the deductible, copays, and whether your doctors are in the network. It will also calculate any tax credits or subsidies you may receive based on your income. Many people who lose employer coverage find that marketplace plans with subsidies cost less than COBRA.

Write down the monthly cost, deductible, and out-of-pocket maximum for both COBRA and your top marketplace options. Then think about your health needs. If you take regular medications or see specialists, make sure those providers are in the network. If you are generally healthy, a plan with a higher deductible and lower premium might save you money.

What to do if you miss the 60-day important date

If you miss the 60-day window to elect COBRA, you cannot get COBRA coverage. This right is gone permanently. However, you are not without options.

You can enroll in a marketplace plan when ready, even outside open enrollment, because losing employer coverage is a may have access to life event. You have 60 days from the date your employer coverage ended to enroll. Visit Healthcare.gov or your state marketplace and select the plan that works for you.

You can also look into Medicaid if your income qualifies. Medicaid rules vary by state, but many states cover adults with incomes below a certain threshold. Contact your state Medicaid office or visit your state's Medicaid website to see if you are may be able to access.

If you have a spouse with employer coverage, you may be able to join their plan. Losing your own coverage is a may have access to event that lets you enroll in a spouse's plan outside their normal open enrollment period.

Frequently Asked Questions

Can I switch from COBRA to a marketplace plan before my 18 months are up?

Yes. You can switch to a marketplace plan at any time during your COBRA period. You do not have to wait for open enrollment. straightforward go to Healthcare.gov or your state marketplace and enroll. Your new coverage will start on the first day of the following month. You can then cancel your COBRA coverage.

What happens if I cannot afford the COBRA premium?

You have a few options. You can switch to a marketplace plan, which may be cheaper with subsidies. You can look into Medicaid. Or you can let COBRA end and go without insurance until you find work with benefits. If you stop paying your COBRA premium, your coverage will be cancelled, but you will still have 60 days from that cancellation to enroll in a marketplace plan.

Does COBRA cover pre-existing conditions?

Yes. COBRA is the same plan you had at work, so it covers everything your employer plan covered, including pre-existing conditions. There are no waiting periods or exclusions for pre-existing conditions under COBRA or any health plan sold today.

Can I get COBRA if I was fired?

Yes, unless you were fired for gross misconduct. Most terminations — even for poor performance or breaking minor rules — do not count as gross misconduct. Your employer's COBRA notice will explain whether your termination qualifies. If you are unsure, contact your plan administrator and ask.

What if my employer goes out of business while I am on COBRA?

Your COBRA coverage continues. The plan administrator — not your employer — is responsible for paying claims and maintaining your coverage. If the plan itself is cancelled, you will receive notice and have the right to enroll in a marketplace plan outside open enrollment as a may have access to life event.