What Is COBRA Health Insurance?

Losing a job is stressful enough without also losing your health insurance. COBRA — the Consolidated Omnibus Budget Reconciliation Act — is the federal law that gives employees and their families the right to continue their employer-sponsored health coverage for a limited time after certain qualifying events. Here's what you need to know before you sign up, and what to do if things go wrong.

What Is COBRA?

COBRA is not an insurance plan — it's a federal continuation-of-coverage law. It requires most employers with 20 or more employees to offer covered employees and their dependents the option to continue their group health plan coverage when they would otherwise lose it due to specific qualifying events.

The coverage you receive under COBRA is identical to what you had as an active employee — the same plan, the same network, the same benefits. The difference is who pays for it.

Who Qualifies?

COBRA applies to employees of employers with 20 or more employees. (Some states have "mini-COBRA" laws extending similar protections to smaller employers.)

Qualifying events for employees:

• Voluntary or involuntary job loss (not for gross misconduct)
• Reduction in hours that causes loss of coverage eligibility

Qualifying events for spouses and dependents:

• Employee loses coverage for any reason above
• Divorce or legal separation from the covered employee
• Employee dies
• Employee becomes enrolled in Medicare (reducing family coverage)
• Dependent child ages out (typically at 26 under ACA rules, though plan specific rules apply)

The COBRA Election Period

This is the deadline you must not miss. After your qualifying event, your employer has 30 days to notify the plan administrator. The plan administrator then has 14 days to send you a COBRA election notice. From the date that notice is sent, you have 60 days to elect COBRA coverage.

Critically: if you elect COBRA within those 60 days, your coverage is retroactive to the day it would have lapsed. This means you can technically wait until you've had a health event — and then elect COBRA retroactively to ensure that event is covered. However, you'll owe all premiums from the retroactive date to the present.

If you miss the 60-day election window, you lose COBRA rights permanently for that qualifying event.

The Cost of COBRA

This is where COBRA often shocks people. As an active employee, your employer was paying a significant portion of your monthly premium — often 70-80% of the total cost. Under COBRA, you pay the full premium yourself, plus an administrative fee of up to 2%.

Example: If your employer plan costs $700/month in total, and your employer paid $550, you paid $150 as an employee. Under COBRA, you now pay up to $714 (the full $700 plus 2%).

COBRA premiums are often $500-$700/month for individuals and $1,400-$2,000/month for families, depending on the plan. The cost is the most common reason people either don't elect COBRA or drop it mid-year.

How Long Does COBRA Last?

• Standard duration: 18 months for job loss or reduced hours
• Extended to 29 months: If you or a qualified dependent is determined disabled by Social Security within the first 60 days of COBRA coverage
• 36 months: For spouse/dependent qualifying events (divorce, death, aging out)

At the end of the maximum COBRA period, you receive a certificate of creditable coverage and may be eligible for a Special Enrollment Period in a Marketplace plan.

Common COBRA Issues and Claim Denials

1. Claims denied because COBRA wasn't properly elected. If there's a gap between your employer notification and your election, providers may not know to bill your COBRA plan. Carry proof of your COBRA election and confirmation of retroactive coverage.

2. Premium payment lapse. COBRA has a 30-day grace period for late premium payments. If you miss a payment, you have 30 days to pay without losing coverage. After that, coverage terminates and cannot be reinstated.

3. Employer fails to notify the plan administrator. If your employer didn't notify the insurer promptly, your coverage may be in limbo. Document when you left employment and contact the plan administrator directly if you don't receive a COBRA election notice within 44 days.

4. Claims denied after retroactive election. If you elected COBRA retroactively after incurring a medical expense, there may be delays or administrative errors in processing claims from the retroactive period. Submit all relevant claims in writing with documentation of your retroactive election.

5. Coordination with new coverage. If you enroll in new employer coverage partway through a COBRA period, COBRA ends when the new coverage begins. Claims from the overlap period must go to the correct plan.

COBRA vs. Marketplace: What's Better?

For many people, especially after job loss, ACA Marketplace coverage can be significantly cheaper than COBRA — particularly if your income has dropped and you qualify for premium tax credits. Job loss is a qualifying life event that triggers a 60-day Special Enrollment Period on the Marketplace. Compare your COBRA premium to Marketplace options before deciding.

Note: if you're in good health and expect to find new employment quickly, COBRA's identical coverage may be worth the premium for continuity. If you have ongoing expensive care, calculate carefully.

Your Appeal Rights Under COBRA

COBRA coverage is governed by the same plan documents as your employer coverage. If a claim is denied:

• File an internal appeal with the insurer as you normally would
• ERISA provides the federal framework for benefit disputes in employer-sponsored plans
• You can sue under ERISA in federal court if appeals are exhausted
• Contact the Department of Labor's Employee Benefits Security Administration (EBSA) if you believe the plan is administering COBRA wrongfully

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Related Reading:

• How to Write an Insurance Appeal Letter
• What Is Medical Necessity?
• Internal vs External Insurance Appeal