Jane Dotson
COBRA, the Consolidated Omnibus Budget Reconciliation Act, is a federal law that allows qualified workers to keep their group health insurance for a limited time after losing coverage due to a job loss or change. This includes voluntary or involuntary job loss, reduction in hours worked, transition between jobs, death, divorce, and other life events. COBRA generally applies to employers with 20 or more employees, although some states have mini-COBRA laws that apply to smaller businesses. To receive COBRA benefits, a qualifying event must occur, and the individual may be required to pay up to 102% of the premium cost.
| Characteristics | Values |
|---|---|
| What is COBRA insurance? | Consolidated Omnibus Budget Reconciliation Act, a federal law that was created in 1985. |
| Who does it apply to? | Most private sector businesses with 20 or more employees. |
| Who is it for? | Qualified workers who want to keep their group health insurance for a limited time after a change in eligibility. |
| What does it cover? | Medical, dental, pharmacy, behavioral, and voluntary benefits. |
| What does it not cover? | Supplemental coverage, such as disability, life insurance, hospital care insurance, or other types of voluntary coverage. |
| How long does it last? | Depending on the qualifying life event, it can last for 18 or 36 months. |
| How much does it cost? | It can be expensive as individuals may have to pay the entire premium (up to 102% of the cost). |
| How to get it? | Contact your employer's health insurance plan administrator or visit HealthCare.gov. |
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What You'll Learn
Who is eligible for COBRA insurance?
COBRA insurance, or the Consolidated Omnibus Budget Reconciliation Act, allows qualified workers and their families to retain their group health insurance for a limited time after a change in eligibility. This change in eligibility could be due to a qualifying event, such as voluntary or involuntary job loss, reduction in hours worked, transition between jobs, divorce, or legal separation. To be eligible for COBRA insurance, there are three basic requirements that must be met:
- Your group health plan must be covered by COBRA: This applies to most private sector businesses with 20 or more employees.
- A qualifying event must occur: This could be a job loss or other qualifying life event, such as divorce or a reduction in hours.
- The amount of time COBRA benefits last depends on the qualifying event: For example, if your hours are reduced or your job is terminated, you can receive COBRA benefits for 18 months. In some cases, benefits may last for up to 36 months.
It's important to note that COBRA insurance can be significantly more expensive than what you paid under your employer's plan, as you may be required to pay the entire premium for coverage, which can be up to 102% of the cost. Additionally, COBRA does not cover supplemental coverage, such as disability, life insurance, or hospital care insurance.
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How long does COBRA insurance last?
The length of time that an individual can remain on COBRA insurance depends on the qualifying life event that caused them to lose their prior health insurance coverage. In most cases, COBRA insurance can be kept for 18 months, but it can be extended to 29 months in certain circumstances. For example, if an individual loses their job or has a reduction in work hours, they can typically stay on COBRA for 18 months. However, if they experience a second qualifying event during the coverage period, such as a divorce or the death of the covered employee, they may be eligible for an extension. Additionally, if someone on the plan qualifies as disabled within the first 60 days of COBRA coverage, the coverage period may be extended to 29 months.
Dependents, such as a spouse or children, can usually be covered under COBRA for up to 36 months. This includes situations where an adult child loses their dependent status at age 26 or a spouse goes through a divorce or legal separation. It's important to note that COBRA coverage may be terminated early if an individual finds a new job that offers health insurance coverage.
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How much does COBRA insurance cost?
The Consolidated Omnibus Budget Reconciliation Act, or COBRA, allows employees to keep their group health insurance for a limited time after leaving their job or another qualifying life event. COBRA insurance can be significantly more expensive than what you paid under your employer's plan as you are now responsible for paying the full amount of the insurance premium plus an administration fee of up to 2%. This means that you will be paying both the portion previously covered by your employer and your own prior contribution.
To estimate your monthly COBRA costs, you can add the amount deducted from your paycheck for health insurance to the amount that your employer contributed. This will give you an estimate of the total monthly cost for continuing your coverage under COBRA. For example, in 2023, the average annual premium cost for employer-sponsored health insurance was $8,435 for individual coverage and $23,968 for family coverage. Employers covered, on average, $7,034 of the individuals' premium and $17,393 for families. With COBRA insurance, you are responsible for the full amount, which means you could be paying average monthly premiums of $703 to continue individual coverage or $1,997 for family coverage.
It is important to note that COBRA costs can change if the underlying health plan premiums are adjusted during the coverage period. The cost of COBRA insurance also varies depending on the state, with monthly average premiums ranging from $307 in Idaho to $1,088 in Alaska.
There are alternative options to COBRA insurance that may be cheaper, such as buying on the open market, a health cost-sharing plan, or a high-deductible health plan paired with a health savings account.
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How to get COBRA insurance?
COBRA, the Consolidated Omnibus Budget Reconciliation Act, allows qualified workers and their families to keep their group health insurance for a limited time after a change in eligibility. This federal law was created in 1985 and applies to most private sector businesses with 20 or more employees.
To be eligible for COBRA insurance, you must meet three basic requirements: your group health plan must be covered by COBRA, a qualifying event must occur, and you must be a qualified beneficiary for that event. Qualifying events include job loss, reduction in hours, divorce, widowhood, or an adult child turning 26 and coming off their parent's health insurance.
If you meet the eligibility requirements, you can enroll in COBRA insurance by following these steps:
- Contact your employer's health insurance plan administrator or human resources department to notify them of the qualifying event.
- Your employer will then have 45 days to send you the COBRA election notice and enrollment forms.
- Once you receive the forms, you will have 60 days to elect the plan or waive your right to continue.
- Make your first premium payment to start your COBRA insurance coverage. Note that you may be required to pay the entire premium for coverage, up to 102% of the cost of the plan.
It is important to note that COBRA insurance is typically more expensive than what you paid under your employer's plan because you are now responsible for the full cost of the health plan. Additionally, COBRA insurance is not the only option when you lose job-based coverage. You can explore other options, such as enrolling in a Marketplace plan or applying for Medicaid or CHIP, to find the best alternative that suits your needs and budget.
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COBRA insurance alternatives
The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers and their families the right to continue their health insurance coverage after leaving a job, but it can be expensive and is only a temporary solution. If you're looking for alternatives to COBRA, here are some options to consider:
Marketplace Insurance
Marketplace insurance, available through the Affordable Care Act (ACA), is a popular alternative to COBRA. It often provides more affordable options, with a range of plans suited to different needs and budgets. The marketplace allows for easy comparison of plans based on coverage, cost, and network of providers. Up to 80% of individuals who apply for a marketplace plan receive a government subsidy to offset premium costs. You can enrol during the open enrolment period or qualify for a special enrolment period due to life events such as job loss.
Medicaid
Medicaid is a no-cost or low-cost alternative for individuals with limited incomes. Eligibility varies by state but is generally based on income, family size, and other factors. You can apply for Medicaid at any time, as there is no annual enrolment period. Many states offer their own health exchanges, but if your state doesn't, you can use the federal government's Marketplace.
Private Health Insurance
Private health insurance plans can be purchased directly from a private organization or agent. These plans typically offer fuller coverage and are suitable for those without budget constraints. Private health coverage can also be renewed if the plan works well for you, though premium and deductible rates may change.
Other Options
Other alternatives to COBRA include short-term medical insurance, accident supplements, and limited indemnity plans. These options can provide flexible and affordable coverage, depending on your specific needs. Additionally, you may be eligible for other group health plan coverage, such as a spouse's plan, during a special enrolment period.
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Frequently asked questions
COBRA, the Consolidated Omnibus Budget Reconciliation Act, is a federal law that gives individuals who experience a job loss or other qualifying events the option to continue their current health insurance coverage for a limited amount of time.
COBRA insurance can be significantly more expensive than what you paid under your employer's plan as you pay 100% of the costs for the health plan. Additionally, it is only available for a limited period of time.
If you recently lost your job, you may be eligible for COBRA insurance. Contact your employer's health insurance plan administrator to find out more about your COBRA benefits.
