Losing your job or leaving an employer can feel overwhelming — and the prospect of losing your health insurance makes it worse. COBRA allows you to keep your employer-sponsored health insurance temporarily, but it comes at a steep price. Here's everything you need to know to make the right decision.
What Is COBRA?
COBRA stands for the Consolidated Omnibus Budget Reconciliation Act, a 1985 federal law that gives workers and their families the right to continue employer-sponsored group health coverage for a limited time after certain qualifying events. It's administered by the Department of Labor.
Who Is Eligible for COBRA?
You're eligible for COBRA if you worked for an employer with 20 or more employees and experienced a qualifying event:
- Voluntary or involuntary job loss (except for gross misconduct)
- Reduction in work hours that made you ineligible for benefits
- Divorce or legal separation from the covered employee
- Death of the covered employee
- Medicare enrollment by the covered employee
- A dependent child losing dependent status under the plan
How Long Does COBRA Last?
- 18 months: For job loss or reduction in hours
- 36 months: For divorce, death of covered employee, or loss of dependent status
- 29 months: If you're disabled at the time of job loss
The Real Cost of COBRA
Here's the catch: under COBRA, you pay the full premium — both your share and the employer's share, plus a 2% administrative fee. Most employers cover 70–80% of health insurance premiums for active employees. When you lose your job, that subsidy disappears entirely.
Example: If your total health insurance premium is $600/month and your employer paid $450, you only paid $150 as an employee. On COBRA, you'd pay $612/month (full $600 + 2% fee).
Bottom line on cost: COBRA is almost always significantly more expensive than alternatives. Always compare before enrolling.
COBRA vs. Your Alternatives
- ACA Marketplace plan: Losing job-based coverage is a qualifying life event that triggers a 60-day Special Enrollment Period. Marketplace plans are often cheaper than COBRA, and you may qualify for premium tax credits.
- Spouse or partner's employer plan: If your spouse has employer coverage, you can join during a Special Enrollment Period triggered by your job loss.
- Medicaid: If your income drops significantly, you may now qualify for Medicaid — which is free or very low-cost.
- Short-term health insurance: Lower-cost temporary coverage, but with significant limitations and no ACA protections.
When COBRA Makes Sense
- You're in active treatment for a medical condition and don't want to change providers or plans mid-treatment
- You're close to meeting your deductible for the year
- You'll be between jobs for only a short time and expect new employer coverage soon
- Your specific doctors or medications aren't available on Marketplace plans in your area
How to Enroll in COBRA
After your qualifying event, your employer or plan administrator must send you an election notice within 44 days. You then have 60 days to elect COBRA coverage. Coverage is retroactive — meaning you can wait until you have a claim, then elect COBRA retroactively within that 60-day window.
Bottom Line
COBRA is a valuable safety net — but it's rarely the best financial choice. Before defaulting to COBRA, spend 30 minutes comparing it to Marketplace plans and Medicaid. For most people who've lost their jobs, there are more affordable options available.