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Guide to Health Benefits Under COBRA

Federal COBRA Insurance

Understanding COBRA insurance can be tricky, especially during an already stressful time when you are experiencing changes in your life due to job loss. We want to help! This guide to federal COBRA insurance will help you understand COBRA insurance, including the key questions you should be asking yourself along the way and key considerations you should consider when deciding whether federal COBRA is the right choice for you. In addition, this guide will help you better understand exactly what COBRA is as well as all the health insurance options you have. Think about it as your go-to guide for understanding COBRA health insurance.

What is COBRA Insurance?

COBRA Insurance is a law, not an insurance plan, that allows you to keep your employer sponsored health insurance plan after job loss.

COBRA insurance allows people to continue to keep the health insurance they had while employed after job loss and therefore protects people from having to go without health insurance or incur serious medical bills after they lose their job. It was created by the federal government in 1986, for just this reason, and was part of a larger piece of legislation known as the Consolidated Omnibus Budget Reconciliation Act. Over time it has simply become known COBRA insurance and has been a helpful option for many individuals and families over the years.

Learn more about the COBRA insurance law.

Who is Eligible for COBRA Insurance?

The good news is that most people are eligible for COBRA insurance. The program was created that way and the government wanted to make sure that most citizens had the option to choose to continue their plan with COBRA if they wanted to. Under the law, there are three technical terms for eligibility known as qualifying plan, qualifying event, and qualifying beneficiaries.

Let's start with qualifying plan. To have a qualifying plan under the law, you must have worked at a company that had at least 20 full time employees on the health insurance plan, or their part time equivalents. Additionally, the plan must still be active. This means if your company went out of business, COBRA isn't an option. Federal government employee plans are not eligible for COBRA, but they have their own similar program.

Next are qualifying event and qualifying beneficiaries. These are a bit more complicated. Qualifying event is how you, or a family member, lost their medical coverage. Qualifying beneficiary is who is eligible for coverage with COBRA. The chart below summarizes who is eligible for COBRA based on these two requirements.

Qualifying Event Qualifying Beneficiary
Voluntary job loss including quitting or retiring Employee, spouse, and dependents
Involuntary job loss including being laid off or fired without gross misconduct Employee, spouse, and dependents
Death of covered employee Spouse and dependents
Divorce or legal separation from the covered employee Spouse and dependents
Covered employee becomes eligible for Medicare 36 months
No longer being a dependent under the law Dependents
Enrollment in Medicare Spouse and dependents

What if I am not eligible for federal COBRA? Learn about state COBRA plans and alternative insurance options.

How Long Does COBRA Health Insurance Last?

In most situations COBRA medical insurance lasts 18 months, or one and a half years. This date starts from the day you lost your health insurance, not the day you enrolled in COBRA (since it is retroactive). However, in some situations COBRA insurance may last longer. Specifically, COBRA continuation lasts 36 months in the event of:

  • Death of covered employee
  • Divorce or legal separation from the covered employee
  • Loss of dependent status
  • Covered employee enrollment in Medicare
  • An additional qualifying event

What options do I have when my COBRA coverage is about to end? Learn about health insurance options after COBRA ends.

How Do I Enroll in COBRA Insurance?

The enrollment process for COBRA coverage is actually much easier than many people think. It involves filling out some paperwork and sending it into the health insurance company with a premium payment. However, there are some very important dates and deadlines to remember. Missing a deadline will result in ineligibility for COBRA.

Event Deadline
Employer notice of your rights to COBRA insurance You have 14 days after enrollment in the employer health plan.
Loss of health insurance due to job loss, reduction in hours, quitting, or retirement. Employer has 30 days to notify the insurance company. They must contact you within 14 days. If you do not receive an election notice within 14 days, call your insurance company directly.
Divorce, legal separation, loss of dependent status, death of covered employee, qualification of covered employee in Medicare Beneficiary/covered employee has 60 days to notify the employer and health insurance company of the change and their intent to use COBRA.
Enrolling in COBRA insurance You must enroll within 60 days of the date on the COBRA election form.
Initial Premium Payment Must be made with the election form in most cases and must pay for the entire period dating back to the election notice.

What can I do if I missed my COBRA enrollment window? Learn more about other health insurance options.

How Much Does COBRA Insurance Cost?

For most people considering COBRA, the first thing they notice when they look at their election form is the extremely high cost of continuing their medical insurance. Under the law, this coverage will cost 102% of the health insurance premium. The premium is made up of both what you paid as well as what your employer paid, plus a 2% assessment for processing and administration.

COBRA Cost Example

Meet Sarah. Sarah is married and has two children. She recently lost her job due to downsizing and is considering COBRA. While employed, Sarah's company paid 75% of her health care costs and she paid 25%. Looking at her most recent pay stub, Sarah determined that she was paying $310 monthly for insurance and her employer paid $930 for a total premium of $1240. With COBRA, Sarah must pay that full amount monthly plus 2%, which comes to a total cost of $1234.20 to maintain the same coverage.

Want to determine how much COBRA would cost? Learn more about the costs of COBRA insurance. Is COBRA insurance too expensive? Learn how to save money on COBRA.

Learn about state sponsored COBRA benefits.

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