When you lose a job or have your hours cut, COBRA can keep your health insurance from disappearing overnight. It lets you hold onto the exact employer plan you had, which is reassuring, but it comes at a real cost, since you take over the whole premium. This guide explains what COBRA is, how it works, what it costs, and when a Marketplace plan might be the better deal. Rules change, so verify current details before relying on them.
The Short Answer
COBRA is a federal law that lets you temporarily keep your employer’s group health coverage after a qualifying event like a job loss. The coverage is the same as you had, but you usually pay the full premium yourself, plus a small administrative fee, which makes it expensive compared with a subsidized Marketplace plan.
Who Qualifies and When
COBRA applies to private employers with 20 or more employees, and to most state and local government plans. You can elect it after a qualifying event, which includes losing your job for reasons other than gross misconduct, having your hours reduced, divorce or legal separation, the death of the covered employee, or a child aging out of dependent status. You have a 60-day window to elect COBRA, counted from the later of when your coverage ends or when you receive the election notice, and after electing you have 45 days to make your first payment, with coverage retroactive to when it would have ended.
How Long It Lasts
Standard COBRA lasts 18 months after a job loss or reduction in hours. It can extend to 36 months for a spouse or dependents after certain events like divorce or the death of the employee, and up to 29 months with a disability extension recognized by Social Security.
What It Costs
This is the sticking point. Under COBRA you pay the full premium, meaning your old share plus the share your employer used to pay, plus up to a 2% administrative fee. During a disability extension, the plan may charge up to 150%. Because the employer no longer subsidizes it, COBRA often costs several times what you paid as an employee, which is why comparing it to other options is so important.
COBRA vs the Marketplace
Before electing COBRA, it is worth comparing it to a Marketplace plan. Losing job-based coverage triggers a 60-day Special Enrollment Period on the Marketplace, and a subsidized Marketplace plan is frequently much cheaper than COBRA. The trade-off is that COBRA keeps your exact plan, doctors, and any progress toward your deductible for the year, while a Marketplace plan may have a different network and a fresh deductible. Weigh the cost savings against the convenience of keeping your current coverage.
If Your Employer Is Small
Federal COBRA only applies to employers with 20 or more employees, but many states have their own “mini-COBRA” laws that extend similar continuation rights to smaller employers. The details vary by state, so if your employer is small, check with your state insurance department.
How to Elect COBRA
You do not sign up in advance. After a qualifying event, the plan administrator sends you an election notice, and you return the election form within your 60-day window. Do not let the deadline pass, and remember that each family member generally has an independent right to elect. If you have questions, the Department of Labor handles private-sector COBRA.
How to Elect COBRA and the Deadlines
COBRA does not start automatically. You must actively choose it, and the deadlines are strict.
After a qualifying event, your plan sends an election notice. You generally have 60 days to elect COBRA. Once elected, coverage is retroactive to when your job coverage ended, so there is no gap. Mark the deadline carefully, since missing it can end your right to COBRA.
Making COBRA More Affordable
COBRA can be expensive, since you pay the full premium. But you have options if the cost is too high.
Compare COBRA to a Marketplace plan, where income-based subsidies may make coverage much cheaper. Losing job coverage opens a special enrollment period, so you can switch. Medicaid may also be an option if your income is low. Weigh all three before committing to COBRA.
COBRA FAQs
How much does COBRA cost?
Up to about 102% of the total plan premium, meaning your old share plus the employer’s share plus a small fee. Ask the plan for the exact figure.
How long do I have to sign up?
60 days from the later of when your coverage ends or when you receive the election notice.
How long does COBRA last?
Usually 18 months, up to 36 in some cases, and up to 29 with a disability extension.
Does my small employer offer COBRA?
Federal COBRA requires 20 or more employees. Smaller firms may fall under a state mini-COBRA law.
Is COBRA retroactive?
Yes. If you elect and pay, coverage is backdated to when it would have ended, so there is no gap.
Can I drop COBRA later for a Marketplace plan?
You can switch during open enrollment or when your COBRA runs out. Voluntarily dropping it mid-term does not by itself create a Marketplace enrollment window.
Is COBRA or the Marketplace cheaper?
The Marketplace is often cheaper with subsidies, though COBRA keeps your exact plan and network. Compare both before deciding.
Does COBRA cover my whole family?
Yes. Your spouse and dependents who were on the plan can continue coverage under COBRA, and each qualified beneficiary has an independent right to elect it.
What happens when my COBRA runs out?
Running out the full COBRA term is a qualifying event that opens a Marketplace Special Enrollment Period, so you can move to a Marketplace plan without waiting for open enrollment.
