COBRA health insurance: how continuation coverage actually works

The key word is "continuation." COBRA does not create a new plan. It lets you stay on the same employer-sponsored plan you were already enrolled in, with the same network, the same benefits, and the same claims processing. What changes is who pays. While you were employed, your employer almost certainly covered a large share of the premium. Under COBRA, that subsidy disappears and the cost shifts to you.

The federal law applies to private-sector employers with 20 or more employees, as well as to state and local governments. Many states have their own "mini-COBRA" laws that extend similar protections to people who work for smaller employers, though the rules and durations vary by state.

In short: COBRA is a federal right to keep your existing employer plan temporarily, not a new plan you sign up for.

Eligibility depends on three things lining up: a qualifying plan, a qualifying beneficiary, and a qualifying event.

The plan has to be a group health plan maintained by a covered employer. The beneficiary has to have been enrolled in that plan on the day before the qualifying event. That beneficiary can be the employee, a spouse, or a dependent child.

The U.S. Department of Labor describes several qualifying events that trigger COBRA rights. The ones that apply to you depend on who you are in relation to the plan.

One important limit: if you are fired for gross misconduct, you may lose the right to COBRA entirely. "Gross misconduct" is not precisely defined in the statute, so how it gets applied can vary, which is why a denial on those grounds is worth questioning with your plan administrator.

In short: You qualify if you were enrolled in a covered group plan and a specific life event ends that coverage, with gross misconduct firings as the main exception.

The maximum length of COBRA coverage depends on the qualifying event. According to the Department of Labor, the two standard windows are 18 months and 36 months.

An 18-month maximum applies when the event is the employee's job loss or a reduction in hours. A 36-month maximum applies to most other events, such as divorce, the death of the covered employee, or a dependent child aging out.

There are a few ways the standard 18 months can be extended:

• Disability extension. If a qualified beneficiary is determined to be disabled by the Social Security Administration at the time of the qualifying event or within the first 60 days of COBRA coverage, the 18-month period can be extended up to a total of 29 months.
• Second qualifying event. If a second qualifying event happens during the initial 18 months (for example, the former employee dies, or the couple divorces), coverage for spouses and dependents can extend to a total of 36 months.

Coverage can also end early. Common reasons include failing to pay premiums on time, the employer ending its group health plan entirely, or the beneficiary becoming covered under another group plan or enrolling in Medicare.

In short: Plan for 18 months after a job loss or hour cut, and up to 36 months for family-related events, with disability and second-event extensions available in specific cases.

Here is where people are usually surprised. Under COBRA, you can be required to pay the entire premium for your coverage, meaning both the portion you used to pay and the portion your employer used to cover. On top of that, the plan can charge an administrative fee of up to 2% of the premium.

That is why the Department of Labor notes that COBRA coverage is often more expensive than the amount active employees pay, even though it is the same plan. Nothing about the plan got worse; the subsidy just went away.

Goodsurance does not publish a specific COBRA premium figure, because the actual number depends entirely on your former employer's plan: the coverage tier, the region, whether you are covering a family, and what the total group premium was. Your plan administrator is required to send you an election notice that spells out the exact cost for your situation. That notice is the number to trust, not an estimate.

A few cost mechanics worth knowing:

• You pay the premium yourself, directly, rather than through payroll deduction, so budget for it as a monthly bill.
• The 2% administrative fee is a maximum the plan may charge, not a guaranteed add-on.
• Because the full unsubsidized premium can be steep, it is worth pricing a Marketplace plan before you elect COBRA. Depending on your income, a subsidized Marketplace plan may cost significantly less.

In short: COBRA costs the full group premium plus up to 2%, so read your election notice for the real number and compare it against subsidized alternatives.

COBRA runs on a chain of deadlines, and missing one can cost you the coverage. The Department of Labor lays out the general timeline, though exact dates in your case come from your plan administrator's notices.

Your employer's clock. When a qualifying event happens, the employer generally has 30 days to notify the plan administrator. The plan administrator then generally has 14 days to send you an election notice.

Your clock to notify the plan. For some events (divorce, legal separation, or a child losing dependent status), you are the one responsible for notifying the plan, generally within 60 days of the event. If you miss that window, you can lose the right to elect.

Your election period. Once you receive the election notice, you generally have 60 days to decide whether to take COBRA. That window runs from the later of the date you lose coverage or the date the notice is provided.

Your first payment. After you elect, you generally have 45 days to make your first premium payment. Coverage is retroactive to the date your prior coverage ended, so once you pay, there is no gap. This is one of COBRA's quiet advantages: you can wait, see whether you have major medical needs, and still elect within the window if you do.

In short: Watch the 60-day election window and the 45-day first-payment window, and remember coverage is retroactive once you pay.

Losing job-based coverage is a qualifying event for a Special Enrollment Period on the Health Insurance Marketplace, which means you do not have to wait for open enrollment to buy an individual plan. According to CMS, that gives you a real choice rather than a default.

A few factors to weigh:

Cost. COBRA charges the full unsubsidized group premium. Marketplace plans may qualify for premium tax credits based on your household income, which can make them substantially cheaper. If your income dropped because you lost the job, you may qualify for more help than you expect.

Keeping your doctors and your deductible. COBRA keeps your exact plan, so you stay in-network with the same providers and you do not reset the deductible and out-of-pocket amounts you already paid this year. Switching to a Marketplace plan usually restarts both. If you are mid-treatment or have already met a big chunk of your deductible, that continuity has real value.

Timing rules. You generally cannot switch from COBRA to a Marketplace plan mid-year just because COBRA feels expensive; dropping COBRA voluntarily does not by itself open a Special Enrollment Period. You typically have to wait for open enrollment or for COBRA to run out. That makes the initial decision more consequential, so compare carefully before you elect.

Other options. Depending on your household, Medicaid, a spouse's employer plan, or coverage under a parent's plan (for those under 26) may be available and cheaper. A Special Enrollment Period can let you move onto a spouse's plan after losing your own coverage.

In short: COBRA preserves continuity but at full price, while a subsidized Marketplace plan is often cheaper, so weigh cost against keeping your doctors and deductible.

If you decide COBRA is right for you, the process is mostly about responding to paperwork on time.

1. Wait for the election notice. Your plan administrator must send it after the qualifying event. If weeks pass and nothing arrives, contact your former employer's HR or benefits office, because the clock on your rights may still be running.
2. Review the exact cost and coverage. The notice lists the premium for each coverage tier and the deadlines specific to you. This is your real cost, not an estimate.
3. Compare before you commit. Price a Marketplace plan and check whether you qualify for premium tax credits or Medicaid during the same window.
4. Elect in writing within your window. Follow the instructions in the notice, generally within 60 days.
5. Pay your first premium on time. Generally within 45 days of electing. Coverage then applies retroactively to the date your old coverage ended.
6. Keep paying on schedule. Late payments are one of the most common reasons COBRA coverage ends early, so treat the premium like any other critical bill.

In short: Electing COBRA is a paperwork-and-deadline exercise, so read the notice, compare your options, elect in writing, and never miss a payment.