What is COBRA?

COBRA Coverage

COBRA stands for Consolidated Omnibus Budget Reconciliation Act. Congress passed COBRA's health benefit provisions in 1986.

The law may allow you to temporarily keep your group health coverage after your employment ends, or after you lose coverage as a dependent of the covered employee.

COBRA covers employees who resign or are terminated for any reason other than gross misconduct.

♦ COBRA applies to plans maintained by private-sector employers and sponsored by most state and local governments. The law doesn't apply to plans sponsored by the federal government or by churches and certain church-related organizations.

Are all employers required to offer COBRA?

No. Federal COBRA usually applies to employers with 20 or more employees. But many states have their own "mini-COBRA" laws that cover smaller employers. Check with your state's insurance department.

Employers covered by COBRA must also notify their employees that COBRA coverage is available.

Who can get COBRA?

Three pieces of the puzzle must fall into place for COBRA to be available.

♦ The first is the plan or company involved. Is the employer required to offer COBRA?

Your employer must have had 20 or more employees during at least 50 percent of the previous calendar year. Both full-time and part-time employees are counted to determine whether a plan is subject to COBRA. Each part-time employee counts as a fraction of a full-time employee, based on hours worked.

To determine if an employer meets the 20-employee threshold, part-time hours are combined weekly. For example, two part-time employees working 15 hours a week equal exactly one full-time equivalent (FTE) employee (assuming a 30-hour standard work week).

♦ The second is the person, or beneficiary.

A qualified beneficiary generally is someone covered by a group health plan on the day before coverage was lost. This is usually the employee, the employee's spouse or the employee's dependent child. In certain cases, retirees may also be eligible for COBRA.

♦ The third is the qualifying event: the reason COBRA coverage might be needed.

For the employee, it might be:

• Voluntary or involuntary termination of employment for reasons other than gross misconduct

• Reduction in the number of hours of employment

For the spouse of an employee, it might be:

• Voluntary or involuntary termination of the covered employee's employment for any reason other than gross misconduct

• Reduction in the hours worked by the covered employee

• The covered employee becoming entitled to Medicare

• Divorce or legal separation from the covered employee

• Death of the covered employee

For a dependent child, it might also be:

• Losing "dependent child" status under the plan's rules, like turning 26

Will the benefits change under COBRA?

No. You must be offered coverage identical to what you had before coverage was lost. However, if the plan changes for active employees, it will also change for COBRA coverage.

Who pays for COBRA?

You'll usually be required to pay for COBRA coverage. The premium can't exceed 102% of the cost to the plan. The 2% is for administrative costs.

• However, if a beneficiary qualifies for a disability extension (extending coverage from 18 to 29 months), the law allows the employer to charge up to 150% of the plan's cost during those extra 11 months.

COBRA premiums must be fixed for a 12-month premium cycle. They may be increased only if the plan's costs increase.

How long will COBRA last?

COBRA requires that coverage be extended in most cases for up to 18 months, and in a few rare situations up to 36 months. The employer has the option to provide longer coverage beyond the maximum required by law.

How long do I have to decide?

You generally have 60 days after you get your COBRA notice (or after your coverage ends, whichever is later) to decide whether to elect COBRA. If you do, your coverage goes back to the day your job coverage ended, so there's no gap.

After you elect COBRA, you have 45 days to make your first payment.

♦ This gives you time to shop for a Marketplace plan first. But don't cut it close. Missing a deadline means losing COBRA for good.

♦ Turning 65 or already on Medicare? Be careful. COBRA doesn't count as job-based coverage for Medicare. You generally have 8 months after your job ends to sign up for Medicare Part B, even if you take COBRA. Miss it, and you could pay a late penalty for as long as you have Medicare.

How much will COBRA cost?

The cost can be quite high.

Most employers who offer a group policy also pay a portion of the cost for the employee. This is considered a benefit. Larger employers usually offer richer, more expensive health insurance plans, and also contribute a larger portion.

Due to sharp premium increases across the country, the total cost of employer-sponsored health insurance keeps hitting record highs. In 2026, family coverage averaged about $28,300 a year, and single coverage about $9,800, according to KFF.

If you choose COBRA, this is the full amount you'll have to pay out of your own pocket, plus a 2% fee.

On average, workers paid 18% of the cost for single coverage and 27% for family coverage in 2026. Your employer paid the rest, until now.

• The average premium is higher at smaller employers. Premiums for covered workers at firms with a relatively large share of older workers are also higher.

How to estimate the cost of COBRA?

Your employer will notify you in writing. If you want to estimate before you receive something in writing, you can look at your last W-2 form.

♦ Employers are asked to report the total cost of health insurance on the W-2 form. Box 12 (labeled with Code DD) shows the total cost of health insurance.

It includes what you paid plus what your employer paid. Most people are shocked by the number.

What to do if COBRA is too expensive?

Before the Affordable Care Act, anyone with a serious health condition had no choices. Insurance companies routinely denied coverage for pre-existing conditions.

Today, you have a few choices.

You could try going without insurance or enroll in short-term insurance, both of which are very risky.

♦ Your first option should be to see if you qualify for Obamacare. An Obamacare plan probably won't have benefits as good as your employer's group plan, but the cost will be a lot less.

♦ You don't need to wait until open enrollment. It's likely you'll qualify for a special enrollment period. It's fast and easy to find out if you qualify by going to your state's exchange or HealthCare.gov and answering a few questions about how you lost coverage.

You might receive premium tax credits to help reduce the cost of a Marketplace plan. If you don't qualify for tax credits, you should also look at plans sold off-exchange.

• Being offered COBRA doesn't stop you from getting premium tax credits on the Marketplace. You only lose that help if you actually enroll in COBRA.

It will take some work, but don't give up. Your chances of finding something are much higher these days.

Further reading: FAQs on COBRA Continuation Health Coverage.

Can I drop COBRA coverage and enroll in a Marketplace plan?

• Within the first 60 days: losing your job-based health insurance gives you a 60-day Special Enrollment Period. If you sign up for COBRA and quickly realize it's too expensive, you can drop it and buy an Obamacare plan, as long as you submit your Marketplace application before your original 60-day window expires.

• After 60 days: once your initial 60-day window ends, you can't voluntarily drop COBRA to move to the Marketplace. You're locked in until the standard fall Open Enrollment period (for plans starting January 1).

• The only exceptions: you can only switch to the Marketplace outside of Open Enrollment if your COBRA coverage completely runs out (usually after 18 months), or if you experience a separate life event, like marriage or having a baby.

♦ Choosing not to pay COBRA premiums isn't a special situation.