Understanding COBRA and Your Health Insurance Options
Key Takeaways
- COBRA is a temporary continuation of employer-based health insurance because of a job loss, reduction in hours, job transition, death, divorce or other qualifying life events.
- COBRA beneficiaries are responsible for 100% of the medical premium plus a 2% administration fee.
- While COBRA can help in a pinch, it may be cheaper to purchase individual healthcare coverage from The Health Insurance MarketplaceThe Health Insurance Marketplace is a virtual space where you can shop and enroll in health insurance. Marketplaces can be run by the government, your state or private companies. Marketplaces can be accessed online, by phone, or in-person. .
What is COBRA Insurance?
COBRA is a law that allows you and your dependents to stay on your current health plan for a specific period after a Qualifying Life Event, such as:
- Voluntary or involuntary job loss
- Reduced hours making you ineligible for coverage (full-time to part-time)
- Transition between jobs
- Death
- Divorce
- Other life events
If you experience a qualifying event, your employer must notify you about enrolling in COBRA coverage within 14 days. The notice is called an election notice. You will have at least 60 days to decide whether you want to join.
Can I bundle multiple benefits into one plan?
Who is Eligible for COBRA?
To be eligible for COBRA, you must show credible coverage with an employer group plan at the time of a qualifying event. Additionally, your former employer needed to have more than 20 employees, at least 50% of the year. Your spouse and dependents qualify for COBRA coverage as long as they were on your group plan before the qualifying event.
Loss of job (fired, quit or retired)- Who’s covered: You, spouse and dependent child
- Who’s covered: You, spouse and dependent child
- Who’s covered: Spouse and dependent child
- Who’s covered: Spouse and dependent child
- Who’s covered: Spouse and dependent child
- Who’s covered: Your child
Please note: You cannot qualify for COBRA if you lose employment for gross misconduct.
What’s Covered?
COBRA must provide the same benefits your group health plan covered. Group health plans generally include:
- Inpatient and outpatient hospital care
- Doctor visits
- Surgery
- Prescription drugs
- Dental and vision
Find the Medicare Plan that works for you.
How Much Does COBRA Cost?
COBRA is more expensive because you are no longer splitting the cost of your health plan with your employer. Instead, you pay 100% of the health insurance plan costs (or monthly premiums) plus a 2% administration fee.
Employers generally pay a portion of the premium for their employees. If you lose your job, paying full premium plus any out-of-pocket costs may be difficult or nearly impossible.
Let’s look at an example of how COBRA works.
The average annual premium in the United States in 2022 for a single employee on a group plan was $7,590. That’s $632.50 a month. Let’s say the employer pays 80 percent per month while the employee pays the other 20 percent.
Electing coverage with COBRA, an employee is responsible for the entire group plan’s cost, plus an administrative fee. For example, here’s the monthly COBRA cost for the example above:
- Employer cost before COBRA: $506 per month
- Employee cost before COBRA: $126.50 per month
- Administrative fee with COBRA: 2% of the total monthly premium
- Your monthly COBRA premium is: $645.15
How Long Can I Keep COBRA Insurance?
COBRA coverage ranges from 18 to 36 months, depending on your qualifying event. You can become eligible for an extension if you are disabled, or a second qualifying event occurs.
Qualifying Event:
Job loss
- Length of COBRA: 18 months
- Length of COBRA: 18 months
- Length of COBRA: 36 months
- Length of COBRA: 36 months
- Length of COBRA: 36 months
Additionally, you could lose coverage if:
- You fail to pay your premiums on time.
- You enroll in a new group plan after electing coverage.
- You become eligible for Medicare.
- Your former employer goes out of business or stops providing group health insurance benefits.
What Should I Consider Before Enrolling in COBRA?
Within a private Marketplace, you can view and compare different policies from the carriers in your area. But with COBRA, you must continue on your current health plan, regardless of any life changes that may have occurred.
Let’s take a look at what to consider before electing COBRA insurance.
Changing Healthcare Needs
Unemployment or unexpected loss of coverage counts as a Qualifying Life Event. This allows you and your family to explore all options outside of the open enrollment period.
It’s also important to consider changing healthcare needs. Your health coverage needs can widely change if your family grows or someone develops a severe medical condition.
Long Term vs. Short Term Coverage
COBRA is a temporary solution, meaning you can only stay on a plan for up to 18 to 36 months after losing it, depending on the life event. COBRA is designed to sustain individuals until they find new coverage. Once COBRA runs out, you are responsible for finding new health insurance.
Payment Toward Your Deductible and Out-of-Pocket Maximum May Carry Over
If you spent money towards your deductible and out-of-pocket maximum amounts, it might still carry over to your COBRA policy during the same plan year. Before deciding if COBRA is right for you, call your carrier directly to confirm.
Find the Medicare Advantage plan that meets your needs.
Do I Have Other Health Insurance Options?
Electing COBRA entitles you only to coverage. People who purchase individual health plans through private exchanges like GoHealth can receive assistance in their decision making. Licensed insurance agents help you and your family find the right coverage. Marketplaces also allow you to view and compare health plans across carriers in your area.
Federal tax subsidies can help lower monthly premiums if you choose a health insurance plan from a private exchange. Tax subsidies typically are available for individuals making between 100 to 400% of the Federal Poverty Level.
Private exchange health plans generally allow the luxury of choice, cost-savings, and comparison, while COBRA does not.
Should I decline COBRA if I want to explore GoHealth options?
What questions should I be asking to determine if COBRA or an individual plan is right for me?
- What type of coverage am I looking for?
- Do I have any severe pre-existing conditions?
- Will I get employer health benefits again soon?
If I get a new job, can or should I stick with my individual policy? I’m getting tired of getting new health insurance every few years.
Sources
- Continuation of Health Coverage (COBRA). DOL.gov.
- An employee’s Guide to Health Benefits Under COBRA. DOL.gov.
- FAQs on COBRA Continuation Health Coverage for Workers. DOL.gov.
This website is operated by GoHealth, LLC., a licensed health insurance company. The website and its contents are for informational and educational purposes; helping people understand Medicare in a simple way. The purpose of this website is the solicitation of insurance. Contact will be made by a licensed insurance agent/producer or insurance company. Medicare Supplement insurance plans are not connected with or endorsed by the U.S. government or the federal Medicare program. Our mission is to help every American get better health insurance and save money.
Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov or 1-800-MEDICARE to get information on all of your options.