COBRA Insurance Explained

What Is COBRA Insurance?

COBRA (Consolidated Omnibus Budget Reconciliation Act) is a federal law that lets you continue the health insurance you had through an employer after leaving the job. When you lose job-based coverage, COBRA allows you to pay to stay on that exact same plan — including the same network, doctors, and pharmacy — for a limited time.

COBRA is available to employees and their covered dependents when they lose employer coverage due to leaving a job (voluntarily or involuntarily), reduced hours below full-time eligibility, or other qualifying events like divorce from an employee or a dependent child aging off the plan.

How Much Does COBRA Cost?

COBRA is almost always expensive because you pay the full premium — both your previous share and your employer’s contribution — plus a 2% administrative fee. If your employer was paying 80% of a $700/month family premium, you were paying $140/month while employed. On COBRA, you pay the full $700 plus the 2% fee, or about $714/month for the same coverage. The shock of seeing the full premium cost is why COBRA is often called “shockingly expensive.”

COBRA vs. Marketplace Plans: The Key Decision

Losing job-based coverage is a qualifying life event that opens a 60-day Special Enrollment Period for marketplace plans. You don’t have to take COBRA — you can compare it against marketplace alternatives. Key comparison factors:

• Network: COBRA keeps your existing doctors. Marketplace plans may have different networks — verify your doctors are in-network on any alternative plan.
• ACA subsidies: Marketplace plans may qualify for ACA premium tax credits based on your income after leaving the job. This can make marketplace plans significantly cheaper than COBRA, especially at lower post-job income levels.
• Continuity: COBRA is particularly valuable if you are in the middle of ongoing treatment with specific providers, as it maintains care continuity.

COBRA Time Limits

You typically have 60 days from losing coverage to elect COBRA. Coverage is retroactive to when you lost it, so you can wait to see if you need care and still elect COBRA within the window. COBRA coverage lasts up to 18 months for employees (24 months for some dependents and disability cases). After COBRA ends, that expiration is a qualifying life event for marketplace enrollment.