COBRA insurance isn't a separate policy: it's your right to stay on your employer's group health plan after you'd normally lose it, for example when you leave a job or your hours are cut. It usually lasts 18 months, sometimes 36, and you can be charged the full cost of the cover plus a small administration charge.
COBRA stands for the Consolidated Omnibus Budget Reconciliation Act. It's run by the Department of Labor for private employers, and it matters to both sides: employees want to know what they can keep, and small employers need to know whether it applies to them at all.
Which employers have to offer COBRA
The DOL says COBRA generally applies to private-sector group health plans maintained by employers that had at least 20 employees on more than half of their typical business days in the previous calendar year. It also applies to plans run by state and local governments.
Who counts as a qualified beneficiary
COBRA isn't only for the person who leaves. The DOL defines a qualified beneficiary as an employee who was covered by the group health plan on the day before a qualifying event, or that employee's spouse, former spouse or dependent child. Each of them gets their own election right, which means a spouse can elect COBRA even if the employee decides not to. A plan only has to offer continuation cover to qualified beneficiaries, and only after a qualifying event has happened. So someone who joined the plan the day after the event, or who wasn't on it at all, has no COBRA right from that event.
What counts as a qualifying event
| Qualifying event | Who can elect COBRA | Maximum cover |
|---|---|---|
| Job ends for any reason other than gross misconduct | Employee, spouse, dependent children | 18 months |
| Hours reduced so cover ends | Employee, spouse, dependent children | 18 months |
| Divorce or legal separation | Spouse and dependent children | 36 months |
| Death of the covered employee | Spouse and dependent children | 36 months |
| Child no longer counts as a dependent | The child | 36 months |
There's a disability extension too. If one qualified beneficiary in a family is disabled and meets the requirements, the whole family gets an extra 11 months, up to 29 months in total. During those extra months, the plan can charge up to one and a half times the cost of cover.
The deadlines, in order
- The employer notifies the plan within 30 days after the job ends, hours are cut or the employee dies.
- The plan sends an election notice within 14 days of getting that notice.
- Each qualified beneficiary gets at least 60 days to decide whether to elect COBRA.
- After electing, they get at least 45 days to make the first premium payment.
- Every later payment has a grace period of at least 30 days.
For divorce, legal separation or a child losing dependent status, it's the employee or family member who must tell the plan, so don't assume HR will spot it.
What COBRA costs
This is the bit that shocks people. While you were employed, your employer probably paid a large share of the premium. Under COBRA, the DOL says premiums can't exceed the full cost of the coverage plus a small administration charge, so you're often paying the whole bill yourself for the first time. The plan sets the due dates, but it has to give you that 30-day grace period on each payment.
COBRA or a new plan?
You don't have to take COBRA. The DOL's guide points out that losing job-based health cover also lets you enrol in your state's health insurance exchange, where you may qualify for a tax credit that lowers monthly premiums. Choose exchange cover within 60 days before or after losing your other cover, or you'll wait for the next open enrolment. If a new employer offers a plan, you usually need to request special enrolment within 30 days.
One trap: if you choose COBRA and then end it early with no special enrolment window open, the DOL says you'll have to wait for the next open enrolment period to join another group plan or the exchange. Decide before you cancel.
What employers need to have ready
| Notice | When |
|---|---|
| General notice | Explains COBRA rights when cover starts |
| Qualifying event notice to the plan | Within 30 days of the event, for job loss, reduced hours or death |
| Election notice | Within 14 days after the plan receives notice |
| Notice of unavailability | Within 14 days of a request the plan denies, with the reason |
| Early termination notice | When the plan ends cover before the maximum period |
Most small employers hand this to their insurer or a benefits provider, which is sensible. Just make sure someone owns the 30-day notice to the plan. A benefits administration platform can trigger it automatically when you mark someone as leaving.
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My verdict
If you're an employee, COBRA is a safety net, not a bargain. Use your 60 days to compare it with exchange cover before you sign. If you're an employer with 20 or more staff, put the 30-day notice in your leaver checklist alongside final pay, and write it into your leave and absence process for reduced-hours changes too. Missed notices are where COBRA problems start.
Frequently asked questions
What is COBRA insurance?
COBRA lets workers and their families keep their employer's group health plan for a limited time after a qualifying event such as job loss or reduced hours.
How long does COBRA last?
Generally 18 months after a job ends or hours are cut, and 36 months for other qualifying events such as divorce or the employee's death. A disability extension can take it to 29 months.
How much does COBRA cost?
Premiums can't exceed the full cost of the coverage plus a small administration charge, so you often pay the share your employer used to pay as well as your own.
How long do you have to elect COBRA?
At least 60 days from the date of the election notice or the date you'd lose cover, whichever is later.
Do small employers have to offer COBRA?
Federal COBRA generally applies to employers with at least 20 employees on more than half of their typical business days in the previous year.
Can you lose COBRA for gross misconduct?
Yes. A job ending for gross misconduct isn't a qualifying event for COBRA.
