COBRA: Continuing Your Health Insurance If You Lose Your Job
The federal law called COBRA gives employees the right to continue their group health coverage, at their own expense, after they lose or leave their job.
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COBRA (an acronym for the Consolidated Omnibus Budget Reconciliation Act) is a federal law that allows employees to continue the group health insurance coverage for a period of time after their employment ends or they otherwise become ineligible (for example, because their hours are cut below the employer's threshold for benefits). The employee has to pay the entire cost of coverage at the employer-negotiated group rate, which is typically less expensive than an individual policy.
Who Is Covered By COBRA?
Private employers with at least 20 employees must comply with COBRA. (Smaller employers may be covered by a similar state law.) Employees who are covered by the employer's group health plan on the day before a "qualifying event" -- an event that would cause them to lose their coverage, such as a layoff, cut in hours, or divorce from a spouse -- are entitled to COBRA benefits.
What Qualifying Events Make an Employee Eligible for COBRA Benefits?
A qualifying event is an occurrence that would cause an employee or an employee's dependent to lose health care coverage through the employer. The following are qualifying events for employees:
- The employee quits.
- The employer terminates employment for reasons other than gross misconduct. For example, an employee who is laid off for economic reasons or fired for being a poor fit is eligible for COBRA.
- The employee's hours are reduced to an amount that would render the employee ineligible for benefits under the employer's plan.
What Qualifying Events Make a Spouse or Dependent Eligible for COBRA Benefits?
COBRA recognizes that employees aren't the only ones who get their health insurance through an employer. An employee's spouse and dependents are also eligible for COBRA coverage in these circumstances:
- The employee has a qualifying event, as explained above.
- The employee becomes entitled to Medicare.
- The spouse and the employee divorce or legally separate.
- The employee dies.
- For a dependent child, the child loses dependent status under the plan (for example, because the child reaches the age when he or she is no longer covered).
How Long Do COBRA Benefits Last?
An employee can continue COBRA coverage for 18 months. A spouse or dependent child who becomes eligible for any reason other than through the employee's qualifying event can continue COBRA coverage for 36 months. For example, if the employee dies, the spouse can continue coverage for 36 months.
In some situations, different rules apply. For example, if a spouse is receiving COBRA coverage because the employee was laid off, both the employee and spouse would be entitled to receive benefits for 18 months. However, if the employee dies during this 18-month period, the spouse's eligibility would be extended to 36 months. COBRA coverage can also be extended (to a total of 29 months) if the person receiving benefits has a disability and meets other requirements.
Who Pays for COBRA?
Currently, the employee or other beneficiary (spouse or dependent child) must pay the full premium to continue COBRA benefits. Congress temporarily changed this rule to provide a partial subsidy, which paid 65% of the COBRA premium. However, this subsidy protected only those who became eligible for benefits due to an involuntary employment termination between September 1, 2008, and May 31, 2010. The subsidy is no longer in effect, so recipients must once again pay the full cost of coverage.
How Does COBRA Work?
The administrator of your employer's health care plan (either your employer, if it self-administers, or a third party) is required to send you a series of notices about your right to COBRA benefits. Once a qualifying event takes place, either the employer or the employee must notify the plan administrator (who is responsible depends on the type of event).
After learning of a qualifying event, the administrator must send out an election notice, telling beneficiaries of their right to choose COBRA coverage. Beneficiaries then have 60 days to inform the administrator whether they do or don't want to continue insurance coverage through COBRA.
Get Legal Help
Often, the COBRA process runs like clockwork, with all proper notices sent out and returned on time. Sometimes, however, there's a glitch. If you believe you are entitled to COBRA benefits and you haven't gotten them, you should consider consulting with an employment lawyer.