COBRA Health Insurance: What It Is, How Much It Costs, and Cheaper Alternatives

When you lose a job or your work hours are reduced, you may also lose your employer-sponsored health insurance. COBRA — which stands for Consolidated Omnibus Budget Reconciliation Act — gives you the right to continue that same coverage for a period of time after leaving your employer, as long as your former employer had 20 or more employees.

The major catch with COBRA is cost. When you were employed, your employer likely paid a significant share of your health insurance premium — often 70% or more. Under COBRA, you pay the full premium yourself, plus a 2% administrative fee. For many people, this means going from $200 per month to $600 or $700 per month or more for the same coverage.

COBRA coverage can last up to 18 months in most situations — or up to 36 months for family members in certain qualifying events like death or divorce. During that time, your coverage is identical to what you had at work, including the same doctors, prescriptions, and benefits.

To elect COBRA, you must notify your employer's benefits administrator and return the election form within 60 days of losing your coverage. Coverage is retroactive to the date you lost your original insurance, so if you had a medical expense during that gap, it could still be covered — but you will need to pay all premiums from the beginning.

Because COBRA is expensive, it is worth comparing it against alternatives: a Marketplace plan through HealthCare.gov (which may qualify for premium subsidies based on your income), Medicaid if your income drops low enough, or a short-term health plan as a temporary bridge. Losing your job qualifies as a life event that opens a Special Enrollment Period on the Marketplace.