What Is COBRA Insurance, and Who Is Eligible?

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  • COBRA is health care coverage that you can get if you lose your job or have another qualifying event. Find out more about COBRA and if it applies to you.

COBRA stands for the Consolidated Omnibus Budget Reconciliation Act. The name is confusing, but when most people talk about COBRA, they're referencing a possible extension of health care coverage during certain qualifying events.

COBRA, for example, can help you stay insured temporarily if you lose coverage because you're changing jobs. Find out more about this coverage option below.

What Is COBRA Insurance Coverage?

COBRA provides for continuation of health coverage under an employer-sponsored plan so you don't lose your coverage automatically if you make a change.

For example, if you have health benefits through your employer and you quit your job, you might need to keep your coverage intact until you're able to get new insurance.

If your employer has 20 or more employees, the health plan is likely governed by the COBRA law. That means you can opt to keep your coverage by paying the total amount of the premiums each month — the amount you might already pay plus the amount the employer was previously covering.

When Can You Get COBRA Coverage?

COBRA doesn't cover all health insurance plans. It's designed to cover plans offered to private-sector workers by employers with 20+ employees.

In some cases, smaller employers might opt to provide a type of COBRA benefit by allowing people to pay for their health insurance premiums for a short time. Some states also have COBRA-type laws that require smaller employers to offer this option.

To be eligible for COBRA, you must have a qualifying event. Those include:

  • Quitting your job
  • Being fired or laid off from your job
  • Having your hours reduced so that you don't qualify for full-time benefits
  • Changing jobs
  • The death of the employed person who qualified for the employer-sponsored benefits for a family
  • A divorce that leaves someone without access to a spouse's employer-sponsored benefits

You typically have to make the decision about COBRA within a short time after the qualifying event. Once you opt for COBRA, it can extend your coverage for up to 18 or 36 months, depending on what type of qualifying event you experienced.

You don't have to keep the COBRA coverage the maximum length of time, though. You can drop it once you have other coverage or if you decide you don't want to pay for it anymore.

The Pros and Cons of COBRA

COBRA can help you ensure that you and your family retain insurance coverage during times of transition. The law requires that COBRA benefits are equal to the benefits provided to a covered employee, which means that you won't experience a drop in what is covered and may even be able to maintain deductibles. That can be helpful if you've already paid a lot of out-of-pocket expenses for the year.

The downside of COBRA is that it can be expensive. Your employer can ask you to pay up to 102% of the plan cost. This could be a lot more than you paid for insurance as an employee if your employer was footing a lot of the bill.

COBRA and Marketplace Plans

In some cases, an individual plan from the health insurance marketplace might be a better option cost-wise. And all the events that qualify you for COBRA qualify you for a special enrollment period in the marketplace, so make sure you do your research before you make a decision.

You can also qualify for a marketplace special enrollment period if your COBRA benefits are running out. You don't qualify, however, if you simply decide to end your COBRA benefits early unless you're doing so because your employer made a decision that changes the costs of your COBRA plan significantly.

Ultimately, COBRA insurance extensions can provide a way to maintain critical coverage during times of change in your life. But make sure you research all your options so you can make the choice that is best for your health, your budget and your family.

COBRA and Medicare

In some cases, you could have COBRA coverage as well as Medicare.

If you have Medicare and COBRA, your Medicare coverage will typically be the first payer for your health care services, with COBRA serving as the secondary payer.

It’s important to make sure you enroll in Medicare at the right time, even if you have COBRA coverage, so that you don’t face late-enrollment penalties for the rest of the time that you have Medicare coverage.

The Benefits Coordination and Recovery Center (BCRC) can help answer questions you may have about Medicare and COBRA coordination. You can reach them by calling 1-855-798-2627 (TTY: 1-855-797-2627).