COBRA Continuation
Federal law allowing employees to continue group health coverage after leaving employment by paying full premiums.
COBRA (Consolidated Omnibus Budget Reconciliation Act) is a federal law requiring employers with 20 or more employees to offer continuation of group health coverage to employees and their dependents following qualifying events that would otherwise cause loss of coverage. COBRA allows individuals to maintain the same health plan benefits they had while employed, but at their own cost—typically the full premium (employee plus employer share) plus a 2% administrative fee.
Qualifying events triggering COBRA eligibility include: voluntary or involuntary termination of employment (other than for gross misconduct), reduction in work hours below the threshold for health plan eligibility, divorce or legal separation (for spouse/dependents), death of the covered employee, Medicare entitlement, and loss of dependent child status under the plan.
Duration of COBRA coverage: 18 months for termination/reduced hours; 36 months for other qualifying events (divorce, dependent aging off). Continuation may be extended in cases of disability. State mini-COBRA laws cover employees at smaller employers (under 20 employees).
COBRA cost is the major barrier to continuation—employees who were paying $200/month for their employer-subsidized share of a family plan may face $1,500–$2,000/month for the same plan under COBRA, encompassing the full employer cost. This makes COBRA financially burdensome for unemployed individuals, which is why many people instead transition to ACA marketplace plans (which may qualify for subsidies based on income).
For employees negotiating severance, employer-paid COBRA continuation for 3–6 months is a valuable benefit worth explicitly including in severance negotiations, particularly for those with families and dependents on their current plan.
FAQs
When must an employer notify employees of COBRA rights?
Employers are required to provide a COBRA notice within 44 days of a qualifying event (14 days after the plan administrator is notified of the event by the employer, plus up to 30 days for the employer to notify the administrator). Initial COBRA election notices must be sent to qualified beneficiaries, who then have 60 days from either the notice date or loss of coverage date (whichever is later) to elect COBRA. First premium payment is due within 45 days of election. Employers who fail to timely provide COBRA notices face penalties of $110 per day per qualified beneficiary, plus potential individual lawsuits for uncovered claims.
Can I be denied COBRA coverage?
You can be denied COBRA coverage (or have it terminated) in specific circumstances: your employer goes out of business and has no active group health plan; you fail to pay premiums by the grace period deadline (30 days); you become covered under another group health plan (though COBRA allows you to switch); you become entitled to Medicare; or your termination was for gross misconduct (the only employment-related exception—though 'gross misconduct' is narrowly interpreted and employers bear the burden of proving it). You cannot be denied COBRA coverage for pre-existing conditions, claims history, or any characteristic protected by anti-discrimination laws.
How does COBRA compare to ACA marketplace plans?
COBRA maintains your exact current coverage—same network, same deductibles, same doctors—with no change in benefits. ACA marketplace plans offer different coverage options and may not include your current doctors or providers. However, ACA plans may be significantly cheaper if you qualify for premium tax credits (based on income), especially at lower income levels post-unemployment. Key comparison factors: network continuity (COBRA preserves your network; marketplace plans may not), cost (COBRA is often more expensive than subsidized marketplace plans), and timing flexibility (you can switch from COBRA to a marketplace plan during annual open enrollment or upon COBRA termination).
Related Terms
Severance Pay
Compensation paid to employees upon involuntary termination, beyond their final paycheck.
Workers' Compensation
State-mandated insurance providing medical and wage benefits to employees injured or ill due to work.
FMLA
Federal law providing eligible employees up to 12 weeks of unpaid, job-protected leave annually for qualifying family and medical reasons.
ADA Compliance
Adherence to the Americans with Disabilities Act prohibiting discrimination and requiring reasonable accommodations.
