COBRA, the Consolidated Omnibus Budget Reconciliation Act, is a federal law that helps people keep their health insurance after a qualifying event like job loss. It gives you the legal right to temporarily continue the exact same plan you had through your employer, even after you're let go. That prevents a dangerous coverage gap and buys you time to find other insurance without going uninsured. Federal COBRA generally applies to employers with 20 or more employees; workers at smaller employers may have similar rights under state mini-COBRA laws.
While COBRA is helpful, the rules often catch people off guard. The core idea is continuation coverage. You keep the same plan, network, benefits, and ID cards. Three things change:
First, you now pay the full premium, your old share plus your employer's, plus an admin fee of up to 2%. That means costs are way higher. Second, coverage is temporary: 18 to 36 months depending on the event. Job loss or reduced hours generally brings 18 months; divorce, the death of the covered employee, a child aging out, or the employee's Medicare entitlement brings 36 months, and a disability determination can stretch 18 months to 29. Third, you have to actively elect it. COBRA doesn't happen automatically.
How COBRA Works: Step by Step
The COBRA process has strict deadlines for your employer and for you.
- The Qualifying Event: The clock starts with an event like job loss, reduced hours, death of the employee, divorce, a dependent aging out, or employer bankruptcy.
- Employer Notification: Your employer has 30 days to tell the health plan administrator about the event.
- Your COBRA Election Notice: The administrator then has 14 days to send you a formal notice explaining your rights, costs, and deadlines.
- The Election Period: You have at least 60 days from the notice date or the date your coverage ended (whichever is later) to decide.
- Payment and Retroactive Coverage: If you elect, you usually have 45 days to make the first payment. Coverage goes back to when your old insurance lapsed, so you're covered for any claims during the election period once you pay.
Pros, Cons, and Your Other Options
- Advantages: You keep your current doctors and avoid a break in coverage, which matters if you're managing ongoing treatments. WellthCare's AI-drafted, clinician-reviewed plans of care provide personalized health guidance that supports members day to day, not just during transitions. You also avoid resetting your deductible or out-of-pocket max mid-year. Pre-existing conditions are not a barrier, because you're continuing the coverage you already have. If you have an HSA, you can use those funds to pay COBRA premiums.
- Disadvantages: The biggest drawback is the cost. You're now paying the full premium plus a fee. Employer HSA contributions stop with the job, even if you keep the same plan through COBRA. Plus, coverage is temporary.
Alternatives to COBRA
COBRA isn't your only choice. The Health Insurance Marketplace (Healthcare.gov) is often a more affordable option. Losing job-based coverage gives you a 60-day Special Enrollment Period. You may qualify for premium tax credits based on your new income, which can make Marketplace plans much cheaper. The enhanced tax credits that were in place from 2021 through 2025 have ended, so for 2026 subsidies are back to the earlier structure and end above 400% of the federal poverty level. Short-term health plans or joining a spouse's plan are other possibilities. A smart move is to compare the total annual cost of COBRA, including deductibles and networks, against a subsidized Marketplace plan.
COBRA vs. Marketplace: Subsidy Timing Rules
Just being offered COBRA doesn't block Marketplace premium tax credits. You can turn COBRA down and take a subsidized Marketplace plan instead. The reverse is not true. If you elect COBRA and later find it too expensive, dropping it early doesn't reopen a Special Enrollment Period. You would wait for the next Open Enrollment, unless COBRA runs out on its own, your former employer stops contributing toward the premium, or another qualifying event occurs.
That makes the first election a partly one-way decision. Price it out before you commit, not after. Your COBRA election window and your Marketplace Special Enrollment Period are both 60 days, so make the decision before either clock runs out.
What Employers and Employees Need to Know
For employers, COBRA administration is an ERISA compliance obligation. Missing deadlines or failing to provide proper notices can lead to excise taxes and lawsuits. Many companies outsource COBRA to third-party administrators to stay compliant. For employees, the key is to read all mail carefully after a job loss, know your election deadline, and research all options. Don't assume COBRA is your best or only choice.