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What does COBRA stand for?

COBRA stands for Consolidated Omnibus Budget Reconciliation Act.

What is COBRA?

COBRA gives employees the right to keep their group health insurance (aka “continuation coverage”) they would otherwise lose under the following circumstances:

  • Reduction of work hours
  • Employee quits his/her job
  • Employee loses his/her job (other than for “gross misconduct”)

Employees can keep their insurance for up to 18 months by paying the whole premium cost. Previously, when something like the above happened, people lost coverage right away. Now individuals and families can keep insurance through an employer as they transition between jobs, even if they don’t work there anymore. COBRA coverage applies to family members (spouses and dependents) who want to keep health insurance after a job loss or other qualifying life event would normally cause them to lose the coverage. COBRA covers medical care, not life insurance or disability benefits.

There is an 11-month extension for people with certain disabilities. The plan may increase the premium by up to 150%. Continuation of coverage can happen again for an 18-month period (for a total of 36 months of COBRA coverage) in the event of a second qualifying life event.

Which employers does COBRA apply to?

COBRA covers most private employers with 20 or more employees, or state and local government employees. Some states may require smaller employers to offer COBRA (sometimes called mini-COBRA plans). However, COBRA coverage does not apply to federal government employees, churches, or certain church-related organizations.

How much does COBRA cost?

Individuals will pay the full share of the cost of coverage, which includes the employee and employer share (including up to 2% for administrative costs). Because the employer usually pays part of the premium, the costs could be significantly higher than before. It might be worth comparing the affordability of state or federal market plans (Affordable Care Act) to COBRA plans.

Qualifying life events and COBRA

Qualifying life events for employee under COBRA:

  • Termination of employment (the employee quits, is laid off, or fired for anything other than gross misconduct)
  • Reduced work hours (for reasons other than gross misconduct)

Qualifying life events for spouse or dependents of the employee:

  • The insured employee’s death
  • Divorce or legal separation from the insured employee
  • Loss of dependent status (as defined by the insurance plan’s rules)
  • Employee becomes eligible for Medicare and the employer takes him or her off the health insurance plan
 Continuation Coverage Under COBRA

Chart from An Employer’s Guide to Group Health Continuation Coverage Under COBRA, Department of Labor

Can COBRA coverage be cancelled?

COBRA can be cancelled under the following circumstances:

  • If you fail to pay the COBRA premiums.
  • You become covered under another group plan or become eligible for Medicare.
  • If your employer stops providing group health coverage to all employees.

What notices do employers have to provide employees concerning COBRA?

  • General Notice/Initial Notice: Provided to covered employees within first 90 days of being covered by group health plan.
  • Qualifying Event Notice: The employer is required to notify the plan of a qualifying life event, including death of the covered employee, reduction of hours of covered employee, employer bankruptcy, employee becomes eligible for Medicare. The employee is required to notify the plan of a qualifying life event, including divorce or legal separation, or a child loses dependent status.
  • Election Notice: Provided within 14 days from notice of a qualifying life event. Must include information including the name of plan, contact person for COBRA information, general description of continuation coverage provided under the plan, and more.
  • Unavailability of Continuation of Coverage Notice: If a request for continuation coverage or extension is denied
  • Termination of Coverage Notice: If coverage is ended due to one of the reasons previously mentioned, the group health plan must provide a notice of early termination.

This information should not be considered legal advice. Individuals should consult legal counsel for guidance.