COBRA Health Insurance: How It Works, What It Costs, and When to Use It

What Is COBRA?

COBRA stands for the Consolidated Omnibus Budget Reconciliation Act, a federal law passed in 1985 that gives workers and their families the right to continue employer-sponsored health insurance for a limited time after certain qualifying events. Without COBRA, losing your job would mean losing your health coverage immediately.

Under COBRA, you keep the exact same health plan you had while employed — same network of doctors and hospitals, same prescription drug formulary, same deductibles and copays, and same coverage for pre-existing conditions. The only difference is cost: instead of your employer paying a portion of the premium, you are responsible for the full amount plus a small administrative fee.

COBRA is not a separate insurance plan or a government program. It is a legal right to temporarily continue the group health coverage you already had. Your coverage quality stays the same, but the full cost often comes as a shock to people who were accustomed to their employer subsidizing most of the premium.

Who Is Eligible for COBRA?

Federal COBRA applies to group health plans maintained by private-sector employers with 20 or more employees. State and local government plans are covered under a parallel provision. You must have been enrolled in the employer's group health plan on the day before a qualifying event occurred.

COBRA recognizes several qualifying events that trigger continuation rights:

• Job loss or termination — being laid off, fired (unless for gross misconduct), or quitting voluntarily all qualify.
• Reduction in work hours — if your hours drop below the threshold required for benefits eligibility.
• Divorce or legal separation — a covered spouse can elect COBRA after the marriage ends.
• Death of the covered employee — surviving dependents on the plan can continue coverage.
• Dependent aging off a parent's plan — typically at age 26 under ACA rules.
• Employee becoming entitled to Medicare — dependents who lose group coverage as a result can elect COBRA.

The one major exclusion is termination for gross misconduct. Federal law does not define gross misconduct precisely, but courts have generally interpreted it narrowly. Standard terminations for performance issues do not constitute gross misconduct.

How COBRA Coverage Works

When a qualifying event occurs, your employer's plan administrator must send you a COBRA election notice within 14 days. This notice explains your rights, the cost, and the deadlines. You then have 60 days to decide whether to elect COBRA coverage.

One of COBRA's most important features is retroactive coverage. If you elect within the 60-day window, your coverage is treated as if it never lapsed. If you had a medical emergency during the election period, you can elect COBRA afterward and the plan will cover those expenses — as long as you pay premiums back to your coverage end date.

This creates a strategic option: you can wait to see if you need care before deciding. If you stay healthy and find other coverage quickly, let the deadline pass. If something happens, elect retroactively. Once you elect, you have 45 days to make your first payment covering all premiums owed. After that, payments are due monthly with a 30-day grace period.

How Long Does COBRA Last?

The duration depends on the qualifying event:

• 18 months — the standard maximum for job loss or reduction in hours. This is the most common duration.
• 36 months — available for events affecting dependents, including death of the employee, divorce, the employee becoming Medicare-entitled, or a child aging off the plan.
• 29 months — if a beneficiary is determined disabled by Social Security within the first 60 days of COBRA. This 11-month disability extension applies to all family members on the plan, but the premium can increase to 150 percent of the total cost.

COBRA can also end early if the employer stops offering group health coverage, you fail to pay premiums on time, you become covered under another group plan, or you become entitled to Medicare.

How Much Does COBRA Cost?

This is where COBRA's biggest drawback becomes clear. You pay 102 percent of the total premium — both the employer's share and the employee's share, plus a two percent administrative fee. When you were employed, your employer likely covered 70 to 83 percent of the premium. Under COBRA, that subsidy disappears entirely.

According to the KFF 2025 Employer Health Benefits Survey, average total premiums for employer-sponsored coverage are approximately $8,500 per year for individual coverage and $24,000 for family coverage. At 102 percent, that translates to:

• Individual COBRA: approximately $722 per month
• Family COBRA: approximately $2,040 per month

If your employer offered a generous PPO or you live in a high-cost area, your COBRA premium could exceed $2,500 per month for family coverage. This sticker shock is the primary reason many eligible people decline COBRA. It is also important to note that COBRA premiums are not eligible for premium tax credits or subsidies — you pay the full 102 percent regardless of your income.

COBRA vs. ACA Marketplace Plans

For most people who lose employer coverage, the biggest decision is COBRA versus a marketplace plan. Losing employer coverage qualifies you for a 60-day Special Enrollment Period on HealthCare.gov.

Cost: Marketplace plans are eligible for income-based premium tax credits. If your income has dropped after losing your job, you may qualify for subsidies that reduce your monthly premium to under $200 or even close to zero. COBRA offers no subsidies. The cost difference can be $500 to $1,500 per month in favor of the marketplace.

Coverage: Both cover essential health benefits. However, COBRA keeps your exact plan with the same provider network and formulary. With a marketplace plan, you may need to switch doctors or check that your providers are in-network.

When COBRA wins: You are mid-treatment with a specific provider, you have already met your deductible for the year, your income is too high for meaningful subsidies, or continuity of care is critical.

When the marketplace wins: For most people — especially those with reduced income — a subsidized marketplace plan offers comparable coverage at a fraction of the cost.

COBRA vs. Short-Term Health Insurance

Short-term health insurance is a temporary policy designed to cover gaps between plans. Monthly premiums often range from $100 to $300, making it much cheaper than COBRA. But the differences in coverage are significant.

• Pre-existing conditions: COBRA covers them fully. Short-term plans almost universally exclude them.
• Essential health benefits: COBRA includes comprehensive benefits. Short-term plans are not required to cover maternity, mental health, or prescriptions.
• Cost: Short-term premiums can be one-fifth to one-tenth of COBRA, but a serious illness could leave you with enormous out-of-pocket costs or denied claims.
• Duration: Short-term plans typically last three to twelve months. COBRA lasts 18 to 36 months.

Short-term insurance can work if you are young, healthy, have no pre-existing conditions, and need coverage for just a few months. For anyone with ongoing health needs, COBRA or a marketplace plan is far safer.

Pros of COBRA

Despite its high cost, COBRA offers several meaningful advantages.

• Same doctors and network. You keep access to the same providers, specialists, and hospitals. If you are mid-treatment, this continuity is invaluable.
• No coverage gap. COBRA is retroactive to the day your employer coverage ended, so there is no lapse in your coverage history.
• No medical underwriting. You do not answer health questions or undergo a physical. COBRA is a legal right, not an application.
• Covers pre-existing conditions. Every condition covered under your employer plan remains covered without any exclusion periods.
• Retroactive election window. The 60-day window lets you self-insure temporarily and only elect COBRA if you actually need care.
• Deductible progress preserved. Because you stay on the same plan, any progress toward your annual deductible or out-of-pocket maximum carries over.

Cons of COBRA

The disadvantages are significant and explain why many eligible people decline COBRA.

• Extremely expensive. Paying 102 percent of the full premium with no employer contribution is the biggest barrier. For many newly unemployed people, COBRA can consume most of their savings or unemployment benefits.
• Temporary by design. COBRA is not a long-term solution. The 18-month standard window means you will need to find permanent coverage eventually.
• No subsidies or tax credits. Unlike marketplace plans, COBRA offers no income-based financial assistance. You pay the full amount regardless of your financial situation.
• Strict payment deadlines. Miss one payment beyond the 30-day grace period and your coverage is permanently terminated with no reinstatement option.
• Tied to your former employer. If your former employer changes plan options, switches carriers, or drops group coverage entirely, your COBRA coverage is directly affected.

State Continuation Coverage (Mini-COBRA)

Federal COBRA only covers employers with 20 or more employees. For workers at smaller companies, approximately 40 states and the District of Columbia have enacted their own mini-COBRA laws with similar continuation rights.

These state laws vary significantly:

• Employer size: Some states cover employers with as few as two employees.
• Duration: Ranges from three months to 36 months depending on the state.
• Premium caps: A few states limit premiums to 100 percent without the administrative surcharge.

Notable examples include California (Cal-COBRA for employers with 2 to 19 employees, up to 36 months), New York (36 months regardless of employer size), and Texas (up to nine months for small employers). Contact your state insurance department to learn what protections apply to you.

How to Enroll in COBRA

Enrolling in COBRA follows a strict timeline. Missing any deadline can permanently forfeit your continuation rights.

1. Qualifying event occurs. Your employer has 30 days to notify the plan administrator. For events like divorce or a dependent aging off the plan, you must notify the plan administrator within 60 days.
2. Election notice is sent. The plan administrator sends you a COBRA election notice within 14 days, detailing your options, costs, and deadlines.
3. Elect COBRA. You have 60 days from the notice date or coverage loss date (whichever is later) to elect. Each qualified beneficiary can elect independently — a spouse can elect even if the employee does not.
4. Make your first payment. You have 45 days after electing to submit your first premium, which must cover all months since coverage lapsed.
5. Continue monthly payments. After the initial payment, premiums are due monthly with a 30-day grace period. Missing the grace period permanently terminates coverage.

A common mistake is setting the election notice aside during the stress of job loss. If there is any chance you will want COBRA, review the notice immediately and mark the 60-day deadline on your calendar.

Alternatives to COBRA

COBRA is one option, but it is rarely the only one and often not the cheapest. Consider these alternatives before committing.

• ACA marketplace plans with subsidies. Losing employer coverage triggers a 60-day Special Enrollment Period. If your income qualifies, premium tax credits can dramatically reduce costs — often making a marketplace plan far cheaper than COBRA.
• Spouse's or partner's employer plan. Losing your coverage typically qualifies as a life event that allows you to join your spouse's plan outside of open enrollment.
• Medicaid. If your income has dropped significantly, you may qualify. In expansion states, individuals earning up to 138 percent of the federal poverty level are eligible. You can apply year-round.
• Short-term health insurance. A low-cost bridge if you are healthy with no pre-existing conditions and expect to have new coverage within a few months.
• Health care sharing ministries. Faith-based cost-sharing organizations with lower monthly contributions, though they are not insurance, do not guarantee payment, and can exclude pre-existing conditions.

Before committing to COBRA, compare costs on HealthCare.gov using your estimated income for the year. In many cases, a marketplace plan offers comparable coverage at a fraction of the cost. COBRA's primary advantage is when keeping your exact provider network or preserving deductible progress is essential.

The Bottom Line

COBRA is a critical safety net that ensures you do not lose health coverage during a major life transition. It provides the continuity of your exact employer plan — same doctors, same prescriptions, same benefits, same pre-existing condition coverage. For people mid-treatment or those who have already met their deductible, this continuity can be worth the cost.

However, at 102 percent of the full premium with no employer subsidy or tax credit, COBRA is expensive. For the majority of people who have lost a job, a subsidized ACA marketplace plan will offer comparable coverage at a significantly lower price. The smart approach is to treat COBRA as one option in a broader comparison.

Check your marketplace eligibility and estimate your subsidies on HealthCare.gov. Ask about joining a spouse's plan. Look into Medicaid if your income has dropped. And remember that COBRA's 60-day retroactive election window gives you time to explore every alternative without risking a gap in coverage. Use that time wisely, compare your options carefully, and choose the path that best protects both your health and your finances.