What happens if you lose your workplace health care coverage?
It’s an extremely common problem. Employer-provided insurance is America’s most prevalent form of health care coverage, with nearly half of civilian workers (48%) participating in workplace medical care benefits in 2024, according to U.S. Bureau of Labor Statistics data. So when people lose their jobs, they often experience a disruption in their health insurance, too.
If this happens to you, you’ll have several options available, one of which you’ve probably at least heard of in passing: COBRA.
The Consolidated Omnibus Budget Reconciliation Act (COBRA) provides workers and their families the right to continue benefits from their group health plan—for a limited time—if they lose their benefits under approved circumstances.
But who’s eligible for COBRA and for how long? What does it cost? And what does it cover? Today, I’ll answer all of those common COBRA questions and more. This information should help you decide whether you should use COBRA or choose a coverage alternative.
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Who Is Eligible for COBRA?
According to COBRA, employers with at least 20 employees in the prior year typically must offer employees and their families a temporary extension of health coverage (aka continuation coverage) if coverage of the plan were to otherwise end.
Some of the circumstances that might qualify you for COBRA include:
- Involuntary or voluntary job loss
- Reduction in the number of hours worked
- A transitional period between jobs
- Death, divorce, and certain other life events
Eligibility extends to your dependents as well.
Note that I said “offer.” You have the option of selecting COBRA coverage, but you are not required to take it.
What Does COBRA Cover?
Your COBRA coverage usually will be the same coverage you had with your previous employer, meaning you have the same benefits and the same provider network.
Even if you decide not to sign up for COBRA coverage for yourself, your dependents, such as a spouse or child, are eligible for coverage.
How Long Does COBRA Last?
If you’ve been laid off or otherwise had your employment terminated, your health coverage might end immediately, until the end of the month, or—if you’re collecting a severance package—sometimes longer.
At whatever point your employer-sponsored benefits end, you have 60 days to enroll in COBRA. Your coverage begins the day your previous coverage ended, even if enrollment is delayed.
Usually, a person’s COBRA coverage will last up to 18 months, though in some circumstances, it can last up to 36 months. It is highly recommended to put an alternative health care plan in place before your coverage is due to end. You can end COBRA coverage whenever you want, so if you’re offered 18 months of COBRA but find a new job with employer coverage after two months, you don’t need to keep paying for COBRA coverage for another 16 months.
Related: Budgeting Priorities if You’re Laid Off
Who Pays for COBRA?
The former employee typically has to pay for COBRA coverage, and unfortunately, it can be pricey. Individuals might need to pay the whole premium amount up to 102% of the plan’s cost.
Remember: Your employer usually pays for a portion of your health insurance premium, then you pay the rest. However, if you elect to get COBRA coverage, you’ll have to pay both the employer and employee portions.
To estimate your monthly COBRA payment, add together the amount deducted from your paychecks throughout the month, as well as the amount your employer contributed. This information should be available on your paystubs; HR typically will provide you with this information if you need it, too.
The average monthly COBRA premium is between $400 to $700 per individual, not including the 2% administration fee. Average premiums can vary substantially by state.
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Related: What Should I Do After a Layoff?
Who Should/Shouldn’t Use COBRA?
If you love your current doctors and want an easy stopgap until you can find long-lasting coverage elsewhere, COBRA might be a good option for you. It’s possible your doctors might not be in-network through your next insurer; this allows you to stay with them for longer while they take care of any medicals you may have and prepare for a potential transition to new providers. Because coverage is retroactive (meaning it officially starts as soon as your old coverage ends), you can be confident there will be zero coverage gaps.
COBRA can be costly, however. So if you can’t afford the premiums, or you simply don’t want to pay them, you should seek more affordable options. You might qualify for coverage through a spouse, parent, Medicare, or a new job you have lined up.
Another financial consideration? COBRA might be costly, but if you’ve already met your deductibles for the current year, keeping your plan might ultimately be cheaper than finding other coverage and having to meet a new deductible within the same year.
You might also need to seek out coverage through the Health Insurance Marketplace. Some beneficiaries who choose to get coverage through the Marketplace might qualify for a premium tax credit and cost-sharing reductions … and even without the credit, Marketplace coverage might cost less than COBRA.
Importantly: Besides often being a cost-prohibitive option, COBRA is only temporary. So even if you do opt into COBRA, you’ll still eventually need to be on the lookout for a new insurance solution.
Related: Health Care Costs in Retirement [Amounts & Types to Expect]
Can I Change From COBRA to the Marketplace?
What happens if you regret your decision to use COBRA?
Well, you can switch to Marketplace coverage—but not necessarily whenever you want.
If you want to switch from COBRA coverage to the Marketplace for any reason, you can enroll in Marketplace coverage during the open enrollment period from Nov. 1 through Jan. 15.
However, if you want to change to Marketplace coverage at any other time, you can only do so under certain circumstances, including:
- Your COBRA coverage is about to end.
- You have to pay the entire cost of COBRA because you lost a government subsidy or an employer stopped contributing.
- It’s within 60 days of losing your job-based coverage.
Other life events, such as getting married or having a baby, also qualify you for a special enrollment period in which you can sign up for Marketplace coverage outside of open enrollment.
If you stop COBRA coverage early between Jan. 16 and Oct. 31 for a nonqualifying reason, though, you’ll have to wait until the next open enrollment to get Marketplace coverage.
Note: If you qualify for CHIP or Medicaid, you can enroll in those programs at any time. But make sure you’re eligible before ending COBRA coverage.
Related: Here’s How You Can Lose Medicare [And How You Won’t]
