What Is COBRA and Who Is Eligible?

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law enacted in 1985. It provides workers and their families the option to extend health coverage in certain instances, such as voluntary or involuntary job loss, reduction in working hours, job transition, death, divorce, and other qualifying life events.

In this guide, we’ll explain what COBRA is, its benefits, eligibility requirements, and how it can be a valuable safeguard during times of transition.

What Is the COBRA?



COBRA is a federal law passed in the United States in 1985. Its primary purpose is to ensure that employees and their families have the option to continue their health insurance provided by an employer for limited periods in some instances where they would normally lose coverage. These include voluntary or involuntary job loss, reduced hours worked, transitions between jobs, death, divorce, and other events.

Under COBRA, the individual may be required to pay the entire premium for coverage up to 102% of the plan’s cost. COBRA generally applies to all private-sector group health plans maintained by employers that have at least 20 total employees (including both full- and part-time).

How Does COBRA Work?

COBRA allows eligible individuals to continue their health insurance after an event that would typically result in a loss of coverage. Essentially, COBRA coverage is an extension of the same health insurance plan you had while employed, with the primary difference being who is responsible for paying the insurance premiums.

Let’s say you get laid off from a company with more than 20 employees. Upon your termination, your employer’s health plan must provide a COBRA election notice to qualified beneficiaries, informing you of your right to continue your existing coverage. You then have 60 days from the date of the notice or the date you would lose coverage (whichever is later) to elect COBRA continuation coverage. 

If you decide to enroll in COBRA coverage, you take on responsibility for paying your monthly premiums. Your health coverage continues like normal until it ends, or you find other insurance and cancel coverage.

It’s important to note that while COBRA ensures the availability of coverage, it does not guarantee the same cost. After electing COBRA, you’ll be responsible for paying the entire cost of your premium, plus a 2% administrative fee. COBRA coverage can last from 18 to 36 months, depending on the nature of the qualifying event. However, coverage ends if you don’t pay the premiums on time or the employer ceases to provide any group health plan.

COBRA Eligibility Requirements

Eligibility for COBRA is not universal and depends on several factors, including the type of qualifying event and the nature of the group health plan. There are three elements to qualifying for COBRA coverage:

The Plan

COBRA applies to group health plans sponsored by an employer (private-sector or state/local government) with 20 or more employees on over 50% of its typical business days in the previous year.

The Qualifying Event

Qualifying events are circumstances that would cause an individual to lose their health coverage. The type of qualifying event determines who the qualified beneficiaries can be and the length of time that a plan must offer health coverage to them under COBRA. These events can include termination of employment, reduction in working hours, divorce or legal separation from the covered employee, or the death of the covered employee (if their family wants to continue coverage).

The Qualified Beneficiary

Qualified beneficiaries are individuals covered by the group health plan on the day before a qualifying event occurs and who would lose coverage due to the qualifying event. This could include the covered employee, the employee’s spouse, and the employee’s dependent children.

In general, each qualified beneficiary may be offered COBRA coverage independently, and each is eligible to make an independent election to receive the coverage. For example, if both the employee and their spouse are eligible for COBRA coverage, they can each choose whether to continue coverage.

It’s crucial to evaluate all options when experiencing a loss of employer-sponsored health coverage. In some cases, alternatives to COBRA continuation coverage, such as buying an insurance plan through the Health Insurance Marketplace, may be more economical or advantageous for the individual’s specific circumstances.

For complete details, refer to the Employee’s Guide to Health Benefits under COBRA.

How to Enroll in COBRA

Once you decide to enroll in COBRA coverage, you must contact your employer’s plan administrator and complete a COBRA enrollment form within 60 days of the qualifying event. The plan administrator will then provide information about costs and when coverage will begin. It’s important to note that until the premium payments are made, coverage is not guaranteed.

If you’ve experienced a qualifying event, follow these steps to enroll in COBRA:

1. Understand your COBRA rights: Refamiliarize yourself with the details of your employer plan that will be available as COBRA coverage. Determine what your premiums will be and how long coverage will last.
2. Identify a Qualifying Event: As part of your enrollment, you’ll need to state your qualifying event, so make sure you know what event makes you eligible for COBRA.
3. Receive a COBRA Election Notice: After your qualifying event, keep an eye out for a COBRA election notice within 14 days from your employer or health plan administrator.
4. Decide to Elect COBRA: After receiving the election notice, you have 60 days to decide whether to continue with COBRA coverage. 
5. Complete a COBRA Enrollment Form: If you choose to go ahead with COBRA, contact your health plan administrator to get a COBRA enrollment form. Fill out the form carefully, ensuring all information is up-to-date and accurate.
6. Submit the Form and Initial premium: Submit the completed COBRA enrollment form to the plan administrator within the 60-day election period. Along with the form, you will have to pay the initial premium. This payment secures your COBRA coverage.
7. Maintain Your Coverage: Once your COBRA coverage begins, it’s essential to keep it active. This means paying premiums on time. Be aware that failure to pay your premium may result in loss of coverage.
8. Track the Coverage Period: Ensure you track your coverage period. COBRA coverage lasts between 18 and 36 months, depending on the qualifying event. It’s crucial to explore other insurance options as your COBRA coverage nears its end.

Frequently Asked Questions

How long does COBRA last?

COBRA coverage typically lasts for 18 months in cases of job loss or reduced work hours. For other qualifying events, such as the death of the covered employee, divorce or legal separation of the covered employee and spouse, or when the covered employee becomes entitled to Medicare, COBRA coverage may last up to 36 months. 

It’s also important to note that these periods may be extended in certain circumstances. Specific timelines depend on the nature of the qualifying event and the individual’s status within the health plan.

Does COBRA coverage begin immediately?

COBRA coverage begins immediately after the qualifying event, ensuring no gap in coverage. However, to continue coverage, the beneficiary must elect COBRA within 60 days from either the date of the COBRA election notice or the date that health care coverage would be lost, whichever is later. Once COBRA is elected and the first premium is paid, the coverage is retroactive back to the qualifying event date.

When does COBRA coverage start?

COBRA coverage starts on the date of the qualifying event that led to a loss of health coverage. This means that once an individual elects for COBRA within the specified 60-day election period and pays the initial premium, the coverage is retroactive, starting from the date of the qualifying event. However, failure to adhere to the election timeline and payment requirements may result in loss of eligibility for coverage under COBRA.