How COBRA Works: The Basics
When you leave a job — whether through resignation, layoff, or reduced hours — your employer-sponsored health insurance typically ends. COBRA gives you the right to continue that same group health plan for a defined period, as long as the employer has 20 or more employees and the plan is subject to COBRA rules.
Key qualifying events that trigger COBRA eligibility include:
- Voluntary or involuntary job loss (except termination for gross misconduct)
- A reduction in hours that causes you to lose benefits eligibility
- Divorce or legal separation from the covered employee
- The covered employee becoming eligible for Medicare
- Death of the covered employee (for dependents)
Once you qualify, you have 60 days from the date coverage ends — or from the date you receive your COBRA election notice, whichever is later — to decide whether to enroll. If you elect COBRA, coverage is retroactive to the date your employer plan ended, meaning there is no gap in coverage even if you wait to decide.
Small Employer? Check Your State's Rules
Federal COBRA only applies to employers with 20 or more employees. If you worked for a smaller employer, your state may have a "mini-COBRA" law that provides similar continuation rights. Requirements, durations, and costs under state mini-COBRA laws vary significantly, so check with your state's insurance commissioner or a licensed agent for details specific to your location.
What COBRA Costs — and Why It Surprises People
The most important thing to understand about COBRA is its cost. Under your employer plan, your employer likely paid a substantial portion of your monthly premium — often 70% to 80% for individual coverage. Under COBRA, that subsidy disappears. You pay 100% of the premium, plus an administrative fee of up to 2%.
~$8,435
Average annual single-coverage employer plan premium
According to the Kaiser Family Foundation's 2023 Employer Health Benefits Survey, the average annual premium for single coverage was approximately $8,435 — most of which employers paid on behalf of workers.
60 days
Window to elect COBRA after losing coverage
Federal law provides a 60-day election period from the later of the coverage loss date or the COBRA notice date; coverage is retroactive if elected.
18 months
Standard COBRA continuation period
Most qualifying events — including job loss and reduced hours — allow up to 18 months of continuation coverage under federal COBRA rules.
For many people, this means a monthly bill that is three to five times what they paid as an employee. A worker who paid $150/month for single coverage may suddenly face a COBRA premium of $600 or more for the exact same plan.
That said, COBRA can still be worth it in specific situations — particularly if you have ongoing treatment with doctors in your current network, are mid-deductible year, or expect new employment with benefits to begin soon.
Alternatives to COBRA Worth Considering
Losing employer coverage is a qualifying life event that triggers a Special Enrollment Period (SEP) on the ACA Marketplace. This means you don't have to wait for open enrollment — you can shop for a new plan right away.
Depending on your income, Marketplace plans may come with premium tax credits that significantly lower your monthly cost. Medicaid may also be available if your income drops below a certain threshold after losing your job.
For a fuller comparison of how employer-sponsored plans and Marketplace plans differ in structure and cost, see our guide to employer-sponsored vs. Marketplace health insurance.
If you're moving into freelance or self-employed work, you'll face a distinct set of considerations. Our article on health insurance for self-employed and freelance workers covers those pathways in depth.
Use the Retroactive Election Window Strategically
You don't have to elect COBRA the moment you lose coverage. If you stay healthy during the 60-day window and find a better alternative, you can skip it entirely. But if you need care during that period, you can elect COBRA retroactively and have the bill covered. Just be prepared to pay the back premiums in full.
Additionally, if your spouse or domestic partner has employer-sponsored coverage, a qualifying life event may allow you to join their plan — often at a lower cost than COBRA.
Making the Decision: COBRA or Something Else?
Choosing between COBRA and an alternative comes down to a few practical questions:
- Do you have active, ongoing care? If you're mid-treatment or have specialist relationships you want to preserve, COBRA keeps you in the same network without disruption.
- How long will you be uninsured through an employer? If you expect new employer benefits within a month or two, COBRA's retroactive election window lets you delay the decision and only pay if you actually use care.
- What will a Marketplace plan actually cost you? Use the official Healthcare.gov calculator to estimate premiums and credits based on your projected income before assuming COBRA is your only option.
It's also worth reviewing what other employer benefits — like group life insurance — you may lose when leaving a job. Our overview of group life insurance through an employer explains what typically ends with your employment and what gaps that may leave.
Each person's situation is different. A licensed insurance agent or benefits adviser can help you weigh your options based on your actual income, health needs, and coverage timeline. This article is general educational information and is not a substitute for personalized professional advice.
This article is for general informational purposes only and does not constitute insurance, financial, or legal advice. Coverage terms, costs, and eligibility vary by employer plan, state, and individual circumstances. Consult a licensed insurance professional or benefits adviser for guidance specific to your situation.
Frequently Asked Questions
In most cases, COBRA extends coverage for up to 18 months. Certain qualifying events — such as the death of the covered employee or divorce — can extend eligibility to 36 months for dependents. Some state mini-COBRA laws may vary these timelines.
COBRA premiums vary widely by plan, but expect to pay the full cost of coverage — typically what you paid plus what your employer contributed — plus up to a 2% administrative fee. For many individuals, this can range from several hundred to over a thousand dollars per month.
If you were terminated for gross misconduct, you may be disqualified from COBRA. Otherwise, qualifying employees and dependents generally cannot be denied continuation coverage for health reasons or pre-existing conditions.
If you do not elect COBRA within the 60-day window, you permanently lose the right to that continuation coverage. However, losing employer coverage still qualifies you for a Special Enrollment Period on the ACA Marketplace.
Not always. COBRA preserves your existing network and plan, which can be valuable if you have ongoing care. But Marketplace plans may cost significantly less, especially if you qualify for premium tax credits based on your income. It's worth comparing both options carefully before deciding.
The content on this site is for informational purposes only and is not a substitute for professional advice. Always consult a qualified professional for guidance specific to your situation.