A worker laid off from a company with 20 or more employees has a federal right to stay on the same employer health plan for up to 18 months under COBRA — but the worker, not the employer, pays the full cost: the combined employee-and-employer premium, plus a 2 percent administrative fee, according to the U.S. Department of Labor.
The Consolidated Omnibus Budget Reconciliation Act, passed in 1985, is one of the few federal guarantees that survives a layoff. It does not lower the price of coverage or subsidize it. It only preserves access — to the identical plan, with the identical doctors and drug formulary, for a set stretch of time, at a price the worker bears alone unless a former employer chooses to help through a severance agreement.
Who Actually Qualifies for COBRA?
COBRA applies to group health plans sponsored by employers with 20 or more workers in the prior year, and it is triggered by a defined list of "qualifying events," not by hardship generally. The Department of Labor lists job termination for any reason other than gross misconduct, a reduction in work hours, employer bankruptcy, divorce or legal separation, an employee's death, a dependent's loss of eligible status, and an employee becoming eligible for Medicare.
Each event carries its own coverage window. The plan administrator, not the worker, is required to send a formal election notice once a qualifying event is reported — and the clock on a worker's options starts running from that notice, not from the date of the layoff itself.
How Long Does the Coverage Actually Last?
Eighteen months is the standard period for an employee and covered family members after a job loss or reduced-hours event, according to the Department's consumer guidance on continuation coverage. Spouses and dependents facing a different triggering event — the employee's death, divorce, Medicare entitlement, or a dependent aging out of eligibility — can extend coverage to 36 months.
Two extensions exist beyond that baseline. A beneficiary determined disabled by the Social Security Administration can extend an 18-month period to 29 months. A second qualifying event during an existing continuation period — a divorce during a spouse's COBRA term, for instance — can extend coverage up to a combined 36 months.
What Does COBRA Actually Cost?
The worker pays 102 percent of the plan's full premium: the share the employee used to pay through payroll deduction, plus the share the employer used to cover, plus a 2 percent administrative charge that the law permits plans to add. For a disability extension beyond 18 months, plans may charge up to 150 percent of the premium for the months covering the disabled individual, according to the Department's FAQ for consumers.
Nothing in the statute requires an employer to subsidize any part of that cost. Some employers choose to cover several months of COBRA premiums as part of a severance package, but that is a matter of negotiation and company policy, not a federal requirement.
What Are the Deadlines, and What Happens If They're Missed?
A worker has 60 days from the later of the date coverage is lost or the date the election notice is sent to decide whether to elect COBRA. Once elected, the first premium payment is due within 45 days. Missing either deadline can mean losing the right to continuation coverage entirely, with no separate appeal process built into the law itself.
For events tied to divorce or a dependent losing eligible status, the worker or family member has 60 days to notify the plan of the event before the standard election clock even begins.
How Does COBRA Compare to a Marketplace Plan?
COBRA is not the only option after a layoff, and federal guidance is explicit that workers are not required to choose it. Losing job-based coverage opens a 60-day special enrollment window for an Affordable Care Act Marketplace plan, and Marketplace coverage may cost less than COBRA — especially for workers who qualify for income-based premium savings, according to HealthCare.gov.
| Factor | COBRA | ACA Marketplace |
|---|---|---|
| Who sets the price | Employer's existing group plan, no income-based discount | Marketplace plans, with possible income-based premium savings |
| Provider network | Identical to the employer plan the worker just left | May differ from the employer plan's network |
| Enrollment window | 60 days from coverage loss or notice | 60-day special enrollment period after job-based coverage ends |
| Standard duration | Up to 18 months, extendable to 29 or 36 | Renewable annually through open enrollment |
HealthCare.gov advises workers to confirm a new coverage start date before dropping COBRA, since voluntarily ending COBRA outside of open enrollment can leave a gap before Marketplace coverage becomes available again.
The Gap the Law Doesn't Close
COBRA's guarantee is narrower than it sounds. It protects continuity of coverage, not affordability of coverage, and it applies only where an employer already met the 20-employee threshold and already offered a group plan. For workers at smaller employers, or those who cannot absorb the full premium on a lost paycheck, the law itself offers no price relief — only the Marketplace's separate enrollment window and any income-based savings a worker qualifies for there.
Frequently Asked Questions
- Do I have to take COBRA if my employer offers it? No. Federal guidance says workers are not required to enroll in COBRA and should compare it against Marketplace options first.
- Can I switch from COBRA to a Marketplace plan later? Yes. Losing COBRA coverage opens a new 60-day special enrollment period for Marketplace plans, according to HealthCare.gov.
- Does COBRA cost the same as what I paid as an employee? No. It includes the employer's former share of the premium plus a 2 percent administrative fee, so the total is typically far higher than payroll deductions were.
- What happens if I miss the 60-day election window? The right to elect COBRA continuation coverage generally lapses, with no separate federal appeal process for a missed deadline.
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