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What is COBRA?

The American Cancer Society does not offer legal advice. This information is intended to provide general background in this area of the law.

COBRA stands for the Consolidated Omnibus Budget Reconciliation Act. It gives employees the right to pay premiums for and keep the group health insurance that they would otherwise lose after they:

  • Reduce their work hours
  • Quit their jobs
  • Lose their jobs

Most people can keep the insurance for up to 18 months. Some people may be able keep it a few months longer.

COBRA also lets family members choose to keep health insurance after a job loss or other qualifying event would normally cause them to lose the coverage they have through your employer. (See the section called “What is a qualifying event under COBRA?” for more on this.)

COBRA applies to nearly all employers with 20 or more employees. A few states require even smaller employers to offer COBRA. See the “To learn more” section to find the National Association of Insurance Commissioners, where you can get contact information for your state insurance commissioner’s office.

Before COBRA, when employees left their companies, they and any covered family members lost their health insurance right away. COBRA allows an employee to buy health insurance through the employer even though the person no longer works there or no longer works full time.

The Affordable Care Act changes coverage

Before the new health care law known as the Affordable Care Act (ACA) became law, people with a pre-existing condition (an existing health problem) such as cancer could be charged more or even denied coverage when they tried to buy health insurance on their own. As a result, COBRA was often the only health coverage option available to cancer patients and survivors who made job changes.

The ACA made major changes to health insurance in the US. The ACA can make health insurance more affordable for people with cancer. It’s also intended to make sure that most insurance plans cover the health care that cancer patients and survivors might need.

The state insurance marketplaces created by the ACA offer more health insurance options to people who don’t have access through their employers. It can also help those who leave their jobs and lose their employer’s group insurance. And for some people, buying insurance through their state’s marketplace may cost less than paying for COBRA coverage.

COBRA vs. individual insurance through your state’s marketplace

For some people, COBRA can still be a good plan. But if you lose your group coverage because you lost or quit your job, compare your COBRA group plan benefits and costs to the individual health plans you can buy on your state’s marketplace. Keep in mind that if you’ve lost your job, your lower income may qualify you for financial help buying a plan on the marketplace. You’ll also have a special enrollment period for buying a marketplace plan.

Before you choose COBRA, be sure that you’re OK with the plan and its cost, at least until your state’s next open enrollment period. (Open enrollment is the time when you can make changes in your coverage without penalties.) For more on this, see the section “Can I stop or skip COBRA and buy a marketplace plan?”

How long does the COBRA coverage last?

The length of time you can keep COBRA coverage depends on your qualifying event (see the next section). If your major medical coverage ends because your employment ends (other than for gross misconduct), or because your hours are reduced, you and your qualified dependents can keep coverage under the employer’s health insurance for up to 18 months by paying for the full cost of the coverage.

Note that a few states require employers to offer COBRA coverage for a longer time than federal laws do. Again, your state insurance commissioner’s office can tell you more about this.

For people with disabilities

Certain people with disabilities may qualify for an extra 11 months of COBRA coverage. (This makes a total of 29 months of coverage – the original 18 months plus the 11-month extension.) But the plan can charge an increased premium of up to 150% of the cost of coverage during the 11-month disability extension.

To qualify for the disability extension, you must:

  • Get a formal disability determination from the Social Security Administration (SSA) that shows you were disabled at the time (or within 60 days) of your COBRA qualifying event.
  • Have the disability during the first 18 months of coverage.

This means that you must apply for disability through the SSA and wait for their decision about whether you are truly disabled. After getting the SSA decision, you must send a copy of the letter to the health plan administrator within 60 days of receiving the letter and before the 18 months of coverage ends.

Later on, if Social Security determines you are no longer disabled and you are not employed, COBRA coverage may be discontinued in the month that begins more than 30 days after Social Security’s decision. You must notify the health plan administrator of the final decision from Social Security within 30 days.

For dependents

Dependents who lose job-based coverage due to a change in the family (such as divorce or other qualifying event) can still get COBRA coverage for up to 36 months. (See the section, “What is a qualifying event under COBRA?”) People with COBRA coverage have the same health benefits and rights as active employees. For instance, they can change plan options during open enrollment periods and parents can add newborns and newly adopted children to their COBRA policies.

What is a “qualifying event” under COBRA?

A qualifying event causes employees or their dependents to lose their group health coverage but lets them qualify for COBRA coverage.

Qualifying events for the employee

Qualifying events for the employee include loss of health insurance because of:

  • Termination of employment (The employee quits, is laid off, or fired for anything other than gross misconduct.)
  • Reduced work hours (for reasons other than gross misconduct)

Qualifying events for the spouse or dependents of the employee

Qualifying events for the spouse or dependents of the employee who had been covered on the employee’s health plan include:

  • The insured employee’s death
  • Divorce or legal separation from the insured employee
  • Loss of dependent status (as defined by the insurance plan’s rules)
  • Employee becomes eligible for Medicare and the employer takes him or her off the health insurance plan
  • Any event in the list above that causes the employee to lose health coverage

The employee’s qualified spouse or children may enroll in COBRA even if the employee does not.

What is a “qualifying event notice” under COBRA?

Before a group health plan must offer COBRA coverage, the group health plan administrator must be told about the qualifying event. The employer has 30 days after the event and must notify the plan if the qualifying event is any of these:

  • Employee job loss
  • Reduced hours of the employee
  • Employee death
  • The employee becomes eligible for Medicare
  • Employer files for Chapter 11 bankruptcy

The employee or dependent must notify the group health plan administrator within 60 days of these family changes:

  • Divorce
  • Legal separation
  • Child’s loss of dependent status

How to go about doing this should be outlined in the summary of plan description (SPD) you get from your employer when you enroll in a health plan. If your employer doesn’t have a procedure for notifying the health plan, you can give notice by contacting the person or department that handles your employee benefits.

What is an “election notice?”

Within 14 days of getting the qualifying event notice (above), the employer or health plan administrator must give the person who’s about to lose health insurance written notice of his or her COBRA rights. This written notice is called the election notice. It should contain all of the information you’ll need to understand COBRA coverage so that you can make an informed decision about whether to continue coverage. It should also give you the name of the person who handles COBRA for the health plan (the COBRA administrator) and tell you how to get more information.

What do I do once I get the COBRA election notice?

The employee or qualified dependents have 60 days after they get the election notice to choose health insurance coverage for themselves under COBRA. The employee or dependent must notify the COBRA administrator listed on their COBRA election notice in writing if they wish to keep their health insurance. The COBRA administrator is the person who keeps up with COBRA benefits for the employer.

How long do I have before I must pay the first COBRA premium?

You have 45 days from the date you chose to continue health insurance coverage with COBRA to pay the first premium bill. That payment generally must cover the period of coverage from the date COBRA was chosen all the way back to the date of the loss of coverage due to the qualifying event.

Note: Neither the health plan administrator nor the employer is required to send you monthly premium notices or “bills,” so it’s up to you to pay attention to due dates.

How much does COBRA cost?

The premium for COBRA coverage equals the full cost of your group health coverage – including the employer and employee share – plus up to 2% more for administrative costs. This is usually much more than you paid when you worked for the company, since the company then probably paid for part of the premium. Some employers may give you the option of dropping out of “non-traditional” insurance plans, such as dental and vision coverage, in order to reduce costs.

If you’ve already had the 18-month standard COBRA coverage and have started on the 11-month disability extension, the premium may be much higher. In this case, the employer may charge up to 150% of the actual insurance cost.

Starting January 1, 2014 state insurance marketplaces created by the new health care law (the ACA) will offer more insurance options that you may find more affordable than COBRA, Low- and middle-income families may also qualify for financial help to pay for health insurance bought in the insurance marketplace.

How long do I need to have a job in order to be covered under COBRA?

You are eligible for COBRA coverage if you were covered under the group health plan on the day before your qualifying event. This 1-day rule also applies to your spouse and dependents who were covered under the plan.

Under what conditions is COBRA discontinued?

COBRA coverage is discontinued in these cases:

  • The covered person becomes covered under another group plan or becomes eligible for Medicare. If the new plan has a waiting period for pre-existing conditions, you may choose to have coverage under COBRA along with the new plan.
  • The covered person does not pay the premiums for the continued coverage. (Premiums are the amount you must pay, or the amount you are billed.) There’s a 30-day grace period to pay premiums, but your coverage may be put on hold for late payments. For example, if you do not pay by the first day of a period of coverage, the plan may cancel your coverage. But if you pay before the grace period ends, they’ll reinstate coverage retroactively back to the date your COBRA coverage started. If you don’t pay in full before the end of the grace period you could lose all COBRA rights.
  • The employer stops providing a group health plan to all employees.
  • The covered person does something (such as fraud) that would justify the plan stopping coverage of a similar participant who’s under the group plan and not receiving COBRA coverage.

Note: The employer is required to notify the employee if COBRA is canceled early.

Can I stop or skip COBRA and buy a marketplace plan?

If you do not choose COBRA and never pay any of the premiums for it, the loss of group coverage triggers a special enrollment period on your state health insurance marketplace. This means you can enroll in a marketplace plan at that time, even if it’s outside the normal “open enrollment” period in the marketplace. (Open enrollment is the time when you can enroll or make changes in your coverage without penalties.) You’ll have 60 days as a special enrollment period. The fastest ways to get a plan on the state marketplace are:

  • Find your state's marketplace website: visit www.healthcare.gov, click “enroll”, and choose the state where you live
  • OR
  • the 24/7 marketplace helpline 1-800-318-2596

If you keep COBRA coverage until it runs out, you will again qualify for a special enrollment period in your state marketplace.

If COBRA coverage is started but then stopped at a time other than during the state marketplace open enrollment period, you’ll have to wait until the next marketplace open enrollment period to apply for coverage. This means you will not have health insurance for a time. Once you’ve started COBRA, you can get a special enrollment only if coverage is exhausted or the employer stops providing a group plan to all employees.

If you choose COBRA, it’s important to be aware of the risks of stopping it before it runs out. You’ll want to coordinate the start of new coverage so you don’t face a gap in coverage while getting treatment or follow-up care.

Is my dependent eligible for COBRA if his or her insurance coverage with my plan ends?

If coverage for your dependent(s) ends for the following reasons, their coverage may be continued for up to 36 months:

  • death
  • divorce or legal separation
  • lose health insurance because you become eligible for Medicare
  • dependent’s change in status that makes them ineligible under your health insurance plan’s rules (a young adult comes of age, gets married, etc.)

What about the person who has been covered under COBRA for 36 months and is almost but not quite 65?

Thirty-six months is the maximum amount of continuation coverage under COBRA. Employers may extend your continuation coverage for a longer period, but COBRA does not require it. A few states require the group health insurers they regulate to extend coverage until the age of Medicare eligibility. You also now have the option of buying insurance through your state insurance marketplace until you can get Medicare.

How can I find out more about COBRA?

Rising medical costs have made health insurance a household necessity for most people, especially those with major illnesses like cancer. The COBRA law gives people an option to keep workplace health insurance for a while longer if they can’t get coverage through their spouse’s job or the health insurance marketplace. Workers need to be aware of health care laws that allow them to find or keep the health insurance they can best afford.

A good place to learn more about COBRA is in your health insurance plan booklet or talk with the person who manages your plan. Most of the specific rules on COBRA benefits can be found in one of these resources.

For more information about COBRA, call the Employee Benefits Security Administration at 1-866-444-3272 or visit their website at www.dol.gov/ebsa. You can also find a detailed brochure called An Employee’s Guide to Health Benefits Under COBRA, online at www.dol.gov/ebsa/pdf/cobraemployee.pdf.

If you have questions about your state’s requirements about COBRA and health insurance, you can find your state’s insurance department by contacting the National Association of Insurance Commissioners (see “To learn more”).

To learn more

More information from your American Cancer Society

Here is more information you might find helpful. You also can order free copies of our documents from our toll-free number, 1-800-227-2345, or read them on our website, www.cancer.org.

More on health insurance, finances, and cost of care

Health Insurance and Financial Assistance for the Cancer Patient (also in Spanish)

The Health Insurance Marketplace (also in Spanish)

Prescription Drug Assistance Programs (also in Spanish)

How to Find a Financial Professional Sensitive to Cancer Issues: Financial Guidance for Cancer Survivors and Their Families

In Treatment: Financial Guidance for Cancer Survivors and Their Families (also in Spanish)

Off Treatment: Financial Guidance for Cancer Survivors and Their Families

Children Diagnosed With Cancer: Financial and Insurance Issues

Advanced Illness: Financial Guidance for Cancer Survivors and Their Families

Can I Be Prepared if Cancer Occurs?: Financial Guidance for Those With Concerns About Cancer

Legal requirements of health insurance plans

The Health Care Law: How It Can Help People With Cancer and Their Families (also in Spanish)

Clinical Trials: State Laws About Insurance Coverage

Women's Health and Cancer Rights Act (also in Spanish)

Job protections

Americans With Disabilities Act: Information for People Facing Cancer (also in Spanish)

Family and Medical Leave Act (FMLA) (also in Spanish)

What is HIPAA? (also in Spanish)

National organizations and websites*

Along with the American Cancer Society, other sources of information and support include:

Your rights at work

US Department of Labor, Employee Benefits, Security Administration (EBSA)
Toll-free number: 1-866-444-3272 (1-866-444-EBSA)
Website: www.dol.gov/ebsa

    Information on employee benefit laws, including COBRA, FMLA, and HIPAA requirements of employer-based health coverage and self-insured health plans. Also has information on recent changes in health care laws. Benefits Advisors are available to help people with benefits problems.

Health insurance laws and information

State Health Care Marketplaces – US Department of Health and Human Services
Toll-free number: 1-800-318-2596 (also in Spanish)
TTY: 1-855-889-4325
Website: www.healthcare.gov

    Provides information on the new insurance law, takes you through the steps of finding insurance, and much more. If you don’t have internet access, the phone number will connect you with your state’s marketplace.

US Department of Health and Human Services – healthcare.gov
Toll-free number: 1-877-696-6775
Website: www.healthcare.gov

    Can help you find insurance coverage options and learn about the kinds of help you might be able to get

Centers for Medicare & Medicaid Services (CMS) – HHS
Toll-free number: 1-800-633-4227
TTY: 1-877-486-2048
Website: www.cms.hhs.gov

    For more information on COBRA, as well as Medicare, Medicaid, and other government-funded programs. General information on Medicaid can be found at www.medicaid.gov

National Association of Insurance Commissioners (NAIC)
Toll-free number: 1-866-470-6242 (1-866-470-NAIC)
Website: www.naic.org

    Has information about insurance and insurance companies and how to file a consumer complaint with state insurance departments. For state insurance department phone numbers, visit: www.naic.org/state_web_map.htm

Patient Services Incorporated (PSI)
Toll-free number: 1-800-366-7741 (ask to be connected to the Oncology Intake Department)
Website: www.uneedpsi.org

    Offers financial aid to people with certain types of cancer. Also helps them find and buy health insurance.

*Inclusion on this list does not imply endorsement by the American Cancer Society

No matter who you are, we can help. Contact us anytime, day or night, for information and support. Call us at 1-800-227-2345 or visit www.cancer.org.

References

US Department of Labor, Employee Benefits Security Administration. An Employee’s Guide to Health Benefits Under COBRA. The Consolidated Omnibus Budget Reconciliation Act of 1986. September 2006. Accessed at www.dol.gov/ebsa/pdf/cobraemployee.pdf on September 16, 2013.

US Department of Labor, Employee Benefits Security Administration. Continuation of Health Coverage COBRA. Accessed at www.dol.gov/dol/topic/health-plans/cobra.htm on September 16, 2013.

US Department of Labor, Employee Benefits Security Administration. FAQs For Employers About COBRA Continuation Health Coverage. Accessed at www.dol.gov/ebsa/faqs/faq_compliance_cobra.html on September 16, 2013.

Last Medical Review: 01/02/2014
Last Revised: 01/02/2014