COBRA

Core Takeaways

• It preserves the plan you already had, including its provider network, deductibles, and accumulated spending.
• The cost is the whole premium, not the employee share: up to 102% of the full amount.
• Eighteen months for job loss or reduced hours; thirty-six for divorce, death, Medicare entitlement, or loss of dependent status.
• It only applies to employers with 20 or more employees; smaller employers may be covered by state mini-COBRA rules instead.

What is COBRA?

In plain English: losing a job used to mean losing health coverage the same day, which is a particular problem for anyone mid-treatment. COBRA decouples the two. The employment ends; the insurance does not have to.

The mechanism is a continuation right rather than a new policy. The plan is not required to offer you the same benefits on new terms — it is required to keep you on the existing terms, which is exactly what makes it valuable to someone whose doctors, prescriptions, and deductible progress are already established.

Who Qualifies

Three conditions must all hold:

• Employer size. The employer employed 20 or more employees in the prior calendar year. Part-time employees count as fractions of a full-time equivalent for the threshold.
• Plan participation. You were covered by the group health plan on the day before the qualifying event.
• Qualifying event. One of the events the statute lists, and one that would otherwise cause a loss of coverage.

Qualifying events, by who they affect

The employee: termination of employment for any reason other than gross misconduct, or a reduction in hours that costs plan eligibility.

The spouse: divorce or legal separation from the covered employee, the employee’s death, or the employee’s entitlement to Medicare.

A dependent child: reaching the age at which the plan ends dependent coverage, or the events above.

The Coverage Periods

Qualifying event	Who may elect	Period
Termination of employment (not gross misconduct)	Employee, spouse, dependents	18 months
Reduction in hours	Employee, spouse, dependents	18 months
Disability determined within the first 60 days	Employee, spouse, dependents	29 months
Divorce or legal separation	Spouse, dependents	36 months
Death of the employee	Spouse, dependents	36 months
Employee becomes entitled to Medicare	Spouse, dependents	36 months
Child loses dependent status	That child	36 months

A second qualifying event during an 18-month period — a divorce, say, after a layoff — can extend the affected family members to 36 months from the original event, which is why the dates on the election notice matter enough to keep.

What It Costs, and Why It Feels Like a Shock

The permitted charge is 102% of the applicable premium: the full cost of coverage, plus a 2% administrative fee. The number is jarring not because it is inflated but because the employer’s contribution was never visible on a payslip. An employee paying $200 a month towards a plan that actually costs $700 faces a $714 COBRA premium, which is the real price of the coverage they had all along.

That comparison is also the reason COBRA is not automatically the right answer. An ACA marketplace plan may cost less, particularly where a subsidy is available, but it will not have the same network or the same accumulated deductible. The comparison that matters is total annual cost including out-of-pocket exposure, not the monthly premium alone.

Where the Deadlines Are

COBRA runs on fixed clocks, and missing one is final.

• Employer to plan administrator: 30 days from the qualifying event.
• Plan administrator to beneficiary: 14 days from receiving notice.
• Beneficiary election: 60 days from the later of coverage loss or notice.
• First payment: 45 days from election, with coverage retroactive to the loss date.
• Monthly premiums thereafter: a 30-day grace period, after which coverage can be terminated.

The 60-day election window combined with retroactive coverage is the feature worth understanding: it allows a beneficiary to wait and see whether they need the coverage, and to elect only if a claim arises. That is a legitimate use of the rule, not an abuse of it, and it is why the election deadline deserves a calendar entry rather than a note.