COBRA Continuation Coverage (2025)

Quick Facts

• What it is: A federal law allowing certain employees, spouses, and dependents to keep their employer-sponsored health insurance for a limited time after losing coverage due to qualifying events.
• Who qualifies: Workers at private-sector employers (and most state/local governments) with 20 or more employees who participate in a group health plan. Smaller employers may have similar protections under state “mini-COBRA” laws.
• Length of coverage: Typically 18 months after job loss or reduction in hours; up to 29 months if the beneficiary is disabled; up to 36 months for other qualifying events such as divorce or a dependent child aging out.
• Cost: Participants pay the full premium (employer and employee share) plus up to 2% administrative fee. Some employers or states offer subsidies in special circumstances.
• Key resources: Department of Labor COBRA guide, IRS COBRA FAQs, and plan-specific notices from employers.

Program Overview

The Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 ensures that employees and their families can maintain group health coverage after certain life events that would otherwise result in loss of insurance. Covered employers must provide notification and enrollment opportunities to qualified beneficiaries, who may then decide whether to continue coverage at their own expense. COBRA applies to group health plans, including medical, dental, vision, and health reimbursement arrangements (HRAs). It does not cover certain plans like disability or life insurance.

Qualifying Events

Common events that trigger COBRA rights include:

• Termination of employment (voluntary or involuntary, except for gross misconduct).
• Reduction in hours that causes loss of eligibility (e.g., moving from full-time to part-time).
• Divorce or legal separation from a covered employee.
• Death of the covered employee.
• A dependent child ceasing to meet plan eligibility rules (aging out).
• Medicare entitlement of the employee when it results in loss of dependent coverage.

Each event has its own timeline for notice and length of coverage.

Election Timeline and Notices

1. Employer notification: When a qualifying event occurs, the employer must notify the plan administrator within 30 days (or the employee must notify the plan within 60 days for divorce, legal separation, or a dependent aging out).
2. COBRA election notice: Within 14 days of receiving notice, the plan administrator sends an election notice detailing the coverage, cost, and deadlines.
3. Election period: Qualified beneficiaries have 60 days from the later of the coverage loss date or the date of the election notice to choose COBRA. Failure to respond within 60 days forfeits the right to continuation coverage.
4. First premium payment: Beneficiaries must pay the first premium within 45 days of electing COBRA, covering the period back to the date coverage would otherwise have ended. Subsequent premiums are typically due monthly with a 30-day grace period.

Coverage is retroactive if premiums are paid on time, preventing any gap.

Cost Considerations

• Participants pay the entire premium plus up to 2% administrative fee. For example, if the employer’s total premium is $600 per month, the COBRA rate could be up to $612.
• If a beneficiary qualifies for the 11-month disability extension (beyond the standard 18 months), the plan may charge up to 150% of the premium during the extra months.
• Some employers may subsidize COBRA as part of severance packages. Confirm details in writing.
• Individuals should compare COBRA costs to Marketplace plans available at HealthCare.gov. Marketplace plans may offer premium tax credits, but once COBRA is elected, you may need to wait until the next Open Enrollment or a qualifying event to switch unless COBRA coverage ends or premiums become unaffordable.

Duration of Coverage

• 18 months: Job loss or reduction in hours.
• 29 months: If any qualified beneficiary is determined to be disabled by the Social Security Administration within 60 days of COBRA coverage and the plan administrator receives notice within 60 days of the determination.
• 36 months: Divorce, legal separation, death of the employee, or a dependent aging out. Spouses and dependents may also receive 36 months when a second qualifying event occurs during the initial 18-month period.

Coverage ends earlier if premiums are not paid, the employer stops offering any group health plan, the beneficiary becomes covered under another group plan, or the beneficiary becomes entitled to Medicare (unless COBRA applies to a secondary plan).

Special Considerations

• Health Flexible Spending Arrangements (FSAs): COBRA applies, but employers may limit coverage to the remainder of the plan year.
• Health Savings Accounts (HSAs): COBRA participants can continue using HSA funds for eligible expenses, but COBRA premiums cannot be paid with HSA funds unless the beneficiary is receiving unemployment compensation.
• Coordination with Medicare: If the employee becomes entitled to Medicare before enrolling dependents in COBRA, the dependents may have up to 36 months of COBRA coverage after the employee’s Medicare entitlement.
• State continuation laws: Some states extend COBRA-like protections to employers with fewer than 20 employees or provide longer coverage periods. Review state insurance department resources.

Decision-Making Tips

• Evaluate healthcare needs: Consider ongoing treatments, prescription costs, and network preferences. COBRA maintains the exact same coverage, which may be vital for complex care.
• Review Marketplace options: Compare premiums, deductibles, provider networks, and eligibility for subsidies. Marketplace plans can sometimes be more affordable, especially if income drops after job loss.
• Plan for retroactive premiums: Set aside funds for the first payment, which covers the time since coverage would have ended.
• Coordinate family coverage: Each qualified beneficiary (employee, spouse, dependent child) can elect COBRA independently. For instance, a spouse may choose COBRA even if the employee declines.
• Use HSAs and FSAs wisely: Evaluate whether to accelerate spending from FSAs before employment ends, since balances may be forfeited unless COBRA for the FSA is elected.

Frequently Asked Questions

Can I switch plans during COBRA? Generally, you continue with the same coverage offered to active employees. If the employer changes plans or offers open enrollment, COBRA participants must receive the same options.

What happens if my former employer goes out of business? COBRA ends if the employer ceases to offer any group health plan. You would need to seek coverage through the Marketplace or other options.

Can I cancel COBRA early? Yes. You can terminate coverage at any time. Notify the plan administrator in writing and ensure alternative coverage is in place to avoid gaps.

What if I miss a payment? There is typically a 30-day grace period. If payment is not received by the end of the grace period, coverage terminates retroactive to the first day of the month.

Does COBRA apply to dental and vision plans? Yes. Any group health plan, including dental or vision, must offer continuation coverage.

References

• COBRA Continuation Coverage – Department of Labor
• Continuation of Health Coverage (COBRA) – IRS FAQs
• HealthCare.gov: Losing job-based coverage
• State Insurance Department Contacts

Insider Tips to Win COBRA Continuation Coverage

• Mirror U.S. Department of Labor’s priority language. Pull phrasing from the latest call documents when you describe healthcare, insurance, employment, so panelists immediately recognize strategic fit.
• Control your timeline. Map your internal production schedule to the Generally 60 days to elect coverage after notice milestone, leaving two weeks for compliance checks and executive sign-off.
• Prove execution capacity. Pair your narrative with data from United States and letters or MOUs that show you already have partners, facilities, and governance to deliver on the workplan.