COBRA after job loss

COBRA (Consolidated Omnibus Budget Reconciliation Act) is a federal law that allows employees and their families to continue their employer-sponsored health insurance after a qualifying event such as job loss, reduction in hours, or other life changes. You keep the exact same plan, doctors, and network — but you pay the full premium yourself (both the employee and employer portions), plus up to a 2% administrative fee.

26 steps across 8 sections

1. Who Qualifies

  • Employees (and their covered dependents) of private-sector employers with 20 or more employees
  • Applies to group health plans including medical, dental, and vision
  • Covers voluntary and involuntary job loss (quit, layoff, termination)
  • Also triggered by: reduction in hours, divorce/legal separation, death of employee, dependent child aging out

2. Who Does NOT Qualify

  • Employees terminated for gross misconduct (the only termination-based exclusion)
  • Employees of companies with fewer than 20 employees (may qualify for state mini-COBRA instead)
  • Employees of federal government (covered by separate federal law) or churches
  • If the employer terminates the group health plan entirely (no plan = no COBRA)

3. The 102% Rule

  • You pay 100% of the full premium (your share + what your employer used to pay) plus up to 2% administrative fee
  • Total: up to 102% of the plan cost

4. Typical Monthly Costs (2026)

  • The average employer pays ~75-80% of employee premiums; under COBRA you pay it all
  • Annual COBRA cost for a family can exceed $18,000-$26,000
  • Costs vary by plan design, geographic location, and employer

5. Payment Rules

  • First payment due within 45 days of electing COBRA
  • Subsequent payments due on the 1st of each month with a 30-day grace period
  • Coverage is retroactive to the date of the qualifying event (no gap)
  • Missing a payment = permanent loss of COBRA coverage (no reinstatement)

6. Standard Duration: 18 Months

  • Applies to job loss and reduction in hours
  • Starts from the date of the qualifying event (not the election date)

7. Extended Duration: 36 Months

  • Divorce or legal separation from the covered employee
  • Death of the covered employee
  • Covered employee becomes entitled to Medicare
  • Dependent child ceases to be a dependent under the plan

8. Disability Extension: 29 Months

  • If you or a covered family member is determined disabled by Social Security within the first 60 days of COBRA
  • Extends coverage from 18 to 29 months
  • Employer can charge up to 150% of premium during months 19-29

Common Mistakes

  • Assuming COBRA is your only option
  • Not comparing costs
  • Missing the 60-day election deadline
  • Missing a monthly payment
  • Not understanding retroactive coverage

Pro Tips

  • The 60-day retroactive election is your biggest leverage
  • Losing your job = SEP for both COBRA and ACA Marketplace
  • COBRA is month-to-month
  • Negotiate with your former employer
  • If you're close to 65

Sources

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