COBRA Insurance: What Is It?

COBRA is not an insurance agency or a special type of insurance, it’s actually a law called the Consolidated Omnibus Budget Reconciliation Act. And the main point of it is that if you work at a company with at least 20 employees on a group health plan, you can take your insurance with you (for a limited time) when you leave the job for pretty much any reason other than being fired for gross misconduct.

One thing to realize is that if you’re in a job where you get health insurance, you may be paying only a portion of the insurance cost while your employer picks up the rest. Some employers may tell you how much they’re picking up and some may not. It’s up to the employer. So when you get that first insurance bill after you invoke your COBRA rights, there may be a bit of sticker shock. You may have been paying a $250 payroll deduction for you, your spouse, and two kids, and now you’re getting a bill for $950.

Part of the reason for this is that you have to be given, and have to take the same level of insurance you were getting while you were working. While you may be able to opt out of some bundled options like dental, vision, or prescription plans, you can’t switch to a cheaper medical plan. So if you had/have really good insurance, you can expect to pay really high prices. If you’re young, single, and don’t have any pre-existing conditions, you may want to go buy a separate individual plan with different options to save money. If you’re older or have a pre-existing condition, an individual plan may be more expensive or even impossible to get.

COBRA only entitles you to 18 months of coverage when you lose your job. If you get divorced, you may be able to get insured under your former spouse’s plan for up to 36 months, and if you were covered under your parents’ insurance but lost your “dependent child” status, it may be possible to get 36 months of coverage under COBRA. But, as described above, there is no employer contribution and you’re required to have the same level of benefits as before, both of which can make such insurance very expensive.

For more information about COBRA, visit the Department of Labor’s Frequently Asked Questions About Cobra.