COBRA After a Job Loss: How It Works and Cheaper Alternatives
When your job ends, your employer health plan usually ends too. COBRA lets you keep the same coverage for a while, but it can be expensive. Here’s how it works and what else to compare.
- COBRA generally applies to employer plans with 20 or more employees.
- You may have to pay the full premium plus up to 2% for administration.
- Losing job-based coverage can make you eligible for a Marketplace plan, which may cost less with savings.
What COBRA is
According to the U.S. Department of Labor: COBRA continuation coverage, COBRA gives workers and their families who lose health benefits the right to continue their group health coverage for limited periods after events like job loss, reduced hours or job changes. It generally applies to employers with 20 or more employees in the prior year. Some states have their own “mini-COBRA” laws for smaller employers.
What it costs
This is the catch. While you were employed, your employer probably paid a large share of your premium. Under COBRA, you may have to pay the entire premium, up to 102% of the cost to the plan. Ask HR for the exact monthly cost before you decide.
Deadlines and paperwork
- Your plan must send you an election notice explaining your rights and deadlines.
- Read it carefully and put each deadline on your calendar: the date to elect coverage and the dates premiums are due.
- Coverage is usually retroactive if you elect within the deadline and pay, but ask your plan administrator to confirm how it works for you.
Compare: the Marketplace
HealthCare.gov: coverage options if you’re unemployed explains that you can apply for a Marketplace plan and may qualify for savings based on your household size and estimated income for the year, not on your employment status. You may also qualify for Medicaid or CHIP. Losing job-based coverage usually opens a special enrollment window, so you don’t have to wait for open enrollment. Don’t miss that window.
How to decide
| COBRA may make sense if | A Marketplace plan may make sense if |
|---|---|
| You’ve already hit your deductible this year, are mid-treatment, or need to keep specific doctors | Your income this year will be lower, so you may qualify for savings |
| You’ll start a new job with benefits soon | COBRA’s full premium is too much for your budget |
If you’re negotiating severance, ask whether your employer will pay part of your COBRA premiums. See our severance checklist.
Header image: Photo: “walmart pharmacy counter 2” by Consumerist Dot Com, BY 2.0 (cropped).