Skip to content
× FreshBooks App Logo
Official App
Free - Google Play
Get it
You're currently on our US site. Select your regional site here:
7 Min. Read

What Is COBRA Insurance? Process, Pros & Cons

What Is COBRA Insurance

If you lose your job or are otherwise eligible, COBRA insurance may offer you short-term health care. You can decide if COBRA insurance is good for you by properly evaluating what it is and how it functions.

So what exactly is COBRA insurance, and how can it help you?

Read on as we take a deeper look into this type of insurance. We’ll cover how it works, how you can qualify, the pros and cons, and what COBRA insurance covers.

Table of Contents

What Is COBRA Insurance?

How Does COBRA Insurance Work?

How Do You Qualify for COBRA Health Insurance?

Pros of COBRA Health Insurance

Cons of COBRA Health Insurance

What Does COBRA Insurance Cover?

Key Takeaways

Frequently Asked Questions

What Is COBRA Insurance?

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a health insurance scheme. It keeps the advantages of health insurance coverage for qualified employees and their families. This is even in the event that an employee leaves their job or has their work hours reduced.

Those who experience a qualifying event, such as losing their jobs, could perhaps prolong their current health insurance coverage. This is in accordance with federal law, which was established in 1985, and is for a specific amount of time. If a company has more than 20 employees, it is required to offer COBRA coverage to qualified employees even if it is not a federally funded organization.

If an employee is no longer eligible for any further benefits from their health insurance from their employer, the company may discontinue paying a portion of the employee’s insurance premiums. This may happen for a variety of reasons. Examples include getting sacked or working less hours than necessary each week.

In the case that something like this occurs, COBRA allows an employee along with their various dependents to carry on with the insurance coverage that they previously had for a small amount of time. This is under the proviso that they are prepared and able to pay for it without the help of the employer.

The Easy Way To Pay Your Team

How Does COBRA Insurance Work?

The plan from an employer expires, you can ask your employer, your insurance company, or both for information about COBRA coverage. Your insurance company is required to explain your COBRA rights in the papers of your plan when you first enrol.

You are allowed up to a maximum of 60 days to come to the decision of whether or not you want to maintain your health insurance. If you decide against it, the coverage under the employer-sponsored plan and your health coverage will both end on the same day.

If you decide to do so, your COBRA continuation coverage would start the day after the plan coverage from your employer expires. The advantages you gained from the group plan from your employer will be exactly the same with this one. You can continue to meet with the same healthcare workers and other healthcare professionals and follow all the rules of the existing plan.

The COBRA coverage period could be for either 18 or 36 months. Your answer will depend on the type of event that meant that you qualified for the programme. It could expire early if you don’t keep up to date with your premiums payment or any other costs associated with the insurance. It can also be canceled if you find a job that offers health insurance before it comes to an end.

Former employees, spouses, ex-spouses, and dependent children must be given the option to keep their group health insurance under COBRA, otherwise, it will be terminated.

These people will probably pay more for insurance coverage now under COBRA than they did as employees since the employer will no longer contribute to the cost of the premiums. However, COBRA protection could be less expensive than a stand-alone insurance policy.

It’s crucial to remember that COBRA is a health insurance programme. And certain plans may pay for expenses like prescription medication, dental work, and vision care. It excludes disability insurance as well as life insurance.

How Do You Qualify for COBRA Health Insurance?

Only specific circumstances permit the use of COBRA health insurance. These circumstances are often known as “qualifying events.” Following are eligible for COBRA:

As an Employee

You need to have a job and be signed up for a group health plan via your employer.Your company must no longer be compelled to provide group health insurance for you if you have been laid off, dismissed, retired, quit your job, or had your work hours reduced to that degree.

As a Dependant

You will also qualify for COBRA if you are a dependent of a person that meets the criteria. If the employee’s spouse divorces or seeks formal separation, you can still be entitled. The spouse of a deceased employee can also be qualified for COBRA benefits.

Pros of COBRA Health Insurance

A person can continue seeing their present physician, health plan, and healthcare providers when purchasing COBRA insurance. COBRA beneficiaries are still covered for routine prescription medications and any prior illnesses.

Even though the plan’s overall costs may actually be lower than that of other standard plans, having insurance safeguards against needing to pay high medical costs. This is in case of a disease or sickness. Therefore having insurance is still better than not having insurance.

Cons of COBRA Health Insurance

It is imperative to be informed of COBRA’s disadvantages. Some of the most notable ones include the large cost of insurance when fully paid for by the employee, the brief COBRA coverage period, and the employee relying on the employer. If the company decides to stop offering health insurance, the ex-employee or related beneficiary would no longer be qualified for COBRA.

Even if the new programme is not the greatest fit for their needs, COBRA beneficiaries are nonetheless compelled to accept changes if the employer makes changes to the health insurance programme. To give an example, a new plan might change the number of services provided, the length of the coverage, the deductibles and copayments, and more.

What Does COBRA Insurance Cover?

Under certain conditions, COBRA allows employees and their families who no longer have access to their health benefits the option to carry on having access to group health benefits from their group health plan for a set period of time.

Such as:

  • A reduction in the number of hours worked
  • A change in occupations
  • A death
  • A divorce
  • Other such life events. 

A qualified person may be compelled to pay the whole premium for coverage, up to a maximum of 102% of the plan’s cost.

Ready To Make Paying Your Team Easier

Key Takeaways

The Consolidated Omnibus Budget Reconciliation Act, or COBRA, gives qualified workers and their dependents the choice of continuing health insurance coverage when a worker leaves their job or has their work hours reduced.

COBRA can be substituted with the purchase of an individual health plan. An individual plan is one you purchase from an insurance broker, company, or through a regional or national health insurance marketplace. You are eligible for special enrollment under the Affordable Care Act (ACA) if you lose your employment and any associated health insurance.

This means that even if it’s not open enrollment season, you can browse for and buy an individual health plan.

FAQS on COBRA Insurance

Can I Get COBRA if I Quit?

After leaving your job, COBRA insurance is still accessible to you. This includes leaving your job, being fired, or being placed on temporary or gardening leave. The employee shall continue to be covered under the same group health plan sponsored by their employer under which they were covered before to separation from service.

How Long Can You Stay on COBRA After Retirement?

A retired employee is eligible for up to 18 months of continuation of their health insurance coverage via COBRA. But you must pay the entire premium; your company likely used to cover some of it.

How Long Can You Draw COBRA Insurance?

Under COBRA, continuation coverage must continue for a finite period of 18 or 36 months after the date of the qualifying occurrence.

What’s the Difference Between COBRA and Obamacare?

The rule of thumb is that ACA insurance is generally cheaper than COBRA insurance when all things are taken into account. This is because, depending on how much you were paid, you may qualify for federal ACA subsidies.