COBRA Continuation Coverage

COBRA — the Consolidated Omnibus Budget Reconciliation Act — requires employers with 20 or more employees to offer continuation of group health coverage to employees and their dependents who lose coverage due to a qualifying event. The coverage is identical to what the employee had while actively employed. The catch: the employee now pays the full premium — both their share and the employer's share — plus up to a 2 percent administrative fee. That's typically $600 to $1,800 per month for an individual and $1,800 to $5,000 per month for a family.

Qualifying events that trigger COBRA rights include job loss (voluntary or involuntary, unless for gross misconduct), reduction in hours below the threshold for benefits eligibility, death of the covered employee, divorce or legal separation from the covered employee, and a dependent child aging out of coverage. The duration of COBRA depends on the qualifying event — most events trigger 18 months of continuation; divorce and aging-out trigger 36 months. Employers must notify the plan administrator within 30 days of the qualifying event, and the plan must notify the qualified beneficiary within 14 days. The beneficiary then has 60 days to elect continuation and another 45 days to make the first premium payment retroactive to the coverage loss date. COBRA is expensive but preserves access to the existing provider network — for someone mid-treatment or with a specific drug regimen tied to their current plan's formulary, the continuity can be worth the cost even at full premium.

The takeaway: for most people, COBRA is a bridge — not a long-term solution — because the cost is high relative to marketplace alternatives. But for someone in active cancer treatment, mid-pregnancy, or on a specialty drug with a specific formulary requirement, COBRA's continuity can be medically and financially worth it for the 18-month window even at full cost.