What is COBRA, and is it your best option after leaving a job?

COBRA is a federal law allowing you to continue your employer group health coverage after a qualifying event such as job loss, reduction in hours, divorce, or a dependent aging off a parent's plan. Continuation generally runs 18 months for job loss and up to 36 months for certain other events. The coverage is identical to what you had, which is its main advantage: the same network, the same doctors, and any deductible you have already met carries over within the plan year, which matters enormously if you are mid-treatment.

The cost is what surprises people. While employed you paid a fraction of the premium and your employer paid the rest, typically the large majority. Under COBRA you pay the entire premium plus up to a 2 percent administrative charge, so a plan that cost you a couple hundred dollars a month can cost well over a thousand. Employers with fewer than 20 employees are generally exempt from federal COBRA, though many states have continuation laws covering smaller employers.

Compare it against the alternatives before electing. Losing job-based coverage triggers a special enrollment period on the ACA marketplace, generally 60 days, and marketplace subsidies are based on your current year income, which may be much lower after a job loss than the amount you earned while employed. That frequently makes a marketplace plan substantially cheaper than COBRA, sometimes dramatically so. A spouse's employer plan is another special enrollment option, and Medicaid eligibility should be checked if income has dropped sharply. Two timing details worth knowing: you generally have 60 days to elect COBRA and the coverage is retroactive to the date you lost coverage, so you can wait, seek care if needed, and elect afterward, and electing COBRA can limit your marketplace options until open enrollment or exhaustion of the COBRA period.