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COBRA Extending Your Employer-Based Health Insurance

Jacques Chambers

What is COBRA? COBRA is a federal law that requires employers to allow employees and dependents losing health insurance to stay on the employer’s plan.

Who is covered by the law? Almost all employers who provide health insurance to their employees except:

The federal government and its employees;

Churches and most religious affiliated employers such as church-owned hospitals; and

Employers with less than 20 employees.

NOTE: Several states have passed laws that provide COBRA-like extension coverage to employer groups of less than 20 employees. They include: Arkansas, California, Colorado, Connecticut, Florida, Georgia, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, West Virginia, Wisconsin, and Wyoming. However, they don’t all match the federal law completely, so check your own state’s law if you work for a small employer.

How does the law work? If you would lose your employer’s health insurance because you terminate employment or your hours are reduced so that you’re no longer eligible, COBRA allows you to stay on the health insurance plan.

Your dependents also have a right to continue their coverage if you die or if your spouse divorces you or if your children are no longer eligible to be insured due to their age.

The only employees who cannot continue their coverage under COBRA are those who are terminated for “gross misconduct,” which usually means due to a violation of law such as theft or embezzlement.

How long can I stay on my employer’s health plan?

If you lose coverage due to termination or reduction in hours, you can stay on the plan for 18 months.

If you are disabled when your coverage ends, you may stay on the plan for 29 months, which is how long it takes to get Medicare, provided you meet the requirements of that separate law.

If you are the spouse of an employee and lose coverage due to the death of the employee or due to divorce, you can continue coverage for 36 months.

If you are the dependent child of the employee and you lose coverage due to passing the age limit for dependent children, you can continue the coverage for 36 months.

Can that time ever be cut short? Yes, you will lose your COBRA continuation rights before the time limit expires if:

You fail to make a premium payment by the due date and grace period.

Your employer stops all health insurance plans for all employees of all of their companies. If, for example, your former employer goes broke and lays off everyone, then there is no coverage left for you to continue.

You become eligible for another group health insurance plan from another employer that covers all of your pre-existing conditions.

You become eligible for Medicare.

What are the benefits of the COBRA plan? COBRA is only a law, not a plan. You must be allowed to stay on exactly the same coverage you had when you were an active employee. If your employer allows employees to switch plans once a year in an open enrollment, you must be given the same privilege. This also means if your employer changes plans, your plan changes too.

Does this only apply to health insurance? It applies to all types of health insurance plus all health-related plans, such as dental, vision, or prescription drug benefits. It does NOT allow continuation of group life insurance or group long term disability coverage. See the plan document for those plans for any continuation they may provide.

Does my whole family have to take the Continuation? No, each insured member of your family has their own COBRA rights and may decide to continue the coverage or not.

How much does it cost? This is the big problem with COBRA; you must pay the entire cost of the insurance including what the employer used to pay on your behalf, what you used to pay out of payroll deduction, plus a 2% administrative fee. For a single individual, this can be $150 or more per month, and much more for a family.

Is there any help with paying those premiums? If you qualify for Medicaid in your state, most states have a plan that will pay the insurance premiums for you. If you are also dealing with HAV/AIDS, many states have set aside some Ryan White funds to pay health insurance premiums. Some doctors and hospitals have been known to pay the premiums so their bills will continue to be paid, but it’s not common.

How do I get on the COBRA continuation? If you are losing your employer’s health insurance, the employer is required to mail you a notice that tells you about COBRA and how much the plan will cost. The employer must also give you the chance to continue the coverage, usually with an enrollment form.

You have 60 days from receiving the notice to accept the coverage. You will owe premiums all the way back to the date you lost coverage but you will have an additional 45 days to pay it from the date you notify the employer of your intention to continue.

My health insurance is very important to me. What should I watch out for when continuing it under COBRA?

Don’t wait for the mailing from your employer. Ask for it when your coverage is about to stop. Some employers may insist on mailing it to you, but you will know when to expect it and can follow up if it doesn’t arrive.

Don’t refuse the COBRA extension even if you know you won’t take it. Let the 60 day period expire. That way, if there’s a medical emergency during that 60 days, you can take the COBRA and have the coverage.

Pay your premiums on time! If you are ever late, they can cancel you and they do not have to reinstate your coverage. When possible stay one month ahead so you have time to correct any mix-ups or lost payments.

Make sure you keep a record of everything you send and everyone you talk to about your COBRA continuation. When possible, send materials Return Receipt Requested or deliver the documents and payments in person and get a written receipt.

Be very careful if your employer hires a COBRA administrator to handle the COBRA Continuation. These companies operate with the goal of getting everyone off COBRA that they can legally get off.

If you’re disabled when your coverage stops, learn the rules for extending the COBRA to Medicare. They are complicated and most employers don’t understand them.

Jacques Chambers is a benefits counselor in private practice. He has over thirty years in benefits and advocacy. You may contact him through his website at

March 2002

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