# How does COBRA health insurance work?

> COBRA keeps your old work health plan for up to 18 months, but you pay the full premium plus 2%.

Source: https://www.walletprep.com/learn/cobra-health-insurance/ · Updated 2026-10-04 · Protect yourself

COBRA lets you keep the exact health plan you had at work after you leave, usually for up to 18 months. The catch is the price: you can be charged the full premium plus 2%, so compare it with a Marketplace plan before you sign up.

## Key facts
- **Who gets COBRA.** COBRA covers group health plans at private employers with 20 or more employees, plus state and local government plans. You, your spouse and your children can elect it after a job loss, cut hours, divorce, a death, or a child aging out of the plan.
- **What it costs.** The plan can charge up to 102% of the full cost of coverage: the part you paid, the part your employer paid, and a 2% administration fee. In a disability extension, it can rise to 150% for the extra months.
- **How long it lasts.** Up to 18 months after a job loss or reduced hours. Up to 36 months after other events, such as divorce or the death of the employee. A disability can extend 18 months to 29.
- **The deadlines.** At least 60 days to elect, at least 45 days after electing to make the first payment, and at least a 30-day grace period for each monthly payment after that. Miss a payment past the grace period and the plan can end coverage.

## Why COBRA costs so much more
While you work, the paycheck deduction for health insurance is only part of the price. Employers usually pay a large share of the premium for active workers. On COBRA, you can be asked to pay all of it, plus 2% for paperwork.
So the plan did not get more expensive. You are just seeing the full price for the first time. That is why a $150 payroll deduction can turn into a $663 monthly bill. Look on your election notice for the exact amount, since every plan is different.

## How the election window works
When you lose coverage, your employer tells the plan, and the plan sends you an election notice. You then have at least 60 days to say yes, starting from the later of the date your coverage ends or the date the notice is provided.
If you elect within the window and pay on time, coverage generally runs back to the day your old coverage ended, so there is no gap. Each family member has their own right to elect. A spouse and children can take COBRA even if the former employee does not.

## COBRA versus a Marketplace plan
Losing job-based coverage is a qualifying life event, so you can buy a Marketplace plan through a Special Enrollment Period. You must pick a plan within 60 days before or after losing the work coverage. Being offered COBRA does not make you ineligible for Marketplace savings.
The Marketplace bases its premium tax credit on your expected income for the whole year. If you lost your job partway through the year, that income may be lower than you think, and the savings can be large. Compare the monthly premium, the deductible, and whether your doctors are in the network.
Timing matters. HealthCare.gov says voluntarily dropping COBRA does not qualify you for a Special Enrollment Period. If you start COBRA and later want to switch, you may have to wait for Open Enrollment, which runs November 1 to January 15 on HealthCare.gov, or until your COBRA runs out.

## When COBRA is the better choice
COBRA makes sense when you are in the middle of treatment with doctors a Marketplace plan would not cover, when you have already met most of your deductible this year, or when your new job's coverage starts in a month or two. A short bridge on a familiar plan can cost less than a new deductible.
It also helps if your income is too high for Marketplace savings and the Marketplace plans in your area cost about the same.

## Small employers and other gaps
Federal COBRA does not apply to employers with fewer than 20 employees, the federal government, or most church plans. Many states have their own continuation laws, often called mini-COBRA, for smaller employers. Check with your state insurance department.
If your income is low, you may also qualify for Medicaid or, for children, CHIP. You can apply through HealthCare.gov at any time of year.

## A worked example: what COBRA really costs
Dana was laid off. Her election notice shows her plan's full cost is $650 a month: her employer paid $500 and $150 came out of her paycheck.

- Employer's share: $500
- Dana's old share: $150
- Full plan cost: = $650
- 2% admin fee: $13
- COBRA premium: = $663
- What she paid before: −$150
- Extra each month: = $513

1. The full cost is $500 + $150 = $650. The 2% fee is $650 × 0.02 = $13, so COBRA is $663 a month.
2. That is $663 − $150 = $513 more than her old deduction. Three months of COBRA would cost $663 × 3 = $1,989.
3. Before electing, Dana gets a Marketplace quote based on her lower expected income for the year, then picks the cheaper plan that still covers her doctors.

## Common mistakes
- **Letting the window close.** If you neither elect COBRA nor buy a Marketplace plan within 60 days, you may be uninsured until Open Enrollment. Pick one, even if you plan to switch jobs soon.
- **Missing a premium payment.** The plan can end COBRA for good if a payment arrives after the grace period. Set up automatic payments or calendar reminders for each due date.
- **Starting COBRA without comparing.** Once you elect COBRA, dropping it on your own does not open a Special Enrollment Period. Compare Marketplace prices before you choose, not after.

## Questions people ask
### Can I sign up for COBRA only if I get sick?
In effect, you can wait. You have at least 60 days to elect, and coverage generally runs back to the day you lost it. Waiting is a gamble, though: if you miss the deadline you lose the option, and you still owe premiums back to the start.

### Does COBRA cover my spouse and kids?
Yes, if they were on your plan. Each covered family member has their own right to elect COBRA, so they can keep it even if you choose a different plan.

### What happens when my COBRA runs out?
COBRA ending at its time limit is a loss of coverage, so you get 60 days to enroll in a Marketplace plan through a Special Enrollment Period. Start shopping before the last month.

### Can my employer pay for my COBRA?
Yes. Some employers pay part or all of the premium for a few months as part of a severance agreement. It is worth asking, since it can save hundreds of dollars a month.

### Do COBRA premiums count toward my deductible?
No. Premiums are the price of the plan. What carries over is the deductible and out-of-pocket progress you made this year, because it is the same plan.

## Do this today
Find your COBRA election notice and write down the monthly premium and the election deadline. Then get a Marketplace quote at HealthCare.gov using your expected income for this year, and compare the two side by side.

## Sources
- [U.S. Department of Labor: Continuation of Health Coverage (COBRA)](https://www.dol.gov/general/topic/health-plans/cobra)
- [U.S. Department of Labor: COBRA law overview](https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/cobra)
- [U.S. Department of Labor: An Employee's Guide to Health Benefits Under COBRA](https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/an-employees-guide-health-benefits-under-cobra-2022.pdf)
- [HealthCare.gov: COBRA coverage and the Marketplace](https://www.healthcare.gov/unemployed/cobra-coverage/)
- [HealthCare.gov: Special Enrollment Period](https://www.healthcare.gov/glossary/special-enrollment-period/)

_General education, not personalized financial, tax or legal advice. Figures are examples. Check current rates and limits before you act._