COBRA, or the Consolidated Omnibus Budget Reconciliation Act, is a federal statute, passed in 1985, that provides employees and their families the right to continue group health benefits under an employers group health plan if their work situation changes.
To exercise this right, the employee must have been a member of a qualified group plan. The employee must also have had a qualifying event such as voluntary or involuntary job loss, reduction in hours worked, or a divorce which leads to a loss of coverage.
While COBRA requires employers to offer qualifying participants the option to continue their workplace insurance coverage, the employee is responsible for all payments up to 102% of the plan’s premium related to that coverage, including the former employer’s contribution. Nonetheless, because they get to pay the employer-negotiated group rate, contributed coverage under COBRA is often less expensive than coverage an individual would find on the open market. If they so desire, however, former employees can elect to choose other options such as Medicaid or the Health Insurance Marketplace if eligible rather than continue with employee provided health insurance.
An employer must notify an eligible employee of their right to continued coverage and that employee has 60 days after they’ve been notified to elect whether to waive COBRA coverage or not. The continued coverage under COBRA lasts for 18 months but may be extended to 36 months under certain circumstances.
The purpose of COBRA is to ensure that employees who lose their jobs receive health insurance benefits. COBRA only applies to group health plans offered by private-sector employers with more than 20 employees as well as to state and local governments. COBRA does not apply to the federal government.
For more information, see FAQs on COBRA Continuation Health Coverage for Workers.
[Last updated in July of 2022 by the Wex Definitions Team]
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