Health Insurance 101: What is COBRA?

It stands for Consolidated Omnibus Budget Reconciliation Act.

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Being laid off, furloughed, or let go from your job can be hard. This may be even worse if you have health insurance through your job. How can you afford your healthcare needs after losing your job? Luckily, most larger companies are required to offer COBRA health insurance to former employees.

Health insurance 101: What is COBRA?

The American Recovery and Reinvestment Act of 2009 established the Consolidated Omnibus Budget Reconciliation Act, or COBRA. COBRA's goal is to provide extended health insurance coverage for 18 to 36 months after a “qualifying life event.” This usually refers to job loss or involuntarily reduced work hours.

Through COBRA, people who lose their jobs get to keep the plan they enrolled in with their employer. However, the employers stop contributing to the person’s monthly premiums. As a result, individuals will be paying more each month for it than they used to, but they get to keep their current coverage.

This is helpful because:

A COBRA plan may or may not still provide dental, vision, and prescription coverage. You might have to sign up for this additional coverage separately. Note that a COBRA plan could end up costing the same or less than other available insurance plans, but it might be worth it for the convenience.

Use it or lose it

If you want COBRA after losing your job, you need to act quickly. You generally need to sign up within 60 days of the extended coverage being offered to you.

An important note—COBRA benefits do not apply when a company:

  • Dissolves or goes out of business
  • Is no longer offering insurance to existing employees due to financial cutbacks
  • Has fewer than 20 employees

However, some states have similar laws to COBRA that provide this aid to people who lost their jobs at smaller companies, or employees to whom insurance was not provided with their benefits.

Not sure if you qualify for COBRA coverage? You can call a representative at the Department of Labor, or your hiring liaison, to determine your eligibility for COBRA.