Understanding COBRA Health Coverage Continuation

Dear, Anita,

I am leaving my current job for a better position. I am confused about the gap between when my old company’s health care policy stops, and when my new company’s benefits will kick in. I’ve heard about Cobra insurance.

Dear, Leery about Lapses,

First, congratulations on your new position! Health insurance coverage often continues until the last day of the month in which employment is ending, but it depends on how the plan was set up. In your documentation, look under “termination of coverage” or a similar title. You may also want to check with your current human resources representative.

CobraCOBRA continuing health coverage is not just for snake bites! The acronym stands for Consolidated Omnibus Budget Reconciliation Act, which gives workers and their families who lose their health benefits the option to continue, for a period, the group plan in which they were enrolled. The qualifying reason for losing your health care coverage could be voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events.

Your employer must provide you with a continuation notice by mail within 14 days after the qualifying event. You must opt in to the COBRA coverage within 60 days. Be forewarned: your premium may be much higher than the amount that has been taken out of your paycheck, as most employers subsidize insurance coverage. While there is no law for how much an employer must contribute to health care premiums, your deduction is generally just a portion of the total cost. COBRA premiums can be up to 102 percent of the cost of the plan.

COBRA coverage generally lasts for up to 18 months. In your situation, you’ll probably only need it until you are eligible for your new group plan. Even though it is expensive, be sure not to go without coverage. With the Affordable Care Act, beginning in 2014, you could face fines or penalties for letting your health insurance lapse.


There are alternatives to COBRA. You may want to research short-term health insurance, which is expensive, but sometimes more affordable than COBRA. If your eligibility waiting period is long, or if you are unemployed with no job in sight, you may wish to look into major medical insurance (sometimes dramatically called catastrophic coverage). Major medical policies have a high deductible and cover serious medical expenses like ER visits, surgeries, and hospital stays, but not things like routine visits to your family doctor.  If you have a pre-existing condition, however, you may have to bite the bullet with COBRA, at least until Obamacare changes go into effect January 1, 2014. After that date, there may be a question about whether short-term and major medical will be creditable plans. You can check out the insurance marketplace website created by the ACA, healthcare.gov, to see health insurance plans for your area.

For more specifics on COBRA, visit the Department of Labor website.

Readers: Have you used COBRA continuing health coverage, or did you find a lower-cost alternative?

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Anita Clew's blog posts are intended for general guidance and should never be taken as legal advice. In all instances where harassment, inequity, or unfair treatment is believed to be present, please consult your HR Department or legal representation.
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