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The Basics of COBRA

COBRA stands for Consolidated Omnibus Budget Reconciliation Act.  Under COBRA, if you are terminated for any reason other than “gross misconduct” or if you voluntarily resign, you are guaranteed the right to stay on your employer’s group insurance plan for up to eighteen months at your own expense.  Only companies with more than 20 employees are covered under COBRA, which means if your employer has fewer than 20 employees COBRA benefits are not required. However, more than 40 states have their own version of COBRA that applies to firms that employ between two and nineteen employees.  So, if you are not eligible for COBRA benefits because your company is too small, be sure and check with your specific state to see if state regulations make you eligible for extended health insurance coverage.

To be eligible for COBRA coverage, you must have been enrolled in your company’s health insurance plan when you worked.  The cost of COBRA insurance is the cost of the insurance plus up to 2% for administrative costs.  Therefore, under no circumstances should your premium exceed 102% of the cost of the plan for normally covered employees.

Your required COBRA coverage will continue (if you wish) until you have reached the maximum length of COBRA coverage your are entitled to (which is normally 18 months, but can be up to 36 months is some states).  Also, your coverage can cease if: you do not pay premiums in a timely manner, the employer goes out of business or the employer ceases to offer any group health plan.  Also, if you become eligible for Medicare benefits, your COBRA coverage will end.

So, if you lose your job, be sure and find out exactly what COBRA coverage is going to cost so you can compare it to the cost of purchasing an individual health insurance policy. 

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Important: although the information presented on this page was provided by the experienced insurance specialists at, it's use is strictly limited to educational and informational purposes. This information is not to be used in place of the consultation provided by a licensed insurance representative or legal advice of an attorney.