COBRA is a federal law that allows certain employees, their spouses and dependents, to keep their group health plan (GHP) for between 18 and 36 months after they leave their job or lose coverage for certain other reasons, as long as they pay the full cost of the premium. Congress passed the Consolidated Omnibus Budget Reconciliation Act (COBRA) in 1986.
Under COBRA, a GHP is defined as a plan that provides medical benefits for the employer’s own employees, their spouses and their dependents. Medical benefits may include inpatient and outpatient hospital care; physician care; surgery and other major medical benefits; prescription drugs; any other medical benefits, such as dental and vision care. Life insurance is not covered under COBRA.
The federal COBRA law generally covers group health plans maintained by employers with 20 or more employees in the prior year. It applies to health plans in the private sector and those sponsored by state and local governments. The law does not, however, apply to plans sponsored by the federal government and certain church-related organizations.
Some states extend rights similar to COBRA to people who would not otherwise be eligible for COBRA, for example, people with companies that have fewer than 20 employees. Check with your state insurance department to find out if you qualify to keep your GHP coverage after you leave your job.
Employer group health coverage under COBRA is generally expensive because the coverage tends to be comprehensive and you pay the full cost of the premium yourself (employers generally pay part of the premium for current employees). However, COBRA coverage is still less expensive than similar individual health coverage, so, people with costly health care needs should probably purchase COBRA. Others may want to explore other health insurance options before choosing to continue with the employer plan through COBRA.