Your Super Simple Guide to COBRA Health Insurance

It’s really hard to fully understand what COBRA is and how it works. It’s a strange but potentially useful little product—but you’re only eligible for it if your life is already in a state of chaos. I don’t know about you, but I’m not great at absorbing complex new information when I am flying through the sky like Adrien Brody in the opening sequence of Predators!

COBRA is a very specific type of health insurance coverage. You can get it in only one circumstance: when you leave a job that has employer-provided health insurance. It’s meant to help you bridge the gap between when your old insurance coverage expires and the new coverage kicks in.

And honestly? Thank god.

If I’m under a fantastic health insurance plan from January 1 to December 30, my ass will be immaculately healthy for all 364 of those days. Then on New Years Eve, I will accidentally drop a bottle of sparkling wine that cannot legally be called champagne. I will twist both ankles as I log-roll over it, windmilling my arms comically while shouting “w-w-woah!” Then I will tumble ass-over teakettle down a staircase, landing on a bed of spikes, and all my prions will simultaneously fold the wrong way.

Like, I’m not superstitious. I’ve just lived long enough to know that’s literally how the world works. The moment you don’t have health insurance coverage, something spectacularly bad is bound to happen.

Which is exactly where COBRA comes in!

What is COBRA?

The Consolidated Omnibus Budget Reconciliation Act (COBRA) was passed in 1985. Guys. Did you know that Republican politicians were once capable passing legislation designed to do something other than oppress trans people!? That was so far in the distant past, surely it must’ve been written in deer blood on vellum…

We’ve talked before about all the ways that employer-sponsored healthcare coverage is a terrible idea. (If you want a recap, you could start here or here.)

Just one of those many reasons is the existence of coverage gaps. When people leave their jobs—voluntarily or otherwise—they’re not just losing a few paychecks. Before COBRA, it was much more likely for people to become unemployed and uninsured at the same time. And as we know, medical bills are the leading cause of bankruptcy in America. COBRA was created in recognition of the brokenness of this one aspect of the system.

COBRA allows you to keep your old job’s health care coverage for a limited period of time as you search for new permanent healthcare.

Who’s eligible for COBRA?

There are only three unique circumstances in which someone can get COBRA insurance.

• If you leave your job voluntarily, you’re eligible for COBRA.
• If you leave your job involuntarily for any reason except gross misconduct, you’re eligible for COBRA.
• If your employer reduced your hours, you’re eligible for COBRA.

That’s it. Simple, right?

Leaving voluntarily can be for any reason. Quitting, retiring, taking a sabbatical, leaving the workforce to make-ah da bebe, and moving to another job are all fair game.

Leaving involuntarily means you were let go. Y’know. Eighty-sixed? Given the old heave-ho? Reduced? Laid off? Down-sized? Right-sized? Your multimillionaire CEO captured some synergistic opportunities to streamline his workforce and enable his rockstar employees to shift towards a more agile mindset in this rapidly changing digital landscape???

Note that if you’re fired for gross misconduct, you’re not eligible. “Gross misconduct” doesn’t mean “you were kinda bad at your job.” It means you were doing violent or illegal things at work. Gross things.

What are the advantages of COBRA?

There are some great but conditional advantages to using COBRA.

First, COBRA coverage is exactly the same as your old health insurance plan. That means you can go to the doctors you were already seeing. Any treatments or medications your old insurance covered will remain covered. You won’t lose access to specialists, nor experience disruptions in your prescriptions. This is a huge plus, especially for people who really need continuity of care.

This continuation of care includes dependents. If a partner or children used your plan before, they can stay on your plan under COBRA.

Second, signing up for COBRA is stupid easy. Your employer is required to do most of the work for you. If you’ve had what’s called a “qualifying event” (i.e., quitting or getting fired), they’ll send you paperwork to sign up. You’ll keep the same health insurance card, with the same policy numbers, so there’s minimal disruption.

Third, you can sign up for COBRA retroactively only if you need it. You can opt-in at any point in the first 60 days. Which means you can also wait to see if you need the coverage, and choose not to pay for it unless you have to.

This is a unique and rare opportunity that might save you hundreds of dollars. So I’ll explain a bit more.

More about retroactive insurance coverage

Let’s say I quit my job on Monday, immediately ending my employer-sponsored insurance coverage. On Tuesday, I am shot in the buttocks by a rogue renaissance fair archer. My COBRA coverage paperwork doesn’t arrive until Friday, because it took my old workplace a few days to get everything together and mail it to my home. It would obviously be super unfair to be stuck with the ER bill for an arrow extraction.

That’s why COBRA coverage is retroactive. You can—and should!—use this to your advantage. If you already have another job lined up, and coverage will kick in within that 60 day window, you can hold off on activating COBRA.

Need to see a doctor before your new insurance kicks in? Sign up.

But if you don’t? Save your money.

Note that if you do activate coverage retroactively, you must pay for all the time that’s passed. If you activate coverage on day 59 of your 60-day window, you will be billed for two months worth of premiums.

For residents of CA, DC, MA, NJ, and RI: Under the Affordable Care Act, until recently you would’ve paid a federal tax penalty if you went without health insurance. But that mandate ended in 2018. (Because Republicans will do anything they can to sabotage universal healthcare, as they love the way employee-sponsored healthcare makes workers magnitudes more dependent and compliant, lol.) A handful of states maintain a state-level coverage mandate. At time of writing, these include California, Massachusetts, New Jersey, Rhode Island, and Washington DC. If you live in one of the states, you may have to pay a penalty when you file your state taxes. But there are many exemptions, and the penalty will likely be tiny compared to your potential savings. Look it up before you commit.

What are the disadvantages of COBRA?

The main disadvantage to COBRA is its expense. I’m sorry to say, but it ain’t cheap.

If you have employer-sponsored healthcare, your employer typically pays 70-80% of your premiums. But once you are no longer an employee, you’ve got to pay for it all on your own. The average cost is about $650 per month.

And it can be much more, especially for couples and families. When my partner recently changed jobs, we chose to wait on activating COBRA because maintaining that coverage would’ve cost us $950 per month. Needless to say, we declined. For that price, I’d rather fly to a sane country with socialized healthcare and drink Piña Coladas through my IV.

At this high price point, it may be cheaper to just sign up for Obamacare. Especially if you’re going to be on this plan for an extended period of time. A basic plan under the ACA would run closer to $350 and $700, respectively. It’s still unreasonably expensive for a basic human right! But it’s the best choice we have today, in this accursed timeline.

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How long can I stay on COBRA?

COBRA is intended as a stopgap. Under normal circumstances, the maximum amount of time you can be covered by COBRA is 18 months.

However, there are a few circumstances that would allow you to extend coverage to around 36 months. The main one is becoming disabled. Others include major life changes like divorce. But even when the plan is extended, your employer has the right to increase the premium to 150% of its original cost during that extension. So unless you’re in an exceedingly rare circumstance, don’t plan to be on COBRA long-term.

So uhhhhh should I sign up, or…?

If this stuff really stumps you, I feel you.

When I try to read insurance documents and legalese, it’s so dense and unfriendly that I take psychic damage. My brain tries to protect me by refusing to absorb any of it. I may be looking at the papers with a decision-maker’s furrowed brow, but I am actually thinking about what makes the Wachowski sisters’ Speed Racer the most under-appreciated film of all time.

When Piggy quit a job, she was offered COBRA coverage. As her insurance with her new employer didn’t kick in until after 90 days of employment (yes, I too am appalled), and she bumbles through life like a death wish on baby fawn legs, she chose to sign up for COBRA. During those 90 days, Piggy experienced one of the worst medical emergencies of her life. The emergency room bills, wound care, medical supplies, pain meds, followup appointments, and physical therapy required to fully recover made the COBRA costs well worth it.

Conversely, when my partner and I had the opportunity to use COBRA, we opted out! We knew about the option for retroactive coverage, and we were comfortable with the decision. It saved us some money, but then, we move through the world in a much less chaotic fashion than Piggy.

How to decide

If you’re having trouble making a decision, here is my general advice. This isn’t for everyone—but it will work for most people, in most situations.

The first thing you should do after leaving your job is open your calendar. Count out 60 days. Create an event called “last day to sign up for COBRA.” Set a reminder to nudge you a few days in advance.

Now, focus all of your energy on finding a new job.

At some point, you’ll receive COBRA documents in the mail. Put them on the fridge, or your desk, or wherever you won’t lose them. If you haven’t gotten a new job with employer-sponsored health care in that 60-day period, but you think you’re close to finding something new, fill out those forms and sign up. But if you think you’re unlikely to find a job in the immediate future, it’s probably best to sign up for Obamacare.

If you have the luxury of leaving your job voluntarily, proactively address your health needs before you leave your job. (It’s a key point on our much-beloved checklist of things to do before you quit.) Get your annual physical; get your teeth cleaned; stock up on any prescriptions you’ll need.

Was that easy?

… And that’s the scoop on COBRA!

I really hope this was an easy read for y’all. My chief goal with today’s article was to give you comprehensive information, without any of the insurance jargon that so effectively makes my eyes glaze over.

You will only be offered COBRA coverage during turbulent times. You’ve either lost your job unexpectedly, had your hours cut back, or have finally gotten to the end of the long, grueling process of finding a new job. You have enough to worry about. You don’t need a 19-page bushel of documents rambling on about eligible beneficiaries, secondary qualifying events, and trade readjustment allowances.

I’m retired; let me carry that burden for you.

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