As the country continues to argue over the extent to which healthcare is a right, a luxury, or something in between, millions of people have come to rely on their employers for health insurance and other healthcare benefits. As a result, many people who are considering a career change must take the possible loss of healthcare benefits into account.

Congress tried to address this issue in the Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, which requires employers to let employees continue their health insurance coverage after they leave their jobs. COBRA coverage can be a lifeline for workers who are transitioning from one job to another, although it also has limitations.

The U.S. Census Bureau reports that, in 2017, 56 percent of the nation’s population had health insurance coverage for all or part of the year. A study by the Kaiser Family Foundation found that forty-nine percent of the population had health insurance through an employer in 2017. Clearly, employer-sponsored health insurance is critically important to millions of workers and their family members.

What Is COBRA Coverage?

No law requires employers to offer health insurance to their employees. Employers who provide health insurance coverage usually do so because they recognize that it is a good business practice. Once an employer starts to offer health insurance benefits, it must follow federal laws and regulations, including COBRA.

COBRA requires employer-sponsored health insurance plans to allow employees and their family members to keep their coverage after certain “qualifying events” occur. These events may include a loss of eligibility for health insurance through the employer because:

• They are no longer an employee, whether they quit, were laid off or terminated (except for “gross misconduct”), or had their hours reduced until they no longer qualified for benefits.
• They are now divorced from an employee spouse.
• They are a dependent family member of an employee who has died.

In any of these situations, a person may continue the same coverage as before the qualifying event, with a few important differences. In this article we'll focus on how people can continue their coverage after leaving their job.

Note that a loss of coverage because an employer stopped providing health insurance benefits is not a “qualifying event.” The employer must still be in business for COBRA coverage to be available.

Qualifying for COBRA Coverage

Employers with at least 20 full-time employees must provide COBRA coverage if they offer health insurance. Some states have their own laws that require continuing coverage by smaller employers.

An employee seeking COBRA coverage must have been covered by an employer-sponsored health insurance plan at the time of the qualifying event. If they did not have health insurance through their employer when their employment ended, they cannot get COBRA coverage afterwards.

The insurance provider is responsible for sending COBRA information to the now-former employee. The employer must notify the insurance provider within 30 days of the employee’s last day of work or last day of insurance coverage, whichever is later. Employees and former employees might be able to expedite this process by requesting COBRA information directly.

The insurance provider, once notified, must send COBRA information to the former employee as quickly as possible. The former employee then has 60 days to decide whether or not to enroll in COBRA coverage under the same plan they had with the employer.

Advantages of COBRA Coverage

Changing jobs is stressful enough on its own. COBRA coverage helps people avoid the significant disruptions that can come from a loss of health insurance coverage. COBRA is particularly beneficial for people with ongoing medical needs, who do not have to worry about a sudden loss of care.

Limitations of COBRA Coverage

COBRA coverage has two rather large drawbacks, discussed below.

Coverage Is Expensive

Employers usually cover a large part of the cost of health insurance benefits, which is why it is often called employer-sponsored health insurance. Employees usually pay 20 to 30 percent of the premium, often as a deduction from their paychecks.

COBRA coverage requires the former employee to pay the entire premium, with no assistance from the employer. As a result, the former employee might have to pay five times as much (or more) for the same insurance coverage. They must make premium payments directly to the insurer, since the employer can no longer do payroll deductions.

Coverage Is Temporary

The original purpose of COBRA was to allow people to continue coverage after they leave a job, and until they find a new job or obtain health insurance by other means. COBRA coverage for former employees is limited to 18 months after the end of their regular benefits. Some states have "mini-COBRA" laws that provide for longer coverage.

Termination of COBRA Coverage

COBRA coverage ceases when one of the following happens:

• The period of continuation coverage ends
• The insured terminates coverage
• The insured stops making premium payments, or
• The insured obtains other health insurance coverage, with some exceptions.

The Supreme Court ruled in Geissal v. Moore Medical Corp., 524 U.S. 74 (1998) that a former employer cannot deny COBRA coverage because a person has other health insurance coverage, provided that the other coverage began on or before the date COBRA would begin. The Centers for Medicare and Medicaid Services have stated that a person may obtain COBRA coverage while also covered by another plan, if the other plan includes restrictions for pre-existing conditions.