Losing your job is stressful enough without worrying about losing your health insurance too. That's where COBRA comes in. You've probably heard the term thrown around, but here's what it actually means for you: COBRA is a federal law that lets you keep your employer's health insurance plan for a limited time after you leave your job. The catch? You'll be footing the entire bill yourself.
Think of COBRA as a bridge. It's designed to prevent coverage gaps while you figure out your next move—whether that's landing a new job with benefits, shopping the health insurance marketplace, or exploring other options. The name stands for the Consolidated Omnibus Budget Reconciliation Act (yes, it's a mouthful), but what matters is understanding how it works and whether it's your best choice.
How COBRA Actually Works
When you experience a qualifying event—like losing your job, having your hours reduced, or getting divorced—your employer's health plan administrator must send you a COBRA election notice. You'll have 60 days from the date you receive this notice to decide whether to enroll. Here's the important part: if you do elect COBRA within that window, your coverage can be retroactive to the day you lost your original coverage. That means if you get sick during those 60 days and then elect COBRA, you're covered.
The coverage itself is identical to what you had as an employee. Same doctors, same prescription benefits, same deductible and out-of-pocket maximum. The only thing that changes is who's paying for it. While you were employed, your company likely covered a significant chunk of your premium—often 70-80%. Under COBRA, you're responsible for 100% of that premium, plus an administrative fee of up to 2%.
COBRA applies to most employer-sponsored health plans at companies with 20 or more employees. If you worked for a smaller company, you might have access to state continuation coverage instead, which works similarly but may have different rules and timeframes.
What COBRA Costs in 2025
Let's talk numbers, because this is where COBRA catches people off guard. In 2025, average COBRA premiums run about $584 per month for individual coverage. If you're covering your family, that number jumps to $2,000-$3,000 monthly. Those figures vary significantly by location—Vermont averages around $1,275 per month while Idaho comes in at just $307 per month for individual coverage.
Want to estimate your own COBRA cost before you get the official notice? Check your W-2 form, Box 12, Code DD. That shows the total annual cost of your employer-sponsored coverage. Divide that number by 12 to get your monthly premium, then multiply by 1.02 to account for the administrative fee. For example, if Box 12 shows $7,200, your monthly COBRA payment would be about $612.
Here's the reality check: if you were paying $200 per month for health insurance as an employee, your COBRA bill might be $600-$800. That's because your employer was subsidizing the rest. For many people losing a job, that price tag is simply unaffordable, which is why exploring alternatives is crucial.
How Long COBRA Coverage Lasts
The standard COBRA coverage period is 18 months if you lost your job or had your hours reduced. That's a year and a half to figure out your next move. For certain other qualifying events—like divorce, legal separation, death of the covered employee, or a child aging out of dependent status—your dependents may qualify for up to 36 months of coverage.
If you become disabled during the first 60 days of COBRA coverage, you may be eligible for an 11-month extension, bringing your total coverage to 29 months. However, during those extra 11 months, your premium can increase to 150% of the standard cost.
Your COBRA coverage will end early if you fail to pay your premium on time, become covered under another group health plan, or become entitled to Medicare. Once COBRA ends, you can't get it back for that same qualifying event—so if you're paying month-to-month, make sure those payments are on time.
When COBRA Makes Sense (and When It Doesn't)
COBRA might be your best bet if you're in the middle of ongoing medical treatment. Say you're halfway through chemotherapy, pregnant, or managing a chronic condition with a team of specialists you trust. COBRA lets you keep seeing those same doctors without interruption. You won't have to worry about switching networks, getting new referrals, or hitting a new deductible partway through the year if you've already met your current one.
It also makes sense if you're confident you'll land a new job with benefits within a few months. COBRA can serve as a short-term safety net while you job hunt, preventing any gap in coverage that might leave you vulnerable to massive medical bills.
But here's when COBRA doesn't make sense: if you're healthy, not expecting major medical needs, and facing financial constraints after a job loss, those hefty premiums might not be worth it. This is especially true if you qualify for subsidized ACA marketplace plans or Medicaid based on your reduced income. For many people, marketplace plans with premium tax credits cost a fraction of COBRA—sometimes less than $50 per month.
Alternatives to COBRA You Should Know About
Losing job-based coverage qualifies you for a Special Enrollment Period on the ACA marketplace through HealthCare.gov or your state exchange. You have 60 days before or after losing coverage to enroll in a marketplace plan. Depending on your income, you may qualify for premium tax credits that dramatically reduce your monthly costs. Many people find they can get comprehensive coverage for less than what they were paying as an employee—sometimes significantly less.
If your income has dropped significantly, you might now qualify for Medicaid, which offers free or very low-cost coverage. Medicaid eligibility varies by state, but job loss often pushes households into qualifying income brackets. You can apply for Medicaid any time, and coverage can start immediately if you're eligible.
If you're married, you can join your spouse's employer plan. Losing your own job-based coverage triggers a special enrollment period for your spouse's plan, even if it's outside their normal open enrollment window. If you're under 26, you might be able to join a parent's plan.
Short-term health insurance is another option, though it comes with significant limitations. These plans typically cost less than COBRA but often exclude pre-existing conditions, may not cover essential services like maternity care or prescriptions, and only last a few months. They're a gamble that makes sense only if you're very healthy and need bare-bones coverage while you transition to something more comprehensive.
How to Make Your Decision
When that COBRA notice arrives, don't panic. You have 60 days to decide, so use that time wisely. Start by shopping around on HealthCare.gov to see what marketplace plans cost with your current income. Run the numbers on Medicaid eligibility if your income has dropped. Check whether you can join a family member's plan.
Here's a smart strategy: you can elect COBRA retroactively. If you're healthy and want to save money, you might skip COBRA initially and use a cheaper alternative. But keep that COBRA election form. If you face an unexpected medical emergency during those 60 days—say, you break your leg or need emergency surgery—you can elect COBRA retroactively and have that emergency covered. It's a safety net for your safety net.
Whatever you decide, don't go without coverage. Medical debt is the leading cause of bankruptcy in America, and even healthy people face unexpected health crises. Between COBRA, marketplace plans, Medicaid, and family coverage options, there's likely an affordable path to staying insured during your transition. Take the time to explore your options, run the numbers, and choose the coverage that protects both your health and your wallet.
