Simple definition
COBRA is a federal law that lets you keep your employer's health insurance for a limited time after leaving a job, losing hours, or another qualifying event. Think of it as a bridge that keeps your current coverage from vanishing overnight. The catch: you usually pay the full premium yourself — including the share your employer used to cover — plus a small fee. It typically lasts up to 18 months.
Why it matters
Losing a job often means losing health coverage at the worst time. COBRA lets you stay on the same plan so a gap doesn't leave you uninsured. But because you pay the entire premium, it's often expensive — so it's worth comparing against Marketplace plans, which may cost less.
Real-life example
Say your employer paid $500 of your $650 monthly premium. Under COBRA, you'd pay the full $650 plus up to a 2% fee — about $663 a month — to keep the exact same plan after leaving. Same coverage, but now the whole cost is on you.
Common mistakes
- Assuming COBRA is your only option when a Marketplace plan may cost far less.
- Missing the enrollment deadline after leaving your job and losing the chance entirely.
- Being shocked by the full premium after your employer's share disappears.
- Forgetting COBRA is temporary — usually 18 months — and planning nothing for after.
Pro tips
- Compare COBRA's full cost against Healthcare.gov Marketplace plans before you enroll.
- Losing job coverage triggers a special enrollment window for Marketplace insurance.
- Weigh a spouse's employer plan, which may be cheaper than COBRA.
- Note that COBRA lets you keep your exact doctors and any deductible met mid-year.
Related Money Dictionary terms
- Open EnrollmentThe yearly window when you can sign up for or change your health insurance without needing a special reason.
- PremiumThe regular payment you make to keep an insurance policy active, usually billed monthly, quarterly, or yearly.
- Short-Term DisabilityInsurance that replaces a portion of your income for a few weeks or months while you recover from illness or injury.
- NetworkThe group of doctors, hospitals, and providers an insurer contracts with to offer care at negotiated rates.
- DeductibleThe amount you pay out of pocket for covered costs before your insurance starts chipping in.
- Emergency FundCash set aside for life's surprises, so a bad week doesn't turn into debt.
Frequently asked questions
Why is COBRA so expensive?
While employed, your employer typically paid a large share of your premium. Under COBRA you pay the entire amount yourself, plus up to a 2% administrative fee. The coverage is identical, but the cost feels much higher because you're now covering what your employer used to. Marketplace plans may cost less.
How long does COBRA last?
COBRA coverage usually lasts up to 18 months after a job loss or reduction in hours, and up to 36 months for certain events like divorce or a dependent aging off. It's meant as a temporary bridge, so plan for other coverage before it ends to avoid a gap.
Is COBRA better than a Marketplace plan?
It depends. COBRA keeps your exact plan, doctors, and any deductible you've already met this year, which can be worth it mid-treatment. But Marketplace plans on Healthcare.gov are often cheaper, and losing job coverage opens a special enrollment window. Compare both costs before deciding.
Knowing what COBRA means is knowledge — the first half. A brick gets placed when you act on it: if you're leaving a job, compare COBRA's full premium against a Healthcare.gov plan.
Also builds: Career Transition & Layoff Recovery
Sources & references
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Plain-English education — not personalized legal, tax, or investment advice.