What is COBRA Health Insurance?
COBRA is shorthand for the Consolidated Omnibus Budget Reconciliation Act of 1985. This federal legislation allows workers and their families covered by their group health plan to maintain coverage for a limited time under specified circumstances. These include voluntary or involuntary job loss, reduction in work hours, death, divorce, and other life events. COBRA applies to most private sector employers with 20 or more employees. Some states, including California, have mini-COBRA laws that apply to employers with fewer than 20 employees. Both full- and part-time employees are counted to determine whether a group is subject to COBRA or Cal-COBRA.
COBRA also applies to plans sponsored by state and local governments. It does not apply to federal government employees or to churches and certain church-related organizations.
COBRA and Cal-COBRA give qualifying individuals the opportunity to continue their group health insurance when it would otherwise end due to certain events.
How does COBRA Insurance Work?
COBRA and Cal-COBRA Qualification
Groups of 2 to 19 Employees
Cal-COBRA lets employees maintain group health coverage when their job ends, and they lose benefits eligibility. Cal-COBRA may also be available to employees who have exhausted federal COBRA benefits. (See below.)
Through Cal-COBRA, employees may be able to extend their group health coverage up to 36 months.
Groups of 20 or More Employees
Federal COBRA offers employees a coverage extension of 18-36 months. If an employee qualifies for an 18-month extension, employees can get a second 18-month extension through Cal-COBRA.
Eligibility
COBRA requires continuation of benefits be offered to:
- covered employees
- former employees
- spouses
- former spouses, and
- dependent children.
COBRA applies when group health coverage would otherwise be lost due to certain events, including:
- A covered employee’s death
- A covered employee’s job loss or reduction in hours for reasons other than gross misconduct
- A covered employee’s becoming entitled to Medicare
- A covered employee’s divorce or legal separation
- A child’s loss of dependent status (and therefore coverage) under the plan.
COBRA sets rules for:
- when plan sponsors must offer and provide continuation coverage
- how employees and their families may elect continuation coverage, and
- what circumstances justify terminating continuation coverage.
Employers may require individuals to pay for COBRA continuation coverage. Premiums cannot exceed the full cost of the coverage, plus a two percent administration charge.
In some situations, employers may choose to cover the cost for those continuing coverage under COBRA. Or, more often, the employer may require the individual or family to pay the full cost for COBRA continuation coverage. Premiums cannot exceed the full cost of insurance plus a two percent administrative charge.
It’s worth noting, though, that employees and dependents may be eligible for other coverage that could be less expensive than COBRA continuation.
For example, an individual health plan available through an Affordable Care Act (ACA) Marketplace might be more affordable than COBRA. Covered California, the Golden State’s ACA Marketplace, says 90% of enrollees received financial help in 2024. Members received an average of $5,000 annually to help them reduce the cost of health insurance. That means more than half of Californians could pay less than $10 per month.
Another option may be a “special enrollment” in other group health coverage. Under the Health Insurance Portability and Accountability Act (HIPAA), in some situations, group health plans must allow those who previously declined coverage for themselves and eligible dependents to enroll.
If, for example, an employee loses group health insurance through a spouse, the employee can enroll in his/her/their employer-sponsored plan. The request for special enrollment must be made within 30 days of the loss of other coverage.
If an individual is 65 or older, or younger with a disability or End-Stage Renal Disease, enrollment in Medicare may be a third option. For details, visit the U.S. Department of Health and Human Services website.
The qualifying event determines who is qualified for COBRA. Cases involving employer bankruptcy, a retiree and spouse, former spouse, or dependent child may be qualified. Other qualified beneficiaries may include a child born to or adopted by a covered employee while insured. Independent contractors and directors who participate in the employer’s group health plan may also qualify.
COBRA, generally, does not apply to someone losing a job due to “gross misconduct.”
COBRA FAQs
To get answers to frequently asked questions about COBRA, visit the U.S. Department of Labor, Employee Benefits Security Administration, FAQs online.
For a Q&A on Cal-COBRA, visit the California Department of Managed Health Care website.
Your health insurance broker can also be a valuable resource to you concerning COBRA.
Your insurance carrier, plan administrator, or broker can also provide answers to your COBRA and Cal-COBRA questions. Don’t hesitate to reach out to them. If you’re a CaliforniaChoice customer, you can contact Customer Service for assistance. Call 800-558-8003 or send an email to CustomerService@CalChoice.com.
