COBRA Continuation Coverage: What It Is, What It Costs, and How Long It Lasts

What is COBRA Continuation Coverage?

COBRA continuation coverage is a federal law that lets you keep the exact same group health plan you had through your job for a limited time after you lose it, as long as you pay the full premium yourself. It's not a new insurance policy — it's your old one, minus the employer subsidy. The rule applies to private-sector employers with 20 or more employees on more than half of their typical business days in the prior calendar year, per IRS and DOL guidance. If you, your spouse, or a dependent child were enrolled in that group plan the day before a qualifying event happened, you generally have the right to keep it going under COBRA.

This matters whether you're an employee who just got a layoff notice and a stack of confusing paperwork, or an HR manager trying to make sure your company doesn't get hit with penalties for a missed deadline. Below, we'll walk through eligibility, the events that trigger coverage, the deadlines you can't miss, what it actually costs, and how long it lasts.

Who Actually Qualifies for COBRA Continuation Coverage?

COBRA comes from the Consolidated Omnibus Budget Reconciliation Act of 1985, and it applies to group health plans sponsored by private employers with 20 or more employees. Government plans and some state and local employer plans follow a parallel federal rule. If your employer has fewer than 20 workers, federal COBRA doesn't apply, but some states have their own continuation laws — often nicknamed mini-COBRA — so it's worth checking with your state insurance department if your company falls under that threshold.

To actually be eligible, a few things need to line up:

●Employer size: 20+ employees on more than 50% of business days in the prior year, per IRS rules.

●Plan enrollment: You (or the family member losing coverage) must have been enrolled in the group health plan the day before the qualifying event.

●Plan type: Medical, dental, vision, and health FSAs can qualify; standalone life insurance or disability plans generally do not.

●A qualifying event: One of the specific triggering events recognized under COBRA law must have occurred (more on that next).

●The plan still exists: The employer has to still be offering that same group health plan to active employees somewhere in the company.

Eligible people are called qualified beneficiaries — that's the covered employee, their spouse, and their dependent children. Each qualified beneficiary has an independent right to elect COBRA, meaning a spouse can elect coverage even if the former employee doesn't.

What Life Events Actually Trigger COBRA Rights?

COBRA isn't triggered just because you're unhappy with your coverage or want to switch plans. It only kicks in after specific qualifying events that cause someone to lose group health coverage. According to the DOL's guide to COBRA, the recognized events are:

●Voluntary or involuntary termination of the covered employee's job, for reasons other than gross misconduct

●Reduction in hours that drops the employee below the plan's eligibility threshold (think full-time to part-time)

●Divorce or legal separation from the covered employee

●Death of the covered employee

●A dependent child aging out of eligibility, typically at age 26

●The covered employee becoming entitled to Medicare, which can trigger coverage rights for the spouse and dependents

Here's a distinction that trips people up: when the qualifying event happens to the employee (termination or reduced hours), coverage runs for 18 months. When it happens to a spouse or dependent instead — divorce, death, Medicare entitlement, or aging out — coverage can run for 36 months. We'll dig into durations more below, but keep that split in mind as you read through the timeline rules.

How Much Time Do You Actually Get to Sign Up and Pay?

This is where a lot of people get caught off guard, because the process involves several separate deadlines stacked on top of each other.

The Notice Chain

1.The employer generally has 30 days from the qualifying event (or from when the plan administrator is notified) to inform the plan administrator, per 29 CFR 2590.606.

2.The plan administrator then has 14 days to send the qualified beneficiary a formal COBRA election notice.

3.For events like divorce or a dependent aging out, the employee or family member typically has to notify the plan within 60 days of the event, since the employer may not know about it otherwise.

The Election and Payment Window

Once you receive the election notice, you have 60 days to elect COBRA, measured from whichever is later: the date your coverage would end, or the date the notice was sent. That figure comes straight from the DOL's "An Employee's Guide to Health Benefits Under COBRA" and 29 CFR 2590.606-4. You don't have to decide the day you get the letter, and you can technically wait most of that 60-day window before enrolling.

After you elect coverage, you get 45 days to make your first premium payment, per DOL guidance — and that payment usually has to cover the coverage retroactively back to the date your old coverage ended, so it can be a big first check. After that, monthly premiums are due on a schedule set by the plan, with a minimum 30-day grace period for late payments.

How Much Does COBRA Actually Cost Each Month?

This is usually the part that causes sticker shock. While you were employed, your employer was almost certainly paying a chunk of your premium behind the scenes. Under COBRA, that subsidy disappears, and you're on the hook for the whole thing.

Per ERISA Section 604 and DOL COBRA continuation coverage FAQs, plans can charge up to 102% of the full premium — the combined employer and employee share, plus a 2% administrative fee. During a disability extension period (months 19 through 29), that cap rises to 150% of the full premium.

Here's what that looks like in practice:

●If your combined employer-plus-employee premium for family coverage was $1,800 per month, your COBRA premium would run around $1,836 per month (102%).

●If you were only paying $300 per month out of pocket while employed, and your employer covered the other $1,500, your COBRA bill jumps to roughly $1,836 — six times what you were used to paying.

●There's no legal requirement for an employer to subsidize COBRA premiums, though some do offer a temporary subsidy as part of a severance package.

If cost is the deciding factor, it's worth comparing COBRA against a Marketplace plan through healthcare.gov, since losing job-based coverage is itself a qualifying life event that opens a special enrollment window there too.

How Long Does COBRA Coverage Actually Last?

Duration depends entirely on which qualifying event triggered your rights, and there are two extensions worth knowing about.

●18 months — the standard period when the qualifying event is the employee's own termination or reduction in hours.

●36 months — for qualifying events affecting a spouse or dependent, such as divorce, the employee's death, Medicare entitlement, or a dependent aging out.

●Up to 29 months — a disability extension, if the Social Security Administration determines that a qualified beneficiary was disabled at any point during the first 60 days of COBRA coverage. You must notify the plan of the SSA determination within 60 days of receiving it, and before the original 18 months run out.

●Up to 36 months — a second qualifying event extension, if a spouse or dependent experiences a second triggering event (say, the former employee dies or becomes Medicare-entitled) during the initial 18-month period.

These figures all come from the DOL's "An Employee's Guide to Health Benefits Under COBRA" publication. Coverage can end early if premiums aren't paid on time, the employer stops offering group health coverage entirely, or the qualified beneficiary becomes covered under another group plan or Medicare after electing COBRA.

What Happens If an Employer Gets a COBRA Notice Wrong?

Employers sometimes treat COBRA notices as a paperwork afterthought, but the penalties for getting it wrong are real and can add up fast. Under IRC Section 4980B, the IRS can impose an excise tax of up to $100 per day per qualified beneficiary (capped at $200 per day per family) for noncompliance. The DOL can separately levy civil penalties of up to $110 per day under ERISA for failing to provide required notices. On top of that, a beneficiary who never got proper notice and then racked up medical bills can sue the plan for those costs.

Common mistakes include missing the 14-day or 30-day notice windows, sending notices to an old address without documented proof of mailing, miscalculating the 102% premium, or forgetting to track disability and second-event extensions. None of this is exotic — it's just a lot of small deadlines that are easy to lose track of when HR is juggling everything else.

Should You Handle COBRA In-House or Hand It Off to a TPA?

For a company with a handful of former employees a year, DIY COBRA administration is manageable with a good spreadsheet and a calendar full of reminders. Once you're tracking multiple qualifying events, disability extensions, premium collection, and carrier remittance across a growing headcount, the odds of a missed deadline go up.

A third-party administrator takes on the actual mechanics:

●Sending election notices within the required windows, with documented proof of delivery

●Collecting and processing premium payments, including the 102%/150% calculations

●Tracking the 18, 29, and 36-month clocks for every qualified beneficiary

●Remitting payments to carriers and reconciling coverage status

●Keeping records that hold up if the DOL or IRS ever comes asking

If you're a Phoenix-area employer or broker who'd rather not own this risk internally, CafeHealth's COBRA administration services in Phoenix handle notices, elections, premium collection, and compliance tracking so your HR team isn't the one staying up at night wondering if a deadline slipped through the cracks.

Whether you're an employee trying to figure out your own coverage options or an employer trying to tighten up compliance, the details matter here — dates, dollar amounts, and documentation all carry legal weight under COBRA.

If you want a second set of eyes on your situation, book a free consultation with Shannon and we'll walk through what your specific plan and timeline actually require.

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Quick Answers to Common COBRA Questions

How long do I have to sign up for COBRA after losing my job?

You get 60 days to elect COBRA, counted from whichever is later: the date your job-based coverage actually ends, or the date you receive the official election notice. This comes straight from the DOL's COBRA guide. Once you elect, you then have 45 days to make your first premium payment, and that first payment usually has to cover you retroactively.

How much does COBRA insurance cost per month?

Plans can charge up to 102% of the full premium — meaning the entire cost that used to be split between you and your employer, plus a 2% admin fee. So if your combined premium was $1,200 a month, expect a COBRA bill around $1,224. During a disability extension, the cap rises to 150%. There's no legal requirement for your old employer to chip in unless it's part of a severance deal.

What counts as a qualifying event for COBRA coverage?

The recognized events are job termination or reduced hours for the employee, plus divorce, legal separation, the employee's death, Medicare entitlement, or a dependent child aging out (usually past 26) for spouses and dependents. Getting fired for gross misconduct is the one exception that does not trigger COBRA rights.

How long can I stay on COBRA after I lose my job?

The standard period is 18 months when the qualifying event is your own termination or a cut in hours. Spouses and dependents can get up to 36 months if the event is divorce, death, Medicare entitlement, or aging out. There's also a disability extension up to 29 months if the Social Security Administration determines a disability within the first 60 days of coverage, and a second qualifying event extension up to 36 months for family members if another triggering event happens during the initial period.

What happens if my employer doesn't send me a COBRA notice on time?

Employers who miss the required notice deadlines can face an IRS excise tax of up to $100 per day per qualified beneficiary under IRC Section 4980B, plus DOL civil penalties of up to $110 per day under ERISA. If you never received proper notice and racked up medical expenses in the meantime, you may also have grounds to pursue the plan directly for those costs. If this happens to you, document every email and letter you receive (or don't receive) and consider reaching out to the DOL's regional Employee Benefits Security Administration office.

Can I switch to a Marketplace plan instead of COBRA?

Yes. Losing job-based coverage is itself a qualifying life event that opens a special enrollment window on healthcare.gov,Book a free chat with Shannon.