COBRA Premium Rules

COBRA lets you stay on your employer's health plan after a layoff. The catch: you pay the full premium. That means your share plus your employer's share plus a 2% administrative fee, per 29 U.S.C. Section 1162. For most employer-sponsored plans, this amounts to $600 to $800 per month for self-only coverage and $1,500 to $2,200 for family coverage.

You have 60 days from the date your coverage ends (or from the date your COBRA notice is mailed, whichever is later) to elect COBRA. If you elect on day 59, your coverage is retroactive to day 1 of the coverage gap. That backdating matters: if you have a medical event in month one and have not yet decided, you can wait, then elect and pay retroactively to cover the claim.

COBRA coverage lasts 18 months for a qualifying event that is a layoff or reduction in hours. Disability qualifying events extend it to 29 months. A second qualifying event such as divorce or a dependent aging off can extend coverage further, up to 36 months in some circumstances.

Before electing COBRA, compare the cost against ACA Marketplace plans. Losing employer coverage is a qualifying life event that opens a 60-day special enrollment window. In many states, a Marketplace Silver plan with premium tax credits is significantly cheaper than COBRA, especially if your income dropped with the layoff.

The ACA premium tax credit is based on your projected annual income for the full calendar year, not just your income after the layoff. If your total income for the year falls within the eligible range, your advance credit can reduce monthly premiums substantially.