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COBRA insurance: How to file if you lose your job

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a health insurance program designed to allow people who have been laid off to continue their medical coverage without restarting their deductibles or switching to a different network of doctors.

“If you lose your job, you’re eligible for COBRA benefits, where you would pay 102% of the premium,” said Dr. John Graves, an assistant professor in health policy at Vanderbilt University. “You're paying both what you were taking out of your paycheck every month plus what your employer was contributing.”

This means that to continue coverage with COBRA, you’ll pay more than what typically came out of your paycheck because your employer will stop contributing to the premium.

After you lose your job, you have 60 days to decide whether you want the COBRA coverage. During that time, you can look at other options such as coverage through the Affordable Care Act or through Medicaid, which are often more affordable options.

After you lose your job, you have 60 days to decide whether you want the COBRA coverage. (Photo: Getty Creative)
After you lose your job, you have 60 days to decide whether you want the COBRA coverage. (Photo: Getty Creative)

How to apply

You likely have access to COBRA if you worked for an employer with more than 20 employees. You are eligible both if you’ve left your job voluntarily or have been laid off. But if the company goes out of business and closes the health plan, then COBRA is not an option.

COBRA operates through your existing plan and may vary depending on the insurance company. Your employer not only must notify you of your right to apply for COBRA, but your employer must also provide the paperwork to apply.

After you notify your insurance company that you have experienced a qualifying event like a job loss, you should be given a COBRA election notice with insurance options and pricing. The coverage should be identical to the one you had when employed; only now you pay the entire premium yourself.

Companies have different election notices, but the notice typically requires printed names and signatures and should be sent back to the insurance company within 60 days. The first premium will be charged within 45 days from the start of the COBRA coverage.

You can cancel COBRA at any time if you get a new job or become eligible for a different health plan.

Unaffordable to many

Even though it can be expensive, COBRA may be an option for people who want to keep the same coverage they’ve had for a while. (Photo: Getty Creative)
Even though it can be expensive, COBRA may be an option for people who want to keep the same coverage they’ve had for a while. (Photo: Getty Creative)

COBRA insurance is considered the priciest option for those who lose coverage due to job loss, according to Karen Pollitz, a senior fellow at the Kaiser Family Foundation, a nonprofit that focuses on national health issues.

“You have to pay the whole premium yourself, your employer stops contributing to the premium,” Politz said. “That makes this unaffordable for a lot of people particularly if they just lost their job and their paycheck.”

But COBRA may be an option for people who want to keep the same coverage they’ve had for a while.

“If you’re pregnant or you’re in the middle of a cancer treatment or somebody in your family is,” Politz said. “If you want to keep your coverage in place, you don’t want to restart a new deductible, you don’t want to switch to a new plan that has a different network of doctors.”

Denitsa is a reporter for Yahoo Finance and Cashay, a new personal finance website. Follow her on Twitter @denitsa_tsekova.

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