Continuation Coverage
Continuation coverage is your legal right to keep group health insurance for a limited time after you lose eligibility due to a qualifying event, such as job loss, reduced work hours, or divorce. Under federal law, your employer must offer you the option to continue the same health plan for 18 to 36 months, depending on the type of qualifying event. You pay the full premium yourself, plus a small administrative fee, typically 2% of the cost.
When Continuation Coverage Applies
COBRA, the Consolidated Omnibus Budget Reconciliation Act of 1985, is the primary federal law requiring employers with 20 or more employees to offer continuation coverage. If your employer has fewer than 20 employees, your state may have its own continuation coverage law with similar protections.
Common qualifying events include:
- Voluntary or involuntary job termination (18 months of coverage)
- Reduction in work hours that makes you ineligible (18 months)
- Divorce or legal separation from your spouse (36 months for spouse and dependent children)
- Death of the employee (36 months for spouse and dependent children)
- Your child aging out of dependent coverage under the plan (36 months)
How This Affects Your Government Benefits
Continuation coverage can affect your eligibility for need-based programs like Medicaid, SNAP, TANF, and WIC. When you elect continuation coverage, the premium you pay counts as an expense that may lower your household income for benefit calculations. However, the cost is substantial, often 120% to 150% of the group rate.
Many people find that federal subsidies through the Affordable Care Act marketplace plans are cheaper than COBRA continuation coverage. If you lose employer coverage, you have 60 days to enroll in a marketplace plan without a waiting period. Additionally, if your income drops below the threshold for your state's Medicaid program (which varies by state), you may qualify for Medicaid immediately upon job loss, which eliminates the need for continuation coverage.
What You Must Do
Your employer must send you a written notice of continuation coverage rights within 14 days of your qualifying event. You typically have 60 days from the date you lose coverage to elect continuation coverage. Once you elect it, you must pay premiums on time, usually monthly, or your coverage ends. Missing even one payment can result in loss of all coverage.
Common Questions
- If I lose my job and elect continuation coverage, can I also apply for Medicaid? Yes. Job loss is a qualifying event for both continuation coverage and Medicaid in all states. However, if your income now qualifies you for Medicaid, you typically cannot receive both simultaneously. Most people choose Medicaid if eligible, as the cost is lower.
- Does continuation coverage cover my family members? Yes, if they were covered under your employer plan before the qualifying event. Your spouse and dependent children can continue coverage for the same length of time you do, though each family member can be required to make their own election.
- What happens after continuation coverage ends? After 18 or 36 months, your coverage ends unless you regain employer coverage or become eligible for another program. You can enroll in a marketplace plan outside the annual open enrollment period if continuation coverage ends, and you will not face a penalty for the gap in coverage.