COBRA Insurance Explained: What It Is & How It Works in 2025

Losing a job or experiencing a major life change can be overwhelming, especially when it comes to maintaining health insurance. Fortunately, COBRA (Consolidated Omnibus Budget Reconciliation Act) provides a temporary solution to keep your employer-sponsored health coverage.

In this comprehensive guide, we’ll break down everything you need to know about COBRA insurance in 2025, including:

What COBRA is and how it works
Who qualifies for COBRA coverage
How much does COBRA cost in 2025
Pros and cons of COBRA insurance
How to enroll in COBRA
Affordable alternatives to COBRA

By the end of this article, you’ll have a clear understanding of whether COBRA is the right choice for you, or if another health insurance option makes more sense.

What Is COBRA Insurance?

COBRA (Consolidated Omnibus Budget Reconciliation Act) is a federal law enacted in 1986 that allows employees, their spouses, and dependent children to temporarily continue their employer-sponsored health insurance after experiencing a qualifying event that would otherwise cause them to lose coverage.

Key Features of COBRA Insurance

• Continuation of the same health plan (no change in benefits or network)

• Available for 18 to 36 months, depending on the qualifying event

• Beneficiaries pay the full premium (plus a 2% administrative fee)

• Applies to employers with 20+ employees

COBRA is not a separate insurance plan; it simply extends your existing employer-sponsored coverage for a limited time.

How Does COBRA Work in 2025?

Step 1: A Qualifying Event Occurs

COBRA eligibility is triggered by specific life events, including:

• Job loss (voluntary or involuntary, except for gross misconduct)
• Reduction in work hours (making you ineligible for employer coverage)
• Divorce or legal separation (for spouses losing coverage)
• Death of the covered employee (for dependents)
• A dependent child aging out of coverage (usually at age 26)
• Step 2: Employer Notifies the Health Plan

Your employer must notify the health plan administrator within 30 days of the qualifying event.

Step 3: You Receive a COBRA Election Notice

You’ll get a COBRA election notice within 14 days of the plan administrator being notified.

Step 4: You Have 60 Days to Enroll

You have 60 days to decide whether to elect COBRA coverage. If you enroll, coverage is retroactive to the date you lost insurance.

Step 5: Make Premium Payments

You must pay the full premium (plus a 2% fee) to maintain coverage. Missing a payment can result in immediate termination of benefits.

Step 6: Coverage Continues for 18-36 Months

• 18 months for job loss or reduced hours

• 36 months for divorce, death, or a child aging out

Who Is Eligible for COBRA in 2025?

COBRA applies to:

1. Private-sector employers with 20+ employees
2. State and local government employees
3. Federal employees (they have a similar program called TCC)
4. Small businesses with fewer than 20 employees (some states have “mini-COBRA” laws)

Eligible individuals include:

• Employees who lose job-based coverage

• Spouses who lose coverage due to divorce or death

• Dependent children who lose coverage (e.g., after turning 26)

How Much Does COBRA Cost in 2025?

Unlike employer-sponsored plans, where the company often pays part of the premium, COBRA requires you to pay 102% of the full cost (100% premium + 2% admin fee).

Example of COBRA Costs

Note: If you qualify for an 11-month disability extension, the cost may increase to 150% of the premium.

Pros and Cons of COBRA Insurance

Advantages of COBRA

• Same doctors & benefits – No need to switch providers.
• Immediate coverage – No waiting period or underwriting.
• Covers pre-existing conditions – Unlike short-term plans, COBRA can’t deny coverage.

Disadvantages of COBRA

• Expensive – You pay the full premium.
• Temporary – Lasts only 18-36 months.
• No subsidies – Unlike ACA plans, COBRA doesn’t offer financial help.

COBRA Alternatives in 2025

If COBRA is too costly, consider these options:

1. Affordable Care Act (ACA) Marketplace Plans

• Subsidies available (based on income)
• More affordable than COBRA for many
• Open enrollment once a year (or special enrollment if you lose coverage)

2. Short-Term Health Insurance

• Lower premiums than COBRA
• Flexible terms (1-12 months)
• Doesn’t cover pre-existing conditions

3. Medicaid

• Free or low-cost for low-income individuals
• Expanded in many states

4. Spouse’s Employer Plan

• Often cheaper than COBRA
• Must enroll within 30 days of losing coverage

How to Enroll in COBRA

1. Receive your COBRA election notice (within 14 days of the qualifying event).

2. Review your options (compare COBRA vs. ACA plans).

3. Submit your enrollment form within 60 days.

4. Pay your first premium within 45 days of enrolling.

Pro Tip: If you decline COBRA initially but change your mind within the 60-day window, you can still enroll—coverage will be retroactive.

Why Choose Medcore Brokerage for Employee Benefits?

At Medcore Brokerage, the Best Employee Benefits Consultant in Texas, we specialize in tailored employee benefits solutions for businesses of all sizes.

Whether you’re navigating COBRA, ACA, or group health plans, our experts help you make the best decisions for your workforce.

Contact us today for a free consultation!

Final Thoughts

COBRA provides a critical safety net for those who lose employer-sponsored health insurance. While it can be expensive, it ensures continuity of care during transitions.

If COBRA isn’t affordable, consider exploring ACA plans, Medicaid, or your spouse’s coverage as alternatives.

For personalized guidance, consult Medcore Brokerage. We’re here to help!

Frequently Asked Questions 

1. How long does COBRA coverage last?

COBRA typically lasts 18 months for job loss or reduced work hours. However, certain qualifying events (like divorce, death of the covered employee, or disability) may extend coverage up to 36 months.

2. Can I get COBRA if I quit my job?

Yes, you can get COBRA if you voluntarily resign, as long as your termination wasn’t due to gross misconduct.

3. Is COBRA cheaper than ACA plans?

Not always. While COBRA lets you keep your existing coverage, ACA Marketplace plans often offer subsidies (based on income) that may make them more affordable than paying full COBRA premiums.

4. What happens if I miss a COBRA payment?

Missing a payment can result in immediate termination of your COBRA coverage with no option to re-enroll. Payments must be made on time to avoid losing benefits.

5. Does COBRA cover dental and vision?

Yes, if your employer’s health plan included dental and vision benefits, COBRA will continue covering them under the same terms.