COBRA Health Insurance

COBRA, named after the Consolidated Omnibus Budget Reconciliation Act of 1985, gives workers and their families the right to continue group health coverage for a limited time after certain events, such as losing a job, having hours cut, divorce, or the death of the covered employee. The U.S. Department of Labor says COBRA generally applies to group health plans of employers with 20 or more employees in the prior year.

COBRA is not free coverage. The Department of Labor says people who elect COBRA may be required to pay the entire premium, up to 102% of the cost to the plan. Under 29 U.S.C. 1162, continuation coverage usually lasts 18 months after a job loss or reduction in hours, and can last up to 36 months for certain other events, such as a divorce or a dependent child aging out of the plan.

COBRA shows up in class actions because the law requires detailed written notices. Employers and plan administrators must tell people about their rights, deadlines, and costs in a way an average person can understand. Lawsuits have alleged that notices were confusing, left out required information, or arrived late, causing people to lose coverage. ERISA allows courts to impose a penalty of up to $110 per day on plan administrators who fail to provide required information, and many of these cases have settled on a class basis.

If you lost coverage after leaving a job, keep the COBRA notice you received, the envelope date, and any medical bills you paid while uninsured. Our ERISA entry explains the broader benefits law, and our guide on the rights of a class member covers what happens if a notice case settles.