What to Know About COBRA Insurance for U65 Individuals

March 4, 2025

homepage of cobra on a cellphone

Losing employer-sponsored health insurance can be stressful, especially for those under 65 who aren’t yet eligible for Medicare. COBRA insurance offers a temporary solution, allowing you to keep your health coverage after a qualifying event like job loss or reduced work hours. However, COBRA can be expensive since you’re responsible for the full premium without employer contributions.

This guide breaks down COBRA eligibility, costs, benefits, and drawbacks while also exploring alternative coverage options. By understanding these factors, you can determine whether COBRA is the right choice for you or if another plan better fits your needs.

What Is COBRA Insurance?

COBRA (Consolidated Omnibus Budget Reconciliation Act) is a federal law that allows individuals to continue their employer-sponsored health insurance after losing coverage due to certain life events. It applies to private-sector employers with 20 or more employees, as well as state and local government employers. Some states also have “mini-COBRA” laws that extend similar coverage to smaller businesses.

How COBRA Works

With COBRA, you can keep the same health plan, but you’ll need to pay the full premium—including the portion your employer previously covered—plus a 2% administrative fee. This ensures uninterrupted coverage, allowing you to keep your current doctors and prescription plans without disruption. Additionally, COBRA coverage can be backdated up to 60 days to prevent any gaps in healthcare access.

Who Qualifies for COBRA?

To be eligible for COBRA, you must have been enrolled in your employer’s group health plan when a qualifying event occurred.

Qualifying Events:

  • Job Loss – Whether voluntary or involuntary (except for gross misconduct).
  • Reduction in Work Hours – Leading to loss of employer-sponsored coverage.
  • Divorce or Legal Separation – Causing a spouse or dependents to lose coverage.
  • Death of a Covered Employee – Allowing the spouse and dependents to continue coverage.
  • Dependent Child Aging Out – When a child reaches the plan’s age limit (typically 26).

Duration of COBRA Coverage

The length of COBRA coverage depends on the qualifying event:

Qualifying Event Coverage Duration
Job loss/reduction in hours 18 months
Disability (as determined by SSA) 29 months
Divorce/legal separation 36 months
Death of covered employee 36 months
Dependent aging out 36 months

Some states offer extensions beyond these periods, so it’s best to check state-specific regulations.

How Much Does COBRA Cost?

COBRA is often more expensive than employer-sponsored coverage because you must pay the full premium yourself.

Breakdown of COBRA Costs:

A COBRA premium includes:

  • Your previous employee contribution
  • Your employer’s contribution
  • A 2% administrative fee

For example, if your total monthly premium under your employer’s plan was $600—where your employer paid $400 and you paid $200—your COBRA premium would be:

Cost Breakdown Amount
Employee’s previous share $200
Employer’s previous share $400
2% administrative fee $12
Total Monthly Cost $612

Since COBRA can be a financial burden, using Health Savings Accounts (HSAs) or exploring alternative plans may help manage costs.

Pros and Cons of COBRA for Those Under 65

COBRA provides uninterrupted coverage, but it may not always be the most cost-effective option.

Benefits of COBRA:

  • Same Plan, Same Network – No need to change doctors, hospitals, or prescriptions.
  • No New Application – Guaranteed coverage without medical underwriting.
  • Covers Pre-Existing Conditions – Unlike short-term plans, COBRA includes all pre-existing conditions.
  • Covers Dependents – Spouses and children can maintain coverage.

Drawbacks of COBRA:

  • High Cost – Without employer contributions, COBRA premiums can be three to four times higher than what you previously paid.
  • Limited Duration – COBRA coverage expires after 18 to 36 months.
  • No ACA Subsidies – COBRA does not qualify for Affordable Care Act (ACA) premium tax credits, making Marketplace plans potentially cheaper.

Alternatives to COBRA

Given the high costs, it’s worth considering other health insurance options.

1. ACA Marketplace Plans

  • Lower Cost with Subsidies – ACA plans may be more affordable, especially for those earning 100%-400% of the federal poverty level (FPL).
  • Comprehensive Coverage – Includes essential health benefits like mental health, maternity care, and prescriptions.

2. Short-Term Health Insurance

  • Lower Premiums – Typically 50%-80% cheaper than COBRA.
  • Limited Coverage – May not cover pre-existing conditions, maternity care, or prescriptions.
  • Best for: Healthy individuals needing temporary coverage before starting a new employer plan.

3. Medicaid and CHIP

  • Free or Low-Cost – Available for low-income individuals based on state-specific guidelines.
  • No Open Enrollment Restrictions – You can apply anytime.
  • Best for: Those meeting income eligibility requirements.

4. Spouse’s Employer Plan

  • More Affordable than COBRA – Employer plans typically offer subsidized premiums.
  • Special Enrollment Period – Losing job-based coverage allows a 30-day window to enroll in a spouse’s plan.
  • Best for: Married individuals who can join a spouse’s employer-sponsored health plan.

How to Enroll in COBRA

Enrolling in COBRA is not automatic—you must follow a specific process to continue your health coverage. Understanding the timelines and requirements is crucial to avoid losing eligibility.

1. Receiving the COBRA Election Notice

After a qualifying event, such as job loss or reduced work hours, your former employer must notify the health plan administrator within 30 days. Within 14 days after that, you should receive a COBRA election notice explaining:

  • Your right to continue coverage
  • The cost of premiums
  • How long coverage will last
  • The deadline to enroll

If you do not receive a COBRA notice within 45 days of losing your job, contact your former employer or the health plan administrator.

2. Enrollment Process

Once you receive the election notice, you have 60 days to decide whether to enroll in COBRA.

  • To enroll, you must submit the election form provided with your COBRA notice.
  • Coverage can be backdated to the day after your employer-sponsored coverage ended, preventing gaps in healthcare.
  • Your first premium payment is due within 45 days of electing COBRA.

3. COBRA Premium Payments

To maintain coverage, you must make premium payments on time. Late or missed payments may result in cancellation of COBRA benefits.

  • Payments are typically due monthly.
  • Some plans offer a 30-day grace period for late payments.

To avoid coverage lapses, consider setting up automatic payments or payment reminders.

4. Switching from COBRA to Another Health Plan

Since COBRA is temporary, it’s important to plan for future coverage before your COBRA benefits expire.

When COBRA Ends Alternative Options
After 18–36 months Enroll in an ACA Marketplace Plan during a Special Enrollment Period (SEP).
If you get a new job Join your new employer’s health insurance plan.
If COBRA is too expensive Switch to an ACA plan, spouse’s employer plan, or Medicaid.

If you voluntarily drop COBRA coverage, you must wait until the next ACA open enrollment unless you qualify for a Special Enrollment Period.

Conclusion

COBRA provides a temporary solution for individuals under 65 who lose their employer-sponsored health coverage due to job loss, reduced work hours, or other qualifying events. While it ensures continuity of care, it often comes with high costs, making it essential to explore alternative health insurance options.

Key Takeaways:

  • COBRA allows you to keep your existing employer health plan for 18–36 months, but you must pay the full premium plus a 2% administrative fee.
  • It’s ideal for those who need immediate coverage and want to keep their current doctors, prescriptions, and healthcare network.
  • ACA Marketplace plans may offer more affordable premiums, especially for those who qualify for income-based subsidies.
  • Short-term health insurance is a lower-cost option but may not provide comprehensive coverage.
  • Medicaid and CHIP offer free or low-cost coverage for those who meet income eligibility requirements.
  • Spouse’s employer plans may be a more cost-effective alternative to COBRA.

What Should You Do Next?

  • Compare COBRA costs with other options like ACA Marketplace plans, Medicaid, or a spouse’s employer plan.
  • Check if you qualify for ACA subsidies to lower monthly insurance costs.
  • Review your COBRA election notice and decide whether to enroll within 60 days.
  • Plan for long-term health coverage before COBRA expires to ensure a smooth transition to a new plan.

If you need affordable health insurance options, visit HealthCare.gov to explore ACA Marketplace plans and subsidies.