People Considering COBRA

The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) requires most employers with group health insurance plans to offer their employees the opportunity to continue their health coverage under their employer's plan even after they have been terminated or laid off or had another change in their employment status.

The American Rescue Plan (passed into law on March 11, 2021), covers 100 percent of premiums for COBRA from April 1 to Sept. 30, 2021. The COBRA subsidy is only available to individuals who have been (or become) involuntarily terminated or have had their hours reduced.

If you were eligible for COBRA, but did not enroll, you may opt in to COBRA coverage from April 1 until 60 days after your employer’s group health plan notifies you of the extended enrollment period. If you opt in, your coverage will count as starting on April 1.

If you are already on COBRA, your coverage end date stays the same, but you are eligible to receive the subsidies beginning on April 1.

Absent the American Rescue plan, when employers offer health coverage to their employees, they usually pay part of the monthly premium for their employees. If an employee loses his or her job, COBRA allows the employee to continue to be in the employer’s group health plan, usually at the full cost of the premium (with no employer contribution), and with an administrative fee added.

If your employer offers COBRA coverage when you leave a job, you have options:

1. Continue coverage under COBRA. You might choose this option if you are undergoing medical treatment or if you don’t want to change anything about your plan or current network of doctors and hospitals, for example.
2. Decide not to participate in COBRA and apply for special enrollment through Covered California. Because you will be newly uninsured, you will qualify for special enrollment in a Covered California health insurance plan outside of the annual open-enrollment period. To take advantage of the special-enrollment opportunity, you have 60 days before and 60 days after your employer-sponsored coverage ends to apply for and select a Covered California plan. It is important to note that if you miss this special-enrollment period, you have to wait for the next annual open-enrollment period to enroll in a health plan unless you have a qualifying life event for another special-enrollment period.
3. Seek coverage elsewhere, in the individual market outside of Covered California or through a spouse’s employer-sponsored health plan, for example.

Enrolling in COBRA vs. Enrolling in Covered California

The choice of whether to enroll in coverage through COBRA or through Covered California is up to you, but here are some factors to consider:

• The network of doctors and hospitals available in each plan.
• The total monthly premium for you and your dependents.
• The copays and deductibles in the various plans.

Depending on your income, you may qualify for financial help from the federal government, state government, or both to help pay for a health insurance plan with Covered California. Financial help may make a difference when comparing the costs of COBRA coverage and Covered California plans. Covered California’s Shop and Compare Tool can estimate financial help and the cost of plans with Covered California. 

Starting in 2020, if you go without health insurance coverage in California, you may face a penalty when you pay your state taxes. Both COBRA coverage and Covered California plans qualify as sufficient coverage to avoid being charged the penalty, so choose coverage based on cost and on the doctors and medical services that are best for you. 

Using COBRA Before Your Covered California Health Plan Becomes Effective

Most consumers will pick either COBRA or Covered California, but some may need to pick both to avoid a gap in coverage. Before doing this, keep in mind these guidelines:

1. If you enroll in a Covered California plan and make a payment before your employer coverage ends, Covered California will pick up where your employer coverage leaves off. There is no need for COBRA.
2. If you use a COBRA plan to cover the one- or two-month gap that can happen when you enroll in Covered California after losing employer coverage, you must cancel the COBRA coverage once the Covered California plan becomes effective. If you have both COBRA coverage and Covered California at the same time, and you receive financial help to help you pay your Covered California premium, when you file your federal taxes, state taxes, or both, you will have to pay back some or all of the financial help you received for the months that you also had COBRA.

Canceling COBRA to Enroll in Covered California

If you enroll in COBRA coverage and the special-enrollment period described above lapses, you cannot cancel your COBRA coverage and enroll in a Covered California health plan until 1) your COBRA coverage is exhausted, 2) you have a different qualifying life event for special enrollment, or 3) the next annual open-enrollment period.

If you stop paying your COBRA premium and lose coverage (or if your employer has agreed to pay for a limited time and you do not continue the payments), you will not be eligible for special enrollment through Covered California. You will only qualify for special enrollment if:

1. Someone else responsible for sending your COBRA premium payments (for example, your former employer) fails to do so on a timely basis.
2. You move out of the plan coverage area, and there is no COBRA continuation coverage available.
3. You reach the plan’s lifetime limit for benefits.

If none of these reasons apply, you will have to wait until the next Covered California open-enrollment period to cancel your COBRA plan and sign up for a Covered California health insurance plan, unless you have another reason (known as a qualifying life event) for special enrollment. It’s also important to know that if you decide to drop or forgo COBRA and enroll in a Covered California plan, you cannot change your mind and go back to COBRA.

What is Cal-COBRA? 

Much like federal COBRA, Cal-COBRA is a California law that lets you keep your group health plan when your job ends or your hours are cut. It may also be available to people who have exhausted their federal COBRA.  

Cal-COBRA applies to employers and group health plans that cover from two to 19 employees. Read more about Cal-COBRA.