COBRA.

In plain English

COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985) lets former employees keep their employer-sponsored group health coverage for up to 18 months after leaving the job (longer in some circumstances, like disability or divorce). The catch: the former employee pays the full premium, employer-share plus employee-share, plus a 2% administrative fee. COBRA applies to most employers with 20 or more employees. Coverage starts on the day employer coverage would otherwise end; election must happen within 60 days of the qualifying event.

01Why it matters

COBRA is the safety net that prevents a gap in coverage between jobs, but the cost shock can be brutal. The employee's paycheck previously deducted only the employee-share; under COBRA the bill now includes the employer's share too, which is often two to three times higher than what showed up on prior pay stubs. For many ex-employees, comparing COBRA to ACA marketplace plans (which may qualify for income-based subsidies after a job loss) is a cost-saving step worth taking before defaulting to COBRA.

02The math, step by step

An employee leaving a job had a $650 per month payroll deduction for family health coverage. The employer was paying the rest, about $1,300 per month, for a total plan cost of $1,950 per month. Under COBRA, the former employee pays the full $1,950 plus 2% (about $39) = $1,989 per month. After 18 months, that is roughly $35,800 in premiums, paid directly to the plan administrator each month.

03What this is NOT

04Receipts

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