COBRA
A federal law that allows employees to continue their employer-sponsored health coverage for a limited period after leaving a job.
COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985) requires employers with 20 or more employees to offer continuation of group health coverage to employees and their dependents who would otherwise lose coverage due to a qualifying event: job loss, reduction in hours, divorce from a covered employee, or a dependent child aging off the plan.
COBRA coverage is identical to the employer's group plan, but you pay the full premium—both your share and the employer's contribution—plus a 2% administrative fee. This can be shocking: an employer might have been paying $1,000/month of a $1,400/month premium; under COBRA you pay the full $1,428. Coverage can last 18 months (job loss/reduced hours) or 36 months (other qualifying events).
Alternatives to COBRA include marketplace plans (especially with ACA subsidies if your income qualifies), Medicaid (if income is low), a spouse's employer plan (special enrollment triggered by job loss), or short-term health insurance. Compare total costs (premiums + expected care) before defaulting to COBRA, which is often but not always the most expensive option.
Real-World Example
After being laid off, the employee elected COBRA for three months while job hunting, paying $1,640/month to maintain her family's health coverage rather than risk a gap.