COBRA
Consolidated Omnibus Budget Reconciliation Act — federal law allowing workers who lose job-based health coverage to continue the same coverage temporarily at their own expense.
Example
“After being laid off, she elected COBRA coverage to maintain her health insurance while job hunting — paying $850/month.”
Memory Tip
COBRA = keep your employer health insurance after leaving a job. Expensive — you pay full premium.
Why It Matters
COBRA matters because losing your job often means losing health insurance, and medical emergencies can occur at any time. Understanding COBRA helps you bridge the gap between jobs without going uninsured, protecting yourself from unexpected medical bills that could derail your finances.
Common Misconception
Many people think COBRA is free or heavily subsidized by their former employer. In reality, you must pay the full premium cost plus a small administrative fee, which is often more expensive than employer-sponsored coverage since you lose the employer contribution.
In Practice
Suppose you lose your job where your employer paid 75 percent of your health insurance premium of 600 dollars per month. Under COBRA, you must now pay the full 600 dollars monthly plus a 2 percent administrative fee, totaling about 612 dollars per month for up to 18 months while you search for new employment.
Etymology
Acronym for Consolidated Omnibus Budget Reconciliation Act. Passed in 1986 to provide healthcare CONTINUITY.
Common Misspellings
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See Also
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