COBRA coverage is a continuation of your existing job-based health benefits plan. It gets its name from the Consolidated Omnibus Budget Reconciliation Act of 1985. This Act included a provision which allows employees and their dependents who are covered under job-based plans to temporarily continue their existing coverage following termination from employment or certain other events which separate them from their plan. For a complete list of "qualifying events" that make an individual eligible for COBRA coverage, see the Department of Labor's FAQs About COBRA Continuation Health Coverage.
COBRA applies to job-based health plans sponsored by employers with 20 or more employees. Most individuals covered under the plan would be eligible for COBRA. This includes the employee herself, the employee's spouse, and the employee's dependent children.
COBRA coverage can last 18 months or 36 months, depending on the reason why you became eligible. For example, if you are the covered employee, and you resign from your job, you are eligible for 18 months of COBRA. However, if you are the employee's spouse and lose coverage due to divorce or legal separation, you are eligible for 36 months of COBRA. For more information, see the Department of Labor's COBRA Fact Sheet.
Because COBRA is really a continuation of your existing plan (as opposed to a brand new plan), it costs the same as your current plan. However, be prepared for some sticker shock -- remember that most job-based plan premiums are subsidized by the employer, so you may not be paying the full premium for your job-based coverage now. For more information, see my FAQ titled Why Am I Being Charged So Much For My COBRA Coverage?
