Layoffs, hiring freezes and recessions are, unfortunately, a fact of modern life in America. Therefore, it’s important to understand the benefits available to you if your role is cut. In the following Q&A, we explore health benefits for those impacted by job loss, specifically COBRA — how it works, who is eligible, what it costs, and more.

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that allows employees and their families to temporarily continue their employer-provided health benefits after losing coverage due to specific life events. These include job loss, reduced work hours, divorce, the death of the covered employee, or a dependent child aging out of the plan.

COBRA generally requires that group health plans sponsored by employers with 20 or more employees in the prior year offer employees and their families the opportunity for a temporary extension of health coverage (called continuation coverage) in certain instances where coverage under the plan would otherwise end.

Everyone who was covered under the employer’s group health plan at the time of the qualifying event (i.e. the termination of employment or the divorce) has the right to elect to continue coverage under the plans they were on (like the medical and/or the dental plan) when the qualifying event occurred.

Some states have special rules and there are some other special circumstances, but generally under the federal COBRA regulations people who experience an employee related qualifying event (like termination or reduction in hours) can continue under the employer’s plan for up to 18 months, and those who experience a dependent type of event (like divorce or the death of the employee) can continue for up to 36 months.

In general, there are two big pros to continuing on an employer’s health plan. First, you already know it, and you know if your doctors are part of the plan. This can be important if you or a member of your family are in active treatment and you don’t want to risk any changes. Second, if you’ve already had an expensive health year and have satisfied your deductible, you may want to continue your current coverage for the rest of the plan year versus having to start from zero with a new deductible on a new plan.

The con generally is simply the cost of the premium. Most employer health plans are generous, and the premiums are high. If you continue the employer’s plan under COBRA you usually have to pay the full premium yourself without the employer contribution most employers pay for active employee coverage under their plan. Many employees may not realize just how much their employer pays each month towards their employees’ insurance premiums until they see the full cost themselves.

Under the federal COBRA rules, you typically have 60 days from the date of the qualifying event to choose to elect continuation of coverage. You can choose to begin paying your premiums when you elect, or you can elect without paying and have an additional 45 days to make your first payment.

It’s important to understand though that when you make your first premium payment you must pay the premiums you owe back to the date of your original loss of coverage to then continue coverage moving forward.

The average U.S. monthly health insurance premium for individuals is roughly $650 per month and for family coverage it is about $1,850 per month. Again, that’s often shocking to many people who don’t realize how much employers cover for active employees. Except for special circumstances like government or employer subsidy programs that are sometimes in place (such as during the COVID-19 pandemic), the individual is responsible for paying the plan premiums.

If you experience a qualifying event (losing coverage under a group health plan due to termination of employment, divorce, etc.) you should receive an official letter from the employer or their administrator notifying you of your rights to elect continuation of coverage, the process to elect, and the cost of the premiums. If you think you should have received this letter and haven’t, you should contact the employer’s HR department.

You lose eligibility to continue health insurance coverage under COBRA if you fail to elect continuation within the 60-day election period; fail to pay the initial premium promptly within the timelines outlined; fail to pay your monthly premium at any time within its payment grace period; become covered under another group health plan; or reach the end of your maximum continuation period.

Before electing health insurance continuation under COBRA, everyone should first understand their options. Depending on your age or life circumstances you may be eligible for Medicare, Medicaid, or government subsidies called “Advanced Premium Tax Credits” for individual health insurance through your state’s health insurance marketplace.

Even if you’re not eligible for any of these, you should explore your coverage options for individual health insurance, the details of the available plans, and the monthly premiums. The best place to start is usually HealthCare.gov.

Health insurance in the United States is expensive because healthcare in the United States is the most expensive of any country in the world (pick your favorite source — the World Bank is one). Employer-sponsored health insurance is often more expensive than individual health insurance, because employers usually offer more generous plans as part of their overall plan to attract and retain employees than one would buy on your own.

If your employer offers group health insurance, has 20 or more employees, and you were on the employer’s health insurance at the time you quit your job, yes, you would usually be eligible to elect to continue coverage under the employer’s plan when you quit your job. One way to know for sure is if you received a notice of your rights under COBRA from your employer when you were initially hired or when you first joined your employer’s health plan.

Yes, and usually you are required to, as your eligibility to continue coverage under COBRA generally ends when you begin coverage under another health plan.

The two most important tips are, one, don’t delay. Spend a little time examining your options when you first lose coverage under an employer health plan. Losing your employer health insurance and becoming eligible for COBRA rarely happens at a happy time, and you’ll feel like you have much bigger things to worry about than health insurance. But timelines are strict.

Contact your insurance carrier to understand exactly where you stand in covering your deductible for the year. Visit HealthCare.gov and take advantage of the opportunity to get local help. Whether you choose to continue your employer coverage under COBRA, purchase an individual plan through healthcare.gov, or discover you are eligible for Medicare or Medicaid, the timeframes allowed for making your decision to elect coverage under each are tight. Don’t delay.

And two, read all the rules carefully. Put reminders in your calendar. Pay your premiums on time. There are usually no second chances if your fail to elect or pay on time.