ABA Family Legal Guide

Health-Care Law

Health-Care Options

Health Insurance and Managed Care Organizations

What happens if I lose my job? Does my employer stop paying for my health plan straight away?

A federal law called COBRA, short for the Consolidated Omnibus Budget Reconciliation Act, gives employees some protection. It applies to almost all businesses that employ more than twenty people, and covers full-time and part-time employees. If you lose your job, or your hours are reduced, COBRA allows employees to purchase their health coverage from their former employers at the same price the employer paid for up to eighteen months.

COBRA also kicks in during specific crises and transition times like divorce or death, covering the employee's spouse and dependents for up to three years. COBRA also applies to ensure coverage of a child who loses dependent child status—for example, by turning nineteen—for up to three years.

Continuing your coverage under COBRA can be expensive because you're still paying your contribution, plus the contribution your employer made, plus up to 2 percent for administrative costs, but often the cost is much lower than the cost of buying individual coverage.